Challenging outlook for businesses despite low levels of profit warnings
Low levels of profit warnings are masking a “challenging outlook” for businesses, EY has warned.
Five listed businesses in the Yorkshire and North East region issued profit warnings in the second quarter of 2017.
While this was three more than in the previous quarter it was two less than the same period in 2016, according to EY’s latest Profit Warnings report.
EY says the seemingly relatively stable picture in the region however masks falling expectations and significant changes beneath the surface that reflect the UK’s changing economic balance.
Across the UK, quoted companies issued 45 warnings in Q2 2017, 40% lower than the previous quarter, almost a third lower than Q2 2016 and well below the post-crisis second-quarter average of 58. According to EY, this is the biggest single quarterly percentage drop in profit warnings since the second quarter of 2009.
A stronger than expected global economic backdrop have resulted in significantly lower warnings, according to the report. A fifth of warnings cite internal operational problems, with external factors, such as exchange rates and price pressures, slipping down the list.
Hunter Kelly, EY’s head of restructuring for Yorkshire and the North East, says: “A low level of profit warnings should not lead to complacency. The reality is that corporate earnings forecasts have reduced and combined with the economy’s relative outperformance compared to expectations this has enabled more companies to meet their forecasts.
“It is possible that compared to expectations profit warnings may not rise dramatically without an economic downturn, given that companies seem to have come to terms with forecasting in the current economic climate.”
