UK profit warnings continue to rise as retail feels the strain

Hunter Kelly, EY's restructuring partner for Yorkshire and the North East
Hunter Kelly, EY's restructuring partner for Yorkshire and the North East
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PROFIT warnings across the UK have continued to rise after a number of big retailers struggled to attract customers, according to a new study.

Quoted companies based in Yorkshire and the North East issued nine profit warnings in the second quarter of 2018, according to EY’s latest Profit Warnings report.

The figures are down slightly from 10 warnings in Q1 (the first quarter), taking the total number of warnings in the first half of 2018 to 19. Across the whole of the UK, profit warnings rose by almost a third, resulting in 58 warnings in Q2 (the second quarter) of 2018. Seven of the nine profit warnings in Yorkshire and North East were from smaller AIM listed companies - a much higher proportion than the rest of the country.

Hunter Kelly, EY’s restructuring partner for Yorkshire and the North East, said: “We’ve reached half-time in 2018 with the rising level of warnings showing that it is getting harder to predict (the future) for businesses. The exceptional summer weather has added to this, as I doubt many would have dared to factor such a long dry and sunny spell into their forecasts.

“The issues in the high street would appear to be more structural and we could see that flow through to other sectors.

“So far in 2018 just over a quarter of listed household goods companies have issued warnings and this includes two housebuilders.”

“The proportion of profit warnings citing delayed or cancelled contracts has reached a six-year high and this is worrying and points to many businesses starting to exercise caution and perhaps rein back.

“Many companies cannot say with any certainty what trading and regulatory regimes they’ll be operating under this time next year adding to the uncertainty around predicting the future.”

The number of profit warnings by retailers listed on the FTSE has doubled as the sector feels the strain of rising costs. According to research from EY, there were 20 profit warnings from listed general retailers in the first half of 2018, double the number issued in the same period the year before. Retailers such as Debenhams, Moss Bros, Carpetright and Card Factory have all issued profit warnings this year.