North West profit warnings down of previous year’s figures

UK-listed companies in the North West have issued 21% fewer profit warnings in the first six months of 2024 than in the same period last year, according to EY-Parthenon’s latest Profit Warnings report.

A total of 11 warnings were issued by businesses in the region in the six months to the end of June 2024, compared to 14 in H1 of 2023.

The second quarter of the year also saw just four warnings issued, the lowest quarterly total in the North West in three years. Nationally, 49 profit warnings were issued during the same quarter, the lowest number since Q2 2021. The consistent declines indicate an improvement in the UK’s economic situation following the country entering a small technical recession at the end of 2023.

Despite the falls, the number of profit warnings being issued by YK-listed companies remains above the peak seen following the 2008 financial crisis. Factors cited as contributing to warnings included contract issues, and increasing labour and supply costs.

Sam Woodward, EY-Parthenon UK&I Turnaround and Restructuring Partner in the North West, said:

“The steady decline in profit warnings issued by listed companies in the North West during the first half of the year is encouraging and reflects the strength of businesses in the region. Although the UK appears to have turned a corner following the mild technical recession seen in late 2023, economic growth remains relatively modest. However, businesses in the North West continue to show resilience.

“With inflation now much lower than it has been in the recent past, coupled with expectations for interest rates to fall later in the year, increasing momentum and stability could be on the horizon. However, fiscal policy may be difficult to predict in the coming months given the recent election of a new government, and economies can be affected by a range of external, volatile factors, so companies should, as always, prioritise scenario planning and optimise cash flow to ensure a stable foundation.”

Jo Robinson, EY-Parthenon Partner and UK&I Turnaround and Restructuring Strategy Leader, said:

“An unprecedented rollcall of global elections and geopolitical risks means that an element of uncertainty remains, potentially exerting further pressure on spending and growth. We can expect the economy to continue to recover, but slowly and unevenly.

“We have started to see more companies coming back to the restructuring table because they haven’t made the fundamental changes needed to adapt their operations and balance sheets to new demand, cost and competitive realities. Refinancing is a growing risk, with many companies surprised by the added levels of due diligence and time needed to refinance in this market.

“We expect all of this to drive a slow uptick in restructuring, but without necessarily a big upsurge in administration appointments, as more companies tackle their issues through restructuring plans and consensual agreements with creditors. The profit warning cycle may have turned, but we are at the start of the restructuring one.”