The number of profit warnings to listed companies in the North West fell in 2023 - but analysts from EY-Parthenon say a challenging end to the year shows many underlying economic problems remain.
EY-Parthenon’s latest Profit Warnings report shows there were 27 profit warnings in 2023, down from 34 in 2022. In the fourth quarter, seven warnings were issued in the North West - up from five in the same period in 2022 and the third highest total for any 海角视频 nation/region.
Eight of those 27 warnings were issued by listed firms operating in consumer discretionary sectors, with the industrial and tech sectors seeing five earnings apiece.
Sam Woodward, EY-Parthenon 海角视频&I turnaround and restructuring partner in the North West, said: “Companies in the North West displayed resilience in 2023 so it was positive to see a year-on-year fall in total profit warnings in the region. However, the challenges facing the economy certainly haven’t subsided, particularly the lagged effect of high interest rates which was highlighted by the region’s uptick in warnings in Q4 2023.
“It’s unsurprising that companies operating in consumer discretionary sectors issued the highest volume of warnings in the North West in 2023 – in line with the national trend - with household disposable income challenged by high inflation and borrowing costs. Meanwhile, companies operating in industrial sectors continued to weather persistent headwinds.
“Listed companies within the technology sector also faced challenges in 2023, however the sector’s potential growth, driven by heightened interest in Generative Artificial Intelligence (GenAI), suggests a more optimistic outlook for the year ahead.
“There are further reasons for positivity looking ahead to 2024, with GDP growth expected to be boosted by falling inflation and cuts to the base rate, along with prospective tax cuts that are expected to be announced in the Chancellor’s Spring Budget.
“However, the North West’s Q4 profit warning figures are an apt reminder that, although prospects may be improving, scenario planning and stress testing will continue to be crucial as businesses look to safeguard their future.”
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Nationally, the 海角视频 saw a total of 294 profit warnings issued in 2023, down 3.6% year-on-year from 305 in 2022. But the proportion of listed companies issuing profit warnings stood at 18.2% - still above the levels seen at the peak of the financial crisis.
More than a quarter of warnings (26%) were attributed to “delayed contracts or decisions”, with 19% due to increased costs and another 19% citing higher interest rates.
Jo Robinson, EY-Parthenon Partner and 海角视频&I turnaround and restructuring strategy leader, said: “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 toward 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 is shaping up to be an easier year for many, but not all 海角视频 companies.”