Profit Warnings Surge in Q3
Profit warnings from UK-listed companies rose to 65 in the third quarter. This is the highest level in nearly two years, according to a report by EY. This figure is up from 59 warnings in the previous quarter. It is also the largest number since the final quarter of 2024, when 71 warnings were issued. Over half of the companies cited geopolitical uncertainty as a main reason for their warnings. Additionally, 38% linked their challenges to the ongoing conflict in the Middle East.
The report noted that rising costs were a major factor, with 35% of firms mentioning inflation. Jo Robinson, UK&I financial restructuring leader at EY, said, "This is not a conventional economic cycle… since the pandemic, supply-side disruption including material and labour shortages, energy shocks, tariffs and wider geopolitical disruption has become far more significant." Nearly 20% of UK-listed businesses issued a profit warning in the last year.
The construction and household goods sectors had the highest number of warnings, totaling eight. Six of these warnings came from housebuilders, bringing the total for the year to 14. This figure surpasses the ten warnings issued during the peak of the 2008 global financial crisis. Companies like Vistry, Persimmon, and Taylor Wimpey cited cost inflation, lower sales rates, and weak demand from first-time buyers as reasons for their warnings.
The rise in profit warnings could lead to more volatility in the UK equity market. This is especially true for sectors like construction and consumer goods. Investors may respond to the potential for lower earnings and higher costs in these industries. Keep an eye on the upcoming autumn Budget. Businesses are urging the government to avoid tax increases amid these cost pressures.
Based on reporting by: cityam.com, standard.co.uk