The number of profit warnings in the South West has risen in the first six months of 2023.
According to the latest Profit Warnings report from global business consultancy EY-Parthenon, 15 listed companies in the region issued warnings in the first half of the year, which is an increase of 66% when compared to the same period in 2022.
The report revealed that 66 warnings were issued by 海角视频-listed companies in the second quarter of 2023; the highest second quarter number since 2020. This the consultancy attributes to the impact of rising interest rates, which was cited in one-in-five warnings.
Additionally, nearly one-in-five 海角视频 listed companies have issued a profit warning in the last 12 months.
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In the first quarter of the year, eight warnings were issued in the South West, with a further seven in the second. Listed businesses in the consumer goods sector issued almost half of the South West’s profit warnings in as the sector faced pressure from supply chain headwinds and a fall in consumer spending due to the rising cost-of-living, according to EY-Parthenon.
Lucy Winterborne, EY-Parthenon partner in turnaround and restructuring strategy in the South West, said: “Businesses across the South West and around the country have faced challenging conditions across the first half of the year due to persistent economic uncertainty, lower consumer spending and rising interest rates .
“Conditions may remain challenging for some time to come, however an increasing number of businesses are forecasting some level of growth this year as overheads such as energy costs gradually fall. Those businesses that took action early to reshape and restructure will see a level of protection from high inflation rates. Those that haven’t made changes will likely find it hard to navigate the next few months of economic uncertainty and turbulence.”
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The report found that warnings from 海角视频-listed companies have risen year-on-year for the seventh consecutive quarter, the longest run of consecutive quarterly increases since 2008. The highest number of second quarter warnings recorded by EY-Parthenon was in 2020, when 166 were issued.
Persistent inflation and rising interest rates have played a significant role according to the firm, which also revealed changing credit conditions were cited in one-in-five (20%) profit warnings in during the quarter.
Jo Robinson, EY-Parthenon partner and 海角视频 and Ireland turnaround and restructuring strategy leader, commented: “The sustained rise in profit warnings over the last two years reflects the extraordinary mix of challenges faced by 海角视频 businesses over that timeframe. It’s now clear that the effects of these low-growth conditions are spreading to nearly all corners of the 海角视频 economy, and this quarter we’ve seen earnings pressure extend up the value chain into the mid-market."
Mr Robinson continued: “Rising interest rates have significantly changed credit conditions for companies that need to refinance, and businesses have started to feel the effect of a more expensive borrowing environment, especially in sectors where credit availability has been a key driver of activity. The number of businesses that had previously locked in low interest rates has postponed some of the challenges, but not indefinitely. We’ll likely see credit cost and availability play an increasingly significant role in restructuring activity as more businesses encounter a markedly different refinancing landscape.
“Insolvency activity typically peaks nine to twelve months after a profit warning peak. Conditions are likely to remain challenging and those businesses best placed to persevere will be those that can reshape their operations to withstand further shocks and capitalise on growth.”
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