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magazineUK profit warnings hit highest first quarter level since the financial crisis
UK-listed firms have issued 89 profit warnings in the first quarter of 2019, marking the highest first quarter total since the global financial crisis according to professional services firm Ernst & Young (EY).
Brexit-related challenges account for only 10% of profit warnings over the quarter. Other headwinds include trade war anxiety as the US and China are yet to come to a resolution and global growth concerns.
EY UK&I Restructuring head Alan Hudson says the UK is struggling with a range of issues such as uneven regional growth, low productivity, high debt and weak business investment.
EMBATTLED RETAILERS
Investors may not be surprised to discover that UK-listed retailers reported 12 profit warnings during the first quarter of 2019, the highest of any sector.
Retailers have come under pressure amid rising costs as shoppers shun the high street in favour of online shopping.
Arguably of greater concern are the 10 profit warnings over the same period from FTSE financial services firms, which equals the same amount from the sector through the entirety of 2018.
Regulatory changes are impacting income and hiking costs as these businesses scramble to meet stricter rules.
‘Companies need to focus on managing regulatory change, risk and volatility and consider how their business model will adapt to changing markets,’ comments Ernst & Young.
WHICH SECTORS ARE ONES TO WATCH?
Based on its research, Ernst & Young says the technology hardware and equipment sector and travel sector are among the ones to watch out for in terms of future warnings.
The global technology sector is struggling with declining electronics sales, particularly in China, while ‘excessive global inventory’ for computer chips and displays is putting pressure on prices.
Overcapacity, higher costs and strikes are among many headwinds affecting airlines.
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