Profit warnings soar in East Midlands

Twelve profit warnings were issued by listed companies based in the Midlands in the second quarter (Q2) of 2019 – double the number in the same quarter in 2018, according to EY’s latest Profit Warnings Report.

The warnings were made across ten sectors, including construction, automotive, general retailers and Support Services. Half of all profit warnings were issued by businesses with a turnover of less than £200m, with many continuing to blame uncertainty over Brexit.

Despite the number of overall profit warnings staying largely unchanged from Q1 2019, there was a boost for businesses in the West Midlands, with profit warnings more than halving, from 10 to four.

However, this story was not mirrored in the East Midlands, where the number of profit warnings increased significantly from two in Q1 to eight in Q2 2019. This is double the number seen at the same time in 2018 and the highest since Q4 in 2008.

Dan Hurd, EY’s head of restructuring in the Midlands, said: “There is now clear evidence that prolonged Brexit uncertainty has created a hiatus in business activity, with companies struggling to forecast and plan. And the economic impact is spreading, affecting a broad range of sectors.

“Slowing global growth and trade and geopolitical tensions add a further unpredictable dimension to the second half of 2019.”

“In the Midlands it’s a bit of a mixed bag, with some positive movements from the last quarter. However, it is worrying that we are seeing an increase in the number of sub £200 million turnover businesses issuing profit warnings, which may reflect a desire to hold off on investment decisions until there is more certainty over what a post-Brexit Britain will look like.

“In the short to medium term I would expect to see businesses continuing to look closely at their structures to see where greater cost efficiencies can be found.”

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