North West: Improved Profit Warnings Buck National Trend

EY’s latest data has reported fewer profit warnings for the North West in 2018 than were recorded in 2017 in contrast to the national trend.

In 2018 North West Listed Companies issued 29 profit warnings compared with 34 in 2017.

Nationally, there was a 4% increase in 2018 to 287 where Q4 recorded 88 profit warnings, the second highest level since 2008.

Sam Woodward, EY’s head of restructuring in the North West, said:

“It is particularly significant that we have seen more new companies warning in 2018. It demonstrates that there are more wide-reaching pressures at work, namely the impact of rising uncertainty on confidence and demand, contributing to a wider spread of profit warnings.

“Investors, like many businesses, are positioning for the worst – which could provide some upside to 2019. Recent events have created further political and economic uncertainty and there is no let-up in the pace of structural change.

“Rising uncertainty wasn’t the only reason why profit warnings spread in 2018. The weather continued to confound normal seasonal patterns.

“Regulatory issues came increasingly to the fore, such as the changes to diesel regulation in the automotive sector and increasing gaming regulation.

“China’s slowdown also particularly hit automotive and technology sales. But, rising uncertainty has certainly exacerbated these and existing pressures.”

Mr Woodward added that with the continuing uncertainty over Brexit, what happens in 2019 becomes ever more unpredictable:

“Markets adjust quickly to new realities and recent falls in consensus expectations suggest that much of UK plc has a difficult year ahead factored into their forecasts.

However, in this fast-moving world companies need to keep moving forward or risk finding themselves on the wrong side of sector trends, potentially triggering a new cycle of profit warnings in years to come.”