UK profit warnings higher than in 2008 crisis; oil rises as Middle East tensions escalate – business live
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High interest rates and weakening confidence have been blamed for pushing more UK companies into issuing profit warnings.
New data from EY-Parthenon this morning show that over 18% of public firms issued warnings in 2023, which is a higher proportion than at the peak of the financial crisis in 2008
In total, 294 profit warnings were issued by businesses in 2023, which is a slight drop on the 305 in 2022 – highlighting how tough the last two years have been for companies.
Over a quarter of warnings (26%) in 2023 were attributed to delayed contracts or decisions, 19% were due to increased costs and a further 19% cited the impact of higher interest rates.
The survey showed that profit warnings blamed on rising costs fell through the year, but there was an increase in warnings blamed on corporate spending delays and higher borrowing costs.
During 2023, 39 listed companies issued their third or more consecutive profit warning in 12 months.
Jo Robinson, EY-Parthenon Partner, says:
“Pervasive uncertainty in 2023 created major challenges for businesses around earnings and forecasting, and this is reflected in the number of profit warnings issued last year. While pressure around costs eased somewhat toward the year-end, the uptick in warnings caused by delays to business decisions and weak consumer confidence indicates an ongoing reluctance to commit to discretionary spending.
Firms issuing profit warnings in 2023 included online shopping group THG, which blamed delivery disruption, contract delays and falling sales at one division, Kingfisher, the owner of B&Q and Screwfix, and drinks giant Diageo, while shoemaker Dr Martens racked up four profit warnings in the year.
And looking ahead, Robinson adds:
“In 2024, businesses will hope for a quicker-than-expected fall in inflation and interest rates, but many moving parts need to slot into place before we can be sure of an economic ‘soft landing’. We expect to see increasing disparity between businesses that are positioned to capitalise on still limited growth and those that are hampered by the impact of recent earnings pressures or their access to and the cost of capital. It is shaping up to be an easier year for many, but not all UK companies.”
The agenda
7am GMT: Sweden’s GDP report for Q4 2023
10am GMT: Belgium’s GDP report for Q4 2023
3.30pm GMT: Dallas Fed Manufacturing Index for January