EY expects ‘easier year for many, but not all’ as South East profit warnings drop

Profit warnings from companies registered in the South East have reached their lowest level since Q3 2021 according to the latest EY-Parthenon Profit Warnings report.

Nine warnings were issued across the region in Q4 2023, rounding out the yearly total at 55 – 15 fewer than in the previous year.

Companies within the consumer discretionary and industrials FTSE sectors were responsible for almost half of all warnings both in the South East and nationally.

Caroline Macaskill, a partner at EY’s Reading office, said: “2023 saw the lowest number of profit warnings issued in the South East of England since 2021.

Hear the latest insights from property experts on The Business Magazine’s new podcast

“While this may be positive news for the region, we’re now starting to see a clear divide between those businesses who took action early to protect themselves against potential economic uncertainty compared to those who didn’t.

“Further economic growth is predicted in 2024, however, it will remain slow.

“For businesses looking for investment or access to funding, challenges may arise as traditional funders remain cautious in investing in exposed sectors.

“Alternative lenders or equity injections may need to be sourced to secure further finance.”

Despite the number of profit warnings across the country falling in 2023, the percentage of businesses issuing warnings was still exceptionally high at 18.2 per cent – compared with 17.7 per cent at the peak of the 2008 financial crisis.

Jo Robinson, EY-Parthenon partner and UK&I turnaround and restructuring strategy leader, added: “Pervasive uncertainty in 2023 created major challenges for businesses around earnings and forecasting, and this is reflected in the number of profit warnings issued last year.

“While pressure around costs eased somewhat towards the year end, the uptick in warnings caused by delays to business decisions and weak consumer confidence indicates an ongoing reluctance to commit to discretionary spending.

“In 2024, businesses will hope for a quicker-than-expected fall in inflation and interest rates, but many moving parts need to slot into place before we can be sure of an economic ‘soft landing’.

“We expect to see increasing disparity between businesses that are positioned to capitalise on still limited growth and those that are hampered by the impact of recent earnings pressures or their access to and the cost of capital.

“It’s shaping up to be an easier year for many, but not all UK companies.”

Read more - South East business deals down 8 per cent last year and transaction value plunges