Crisis triggers huge increase in profit warnings across region

Stock Market

The number of profit warnings issued by listed companies in the North West has soared in recent months.

According to figures from EY profits warnings in the region have increased by 70 per cent – mostly triggered by Covid-19.

Twenty profit warnings have been recorded in the region sinc this year, more than double the number (eight) issued in the first three full months of 2019.

Fourteen of the warnings issued so far in 2020 specifically blamed the impact of Covid-19 for a material downgrade to their profit expectations.

When analysing all UK profit warnings made in 2020, compared to Q1 2019, EY found the Midlands has experienced the greatest year-on-year increase (209%), followed by the South East (188%), the North West (150%) and Yorkshire & the North East (100%).

Sam Woodward, EY restructuring partner in the North West said: “Covid-19 has profoundly affected North West businesses’ ability to plan and forecast, driving a significant rise in profit warnings, which are currently being issued at an exceptional rate.

“The impact is being felt throughout the economy, most notably in sectors closely connected to consumer spending, including travel, leisure and retail.

“With a partial lockdown set by the Government last week, we are likely to see an increasing impact on other sectors that require ‘employee proximity’ such as construction and manufacturing.”

UK quoted companies have issued 167 Covid-19 related profit warnings, equivalent to around 13% of the whole of the Main Market and AIM.

Almost 25% (38) of the total number of COVID-19 related profit warnings issued in the UK in 2020 were from companies in the FTSE travel and leisure sector.

Others hit hardest include sectors affected by social distancing measures, such as retailers, housebuilders and media companies – especially those impacted by event cancellations and falls in advertising spend.

Bob Ward, managing partner for EY in the North West, said: “Many regional economies, like the North West, are dominated by particular sectors and we know that when economic activity is concentrated in such a way the impact locally can be all too real.

“Beyond the implementation of immediate stabilisation measures, which will of course be the prime focus, it will be important to turn to the geographic impact of COVID-19 and to identify what additional schemes are required to protect and then restore the North West’s local economies.”