Construction sector under pressure as profit warnings increase

Profit warnings from the construction sector hit a six-year high in the East Midlands, with five profit warnings recorded in 2018 – the highest since 2012.

However, the East Midlands saw the number of profit warnings drop for the third consecutive year since 2016, when 19 warnings were issued – matching the 2018 total number of warnings. 2016 was the only year profit warnings had risen above 12 since 2008, when 23 warnings were issued.

According to EY’s latest Profit Warnings Report, the East Midlands recorded profit warnings from the following five sectors: Construction and Materials; Electronic and Electrical Equipment; General Retailers; Gas, Water and Multiutilities; and Automobiles and Parts.

Across the UK, 2018 saw the second highest level of profit warnings issued by UK plc since 2008, with 287 profit warnings, a rise of 4% year-on-year. The General Retailers sector across the UK recorded the highest percentage of profit warnings in a decade, with 38% of the sector issuing profit warnings in 2018.

Dan Hurd, EY’s head of restructuring in the Midlands, said: “Following recent events in Westminster, there is a further political and economic uncertainty to contend with and no let-up in the pace of change. But rising uncertainty wasn’t the only reason why profit warnings spread in 2018.

“In the retail sector, a combination of a relentless margin squeeze, the continuous need for reinvention and falling consumer confidence made 2018 an exceptionally tough year for the retail sector across the whole of the UK.

“What happens next depends on how much more unpredictable 2019 becomes. Markets adjust quickly to new realities, however, in this fast-moving world companies need to keep moving forward or risk finding themselves on the wrong side of sector trends, potentially triggering a new cycle of profit warnings in years to come.”