Between July and September 2024, UK-listed companies experienced an increase in profit warnings, reaching a two-year high.
- The number of profit warnings issued was 84, marking an 11% rise compared to the same period in 2023.
- Industrial Support Services and Technology Hardware & Equipment sectors issued the most warnings, with significant contract delays and cancellations.
- The lingering uncertainty in the business environment, not preceded by any major economic downturn, contributed to these warnings.
- Companies are urged to stay alert and address issues promptly to adapt to the shifting economic climate.
UK-listed companies experienced a notable surge in profit warnings between July and September 2024, with 84 alerts recorded according to data from EY. This represents the highest quarterly total in two years, reflecting an 11% increase from the third quarter of the previous year.
The primary drivers behind these warnings were identified as contract and order cancellations or delays, implicated in 38% of the reports. This marks the highest percentage for such reasons in 15 years. Additionally, falling sales accounted for 33% of the warnings, indicating widespread challenges across the economy.
The Industrial Support Services and Technology Hardware & Equipment sectors were hit hardest, issuing 10 and 8 warnings respectively. There was a marked hesitancy among customers to engage in new contracts or orders, which was particularly evident in these sectors. Notably, over 90% of the industrial sector’s warnings and over 70% of the technology sector’s warnings were linked to lower orders or contract issues.
Jo Robinson, a partner at EY-Parthenon and leader in UK&I turnaround and restructuring strategy, remarked on the unusual nature of this surge in profit warnings, noting that it was not triggered by an immediate economic downturn or singular event. Instead, companies grappled with uncertainty intensified by anticipation of the new Chancellor’s Autumn Budget and ongoing geopolitical tensions.
Robinson highlighted the potential for this trend to either represent a temporary fluctuation or signal a longer-term shift, given the volatile macroeconomic environment and transformative changes in technology and consumer behaviour. She emphasised that companies and their stakeholders need to be vigilant, identifying and addressing emerging issues proactively. Prompt action is essential to navigating this rapidly evolving restructuring landscape, where innovation could provide opportunities for preserving value.
The current climate demands that companies remain proactive amidst uncertainty, ensuring adaptability to swiftly address economic challenges.
