Profit warnings increase in Yorkshire despite UK economic uptick

DESPITE the positive news about the UK economy the number of profit warnings in Yorkshire increased in the first quarter of this year.

That’s according to EY’s latest Profit Warnings report, which revealed that the region’s quoted companies issued eight profit warnings in Q1, up from three in the previous quarter to the same number as the corresponding period in 2013 when the economic outlook had more clouds on the horizon.

Warnings came from businesses in industrial engineering and food and drug retailers both with two warnings each, software and computer services, technology hardware and equipment, chemicles, oil equipment services and distribution, each issuing one warning.

Hunter Kelly, restructuring partner at EY in Yorkshire, said: “Confidence is unquestionably returning to the wider UK economy, but the reality for many Yorkshire and North East-based PLCs is very different in what remains a consumer-led recovery. Pricing pressures, increased competition across a number of sectors and delayed contracts have all been cited by Yorkshire and North East businesses as reasons for profit warnings in Q1 2014.

“These issues, alongside the strong pound, impacting exports, continue to challenge the Yorkshire and the North East’s industrial sector businesses. It is speculation if these increased pressures also reflect the restricted investment by UK businesses over the past five years.

“The rest of 2014 looks set to bring new challenges, which together with low inflation, will test earnings forecasts. Yorkshire and North East businesses should think carefully about capital needs and allocation in the next 12-18 months, and how they will leave themselves operationally and financially agile enough to respond to growth opportunities as they arise. Efficiency savings or transactions are two possible ways to achieve growth in this environment.”