Profit warning figures revealed

Listed companies in the East Midlands issued four profit warnings in Q2 2023, twice the number issued in the region in Q1 2023,according to the latest EY-Parthenon Profit Warnings report.

Nationally, profit warnings issued by UK-listed companies between April and June 2023 marked the highest second quarter total in three years, with 66 warnings issued.

The report found that warnings from UK-listed companies have risen year-on-year for the seventh consecutive quarter, the longest run of consecutive quarterly increases since 2008. The highest number of Q2 warnings recorded by EY-Parthenon was in 2020, when 166 were issued.

Persistent inflation and rising interest rates have played a significant role in Q2’s warnings, driving a tighter and more expensive lending environment. Changing credit conditions were cited in one-in-five (20%) profit warnings during the quarter, the highest proportion since Q2 2008 and up from one-in-ten (9%) in Q1 2022.

While Q2 2023 saw a rise in the number of profit warnings when compared to the previous quarter, the total of six warnings for the first half of 2023 is the same as that reported in H1 2022. The region’s industrial sector reported the most warnings this quarter as it continues to be impacted by the uncertain economic environment.

Dan Hurd, a partner at EY-Parthenon in the Midlands, said: “Although there is some optimism around the falling costs of energy and other raw materials with Production Inflation (PPI) in May having dropped from 25% to 0.5% in less than 12 months, many businesses continue to feel under pressure experiencing both their own specific higher inflation rates and from rising interest rates. Manufacturing, a key sector for the region, is experiencing a sustained period of contraction, as indicated by June’s 6 month low Purchasing Managers Index (PMI) of 46.5.

“Conditions in the region will remain challenging for some time, and whilst the overall outlook may be more positive than 12 months ago on the cost inflation side, there are signs of demand softening and the cost of servicing debt is becoming a real burden for many businesses.”