Profit warnings issued by UK-listed companies hit two-year high

UK-listed companies issued 84 profit warnings between July and September 2024, the highest quarterly total for two years, according to data from EY.

The report found that profit warnings from UK-listed companies rose 11% compared with Q3 2023.

The proportion of those that have issued a warning over the last year now stands at 19.2%, the highest rolling 12-month percentage since the pandemic and, before that, since 2001.

Leading factors behind Q3’s profit warnings included contract and order cancellations or delays, cited in 38% of warnings, the highest percentage for this reason in 15 years. Falling sales also triggered a third (33%) of the quarter’s warnings.

The FTSE sectors with the highest number of profit warnings in Q3 were Industrial Support Services, with 10 warnings issued, and Technology Hardware and Equipment, with eight.

Customer reluctance to commit to new contracts and orders was particularly pronounced in the Industrial and Technology sectors, where over 90% and 70% of the warnings, respectively, were related to either lower orders or contract delays and cancellations.

Jo Robinson, EY-Parthenon partner and UK&I turnaround and restructuring strategy leader, said: “Uncertainty has been a persistent feature of the business environment for several years now but, unusually, this latest surge in warnings wasn’t preceded by a sudden economic downturn or one-off event.

“This uncertainty seemed to intensify over the summer as companies awaited the new Chancellor’s Autumn Budget and were also affected by ongoing heightened geopolitical tensions. The latest profit warning data gave us a real-time indicator of this shift in business sentiment and the impact this can have on company earnings.”

She added: “Time will tell whether this rise in profit warnings is a temporary spike or indicative of a longer-term trend, but against a volatile macroeconomic and policy backdrop, coupled with profound changes in technology and consumer behaviour, abrupt adjustments to earnings expectations appear increasingly likely.

“In this environment, companies and their stakeholders must be vigilant in proactively identifying and addressing emerging issues before they escalate. The restructuring landscape may be rapidly evolving, with innovation often offering opportunities for value preservation, but prompt action is still crucial to secure the best possible range of outcomes.”