Profit Warnings Reach Highest Level Since Financial Crisis in 2008
- 18.2% of UK-listed companies issued profit warnings in 2023, higher than the peak of the financial crisis in 2008.
- Two out of five FTSE retailers issued a profit warning last year.
- Overall, 24 profit warnings were issued in the retail sector in 2023 compared to 36 in 2022.
- 294 profit warnings were issued across UK-listed companies in 2023, down from 305 in 2022.
- Delayed contracts or decisions accounted for 26% of the reasons for profit warnings, while increased costs and higher interest rates made up 19% each.
The UK retail sector faced a significant challenge last year as the percentage of companies issuing profit warnings reached its highest level since the financial crisis in 2008, with two out of five FTSE retailers issuing a warning. The overall number of profit warnings increased to 24 in 2023 from 36 in 2022. EY attributed this to high pressure on disposable incomes affecting discretionary spending, particularly in non-food areas like fashion. In total, 294 profit warnings were issued across UK-listed companies, a slight decrease from the previous year’s 305. Delayed contracts or decisions accounted for 26% of the reasons, while increased costs and higher interest rates made up 19%. Thirteen percent of companies that warned for the third time in 12 months have since de-listed. EY predicts an uncertain economic future with disparities between businesses capable of capitalizing on growth and those hampered by earnings pressures and access to capital.
Factuality Level: 8
Factuality Justification: The article provides accurate information about the increase in profit warnings among UK-listed companies, specifically focusing on the retail sector and mentioning the reasons behind it such as delayed contracts, increased costs, and higher interest rates. It also includes expert opinions from EY partners George Mills and Jo Robinson to provide context and analysis of the situation. The article is not overly dramatic or sensationalized, and presents a balanced view on the economic outlook for 2024.
Noise Level: 7
Noise Justification: The article provides relevant information about the increase in profit warnings among UK-listed companies and discusses some of the factors contributing to this trend, such as increased costs, delayed contracts, higher interest rates, and weak consumer confidence. However, it lacks a more in-depth analysis or exploration of potential solutions for affected businesses and does not offer significant actionable insights for readers.
Financial Relevance: Yes
Financial Markets Impacted: UK-listed companies, FTSE retailers, chemicals, recruitment sector
Financial Rating Justification: The article discusses the high percentage of profit warnings issued by UK-listed companies and its impact on various sectors such as retail, chemicals, and recruitment. It also mentions the potential challenges for businesses in accessing capital and refinancing due to increased interest rates and weak consumer confidence.
Presence Of Extreme Event: a
Nature Of Extreme Event: Financial Crisis (stock market crash, bankruptcy of a major corporation, etc.)
Impact Rating Of The Extreme Event: Severe
Extreme Rating Justification: The article discusses the high percentage of UK-listed companies issuing profit warnings, exceeding the levels seen at the peak of the financial crisis in 2008, with retail being one of the hardest hit sectors. The economic impact is significant as it affects consumer spending and business confidence.
www.retailsector.co.uk