Low profit warnings in the West Midlands masks underlying changes in the balance of the UK economy
Four listed businesses in the West Midlands issued profit warnings in the first quarter of 2017, one more than the previous quarter and two less than the same period of last year, according to EY’s latest Profit Warnings report.
Three of the profit warnings recorded in the West Midlands were from AIM-listed businesses.
Across the whole of the UK, quoted companies issued 75 profit warnings in Q1 2017, with only 13% of these warnings coming from the Midlands region. The East Midlands recorded six warnings in the first quarter of 2017.
According to the report, this seemingly stable picture masks falling expectations and significant changes beneath the surface that reflect the UK’s changing economic balance.
The report says that UK profit warnings from industrial and commodity sectors have fallen significantly since the end of 2015, helped by a higher oil price and improving global economy. But, the impacts of a weaker pound and rising pricing pressures loom large. In Q1 2017, 28% of warnings cited rising costs and pressure on prices, compared with 15% in 2016. At the same time, uncertainty increasingly prevails, with 28% of warnings citing contract delays or cancellations – the highest proportion of warnings in more than five years.
Dan Hurd, director in EY’s restructuring team in the Midlands, said: “Improving global growth and the positive impact of a weaker pound on exports, combined with falling expectations in stressed areas, should limit the number of profit warnings in the near-term.
“However, increased overheads, political and regulatory change, and digital disruption are piling pressure on sectors with long-standing structural issues, especially in consumer and business services. Periods of rapid change often leave companies behind and the next few years are unlikely to prove an exception.”
Nationwide, the report found retailers had issued a record low number of profit warnings in the first three months of the year. Dan Hurd said: “The UK economic climate is changing with post-Brexit realities catching up with consumers and retailers in 2017. As currency hedges unwind, retailers still face a double whammy of raised import prices and falling disposable incomes.”
