Highest number profits warnings for East Midlands business in a decade

East Midlands quoted companies issued a total of 19 profit warnings in 2016, compared to 12 in 2015 – the highest number of warnings since 2008 when quoted companies in the region issued 23 warnings. Retail was the FTSE sector with the highest number of warnings (8) in the East Midlands, according to EY’s latest Profit Warnings report.

The number of warnings doubled in the region doubled to six in Q4 2016, compared to three in the previous quarter and three in the final quarter of 2015.

This contrasts with the national trend which saw fewer companies issuing profit warnings in the final quarter of 2016. UK quoted companies issued 73 profit warnings in Q4 2016 – 27 fewer than Q4 2015.

According to the report, the number of profit warnings nationally reflects the mixed impact of the Brexit vote, along with relative stability in both the UK and global economy in the second half of 2016, with UK consumer spending in particular defying expectations.

Behind the national headlines, however, the report says that there are less positive signals. A record level of FTSE support services warnings in 2016 suggests that businesses are starting to react to uncertainty, as does the 27% of warnings citing contract delays or cancellations in the final quarter. Companies exposed to the weak pound are also reporting increasing pressure on earnings, with 11% of warnings citing adverse exchange rates.

Tom Lukic, EY’s restructuring partner in the Midlands, said: “The headline numbers nationally show the UK economy weathering the initial impact of the Brexit vote remarkably well, which perhaps represents the calm before the storm. But the East Midlands figures for 2016 highlight the challenges facing many retail businesses and wider uncertainty which is likely to continue through 2017.

“There is a gap between winners and losers, one which in many cases predates the Brexit vote and stems from ongoing structural weaknesses that will leave some companies exposed to the significant changes and new challenges that lie ahead. Companies can’t take much for granted in this period of challenge to the political and economic consensus, but neither can they afford to be paralysed in the face of rapid change.”