Profit warnings soar in region amid virus crisis
THE number of profit warnings issued by listed businesses in the West Midlands in the first half of 2020 increased by 131 per cent, according to new research.
Unsurprisingly, more than three quarters (77 per cent) of those issuing the profit warnings cited the impact of Covid-19 as the reason behind them.
The figures are contained in the latest profit warnings report published by financial services firm EY which is warning of funding “cliff edges” and months of uncertainty.
The report said there were 30 profit warnings among West Midlands companies in the first six months of this year – the highest figure for two decades – with 21 in the first quarter and nine in the second.
The warnings related to a wide range of sectors in the region, with the highest figures coming from automobiles and parts and industrial metals and mining (both five).
Dan Hurd, partner in the strategy and transactions team at EY in the Midlands, said: “Unsurprisingly, the most immediate and significant impact of Covid-19 has been acutely felt by companies whose existing structural challenges have been exacerbated by the pandemic.
“Many businesses that were essentially sound before the virus struck have been forced to reassess their expectations and business plans too.
“It’s vital businesses in the West Midlands don’t underestimate the depth and extent of both the immediate and long-term challenges ahead.
“Manufacturers in particular have felt the squeeze from Covid-19 and the subsequent pause in their operations. With many of these businesses also reliant on a global supply chain and export sales market, it’s likely some will continue to face considerable challenges in the short to medium term.
“Business resilience and the ability to remain flexible and utilise new technology will undoubtedly result in opportunities for growth for some businesses. It is still a highly uncertain time for businesses who are adjusting to new ways of working and changing levels of demand.
“With potential cliff-edges in government support and further twists and turns likely in Brexit negotiations, this uncertainty may continue in the months ahead.”
The picture across the UK is similarly bleak. Almost a third of listed companies (compared to 18 per cent in 2019) issued a profit warning in the first half of 2020.
EY said it recorded 466 profit warnings for the six-month period, more than the total number issued for the whole of 2019 (313).
The impact of the virus was most felt in the first quarter by sectors such as travel, leisure, hospitality and retail. But this has since spread to industries exposed to the knockon effects of changing corporate and consumer behaviour.