Profit warnings issued by listed companies in the North West down 21% year-on-year in the first half of 2024

•  Listed companies in the North West issued 11 profit warnings in H1 2024, down from 14 in the first half of 2023
• Four warnings were issued during Q2 2024 in the North West, down slightly from five in the same quarter last year
• Consumer-facing and industrial North West listed companies were most significantly affected, issuing a total of three warnings each in H1
• Nationally, the UK saw a total of 49 profit warnings issued in Q2 2024, the lowest quarterly total since Q2 2021

North West, 23rd July 2024: UK-listed companies in the North West issued a total of 11 profit warnings during H1 2024, down by 21% from the 14 warnings issued in the same period last year, according to EY-Parthenon’s latest Profit Warnings report.

Three of the warnings were issued by consumer-facing businesses in the North West, reflecting recent consumer confidence challenges. Meanwhile, a further three warnings were issued by companies in the FTSE Industrials sectors in the region.

In the second quarter of 2024 there were just four profit warnings issued in the North West, down from five in Q2 2023, marking the region’s lowest quarterly total for three years. This also represented a 43% fall quarter-on-quarter, with warnings down from seven in Q1 2024.

Similarly, a total of 49 profit warnings were issued in Q2 across the UK – also representing the smallest number of quarterly warnings since Q2 2021.

Despite a decrease in the number of quarterly profit warnings, the proportion of UK listed companies issuing a warning over the past year stands at 18.4%, exceeding the peak level observed immediately after the 2008 global financial crisis. This high level can be attributed to a significant number of ‘new’ companies issuing warnings for the first time within a 12-month period. During Q1 2024, 61% of profit warnings came from companies that had not issued one for the past 12 months, and during Q2 2024 this figure stood at 50%.

Leading factors behind many Q2 profit warnings included contract issues, which were cited in 29% of warnings. As companies contended with increasing labour and supply expenditure, cost pressures rose as a key factor in profit warnings for the first time in more than 12 months and were cited in more than a quarter (27%) of Q2 profit warnings.

Sam Woodward, EY-Parthenon UK&I Turnaround and Restructuring Partner in the North West, said: “The steady decline in profit warnings issued by listed companies in the North West during the first half of the year is encouraging and reflects the strength of businesses in the region. Although the UK appears to have turned a corner following the mild technical recession seen in late 2023, economic growth remains relatively modest. However, businesses in the North West continue to show resilience.

“With inflation now much lower than it has been in the recent past, coupled with expectations for interest rates to fall later in the year, increasing momentum and stability could be on the horizon. However, fiscal policy may be difficult to predict in the coming months given the recent election of a new government, and economies can be affected by a range of external, volatile factors, so companies should, as always, prioritise scenario planning and optimise cash flow to ensure a stable foundation.”

Jo Robinson, EY-Parthenon Partner and UK&I Turnaround and Restructuring Strategy Leader, said: “An unprecedented rollcall of global elections and geopolitical risks means that an element of uncertainty remains, potentially exerting further pressure on spending and growth. We can expect the economy to continue to recover, but slowly and unevenly.

“We have started to see more companies coming back to the restructuring table because they haven’t made the fundamental changes needed to adapt their operations and balance sheets to new demand, cost and competitive realities. Refinancing is a growing risk, with many companies surprised by the added levels of due diligence and time needed to refinance in this market.

“We expect all of this to drive a slow uptick in restructuring, but without necessarily a big upsurge in administration appointments, as more companies tackle their issues through restructuring plans and consensual agreements with creditors. The profit warning cycle may have turned, but we are at the start of the restructuring one.”

FTSE Industrial Support Services accounted for more than a fifth of all warnings in Q2 2024

While overall profit warnings fell in Q2 2024, there were a number of sectors where warnings remained high, revealing persistent and developing challenges.

Companies within FTSE Industrial Support Services, which encompasses business service providers, industrial suppliers and recruitment companies, issued 10 warnings in Q2 2024, accounting for 20% of all UK profit warnings during the period. Of the 19 warnings issued by the sector in 2024, eight have come from business services providers, seven from recruitment and training companies and four from industrial suppliers.

Warnings were also seen across FTSE Software and Computer Services (5), Retailers (4), Household Goods and Home Construction (4) and Finance and Credit Services (3).