UK profit warnings increase in third quarter

There were 84 profit warnings between July and September this year, an 11% year-on-year rise, bringing the number of warnings this year to 203 to date.

EY-Parthenon tracks the statements from publicly listed companies to the stock exchange outlining that they will report full-year profits materially below management or market expectations.

The proportion of companies to have issued a warning over the last year is now 19.2%, the highest rolling 12-month percentage since the pandemic, according to the analysis.

Almost two-fifths of warnings ( 38%) cited contract and order cancellations or delays – the highest percentage for this reason in 15 years – while a third ( 33%) of warnings mentioned falling sales.

The FTSE sectors with the highest number of warnings in the third quarter were: industrial support services ( 10 ), technology hardware and equipment ( 8 ) and software and computer services ( 7 ).

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.

“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.”