South East: Number of profit warnings edges up as Brexit uncertainty bites, says EY

Quoted companies in the South East issued 18 profit warnings in the third quarter of 2016, equal to the number of warnings issued during the same period in 2015, according to EY’s latest Profit Warnings report.

The South East, along with London, was the worst hit region, with companies issuing a combined 38 warnings across the region – more than half the total number of warnings across the UK.

Brexit led the reasons for UK profit warnings this quarter, with 20 warnings citing the fallout from the vote. Nevertheless, the initial Brexit impact has been mixed and the negative effects have been focused on sectors most exposed to business uncertainty and the weaker pound. The FTSE sectors with the most Brexit-related warnings so far in 2016 are: support services (six), travel & leisure (four) and real estate investment & services (four). 

Most companies also blamed other factors, including falling sales and difficult conditions in their own sector. Overall, the FTSE sectors leading profit warnings in Q3 2016 were: support services (12), general retailers (six), travel & leisure (five), household goods (five) and industrial engineering (five).

Neil Hutt, transaction partner at EY across the Thames Valley and South Coast, commented: “Companies in the South East are contending with a daunting level of uncertainty. The fallout from Brexit has impacted profit warnings nationally and we’re beginning to see the mirrored effects in the regions.

“Sluggish, disrupted and competitive markets don’t provide companies with the luxury of standing still – whatever the outlook. Companies will need to remain agile in their operations and capital structures to ensure they are resilient in the face of new challenges – and to grasp opportunities.”