Percentage of UK firms posting profit warnings higher than 2008

Last year, 294 profit warnings were issued by UK-listed companies, marking a decrease of 11 compared with the 305 issued in 2022, according to EY-Parthenon’s most recent Profit Warnings report.

The percentage of companies to have issued a warning in 2023 – 18.2% – exceeded the level of 17.7% recorded in 2008, during the financial crisis.

The FTSE industrial support services sector issued 25 warnings – 50% higher than in 2022 and the highest number of warnings in 2023 – followed by FTSE retailers ( 24 ), FTSE software and computer services ( 21 ), FTSE media ( 17 ) and FTSE construction and materials ( 16 ).

A profit warning is a statement from a publicly listed company to the stock exchange outlining that it will report full-year profits materially below management or market expectations.

Of the total warnings issued last year, over a quarter ( 26%) were attributed to delayed contracts or decisions, 19% were due to increased costs and 19% cited the impact of higher interest rates.

Jo Robinson, EY-Parthenon partner and UK&I turnaround and restructuring strategy leader at Ernst & Young, said: “Pervasive uncertainty in 2023 created major challenges for businesses around earnings and forecasting, and this is reflected in the number of profit warnings issued last year.

“While pressure around costs eased somewhat toward the year-end, the uptick in warnings caused by delays to business decisions and weak consumer confidence indicates an ongoing reluctance to commit to discretionary spending.

EY-Parthenon analyses UK-registered companies listed on the UK’s main market or alternative investment market to produce the report.

Robinson added: “In 2024, businesses will hope for a quicker-than-expected fall in inflation and interest rates, but many moving  parts need to slot into place before we can be sure of an economic ‘soft landing’. We expect to see increasing disparity between businesses that are positioned to capitalise on still limited growth and those that are hampered by the impact of recent earnings pressures or their access to and the cost of capital. It is shaping up to be an easier year for many, but not all UK companies.”