Profit warnings issued by listed companies in Yorkshire down by 35% in H1 2024

UK-listed companies in Yorkshire issued a total of 11 profit warnings in H1 2024, down by 35% from the 17 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 Yorkshire, reflecting recent consumer confidence challenges. Meanwhile, a further three warnings were issued by companies in the FTSE Industrials sectors in the region.

Listed companies in Yorkshire issued a total of four warnings in Q2 2024, less than half of last year’s Q2 total for the region (nine). This marked Yorkshire’s lowest quarterly number of profit warnings since Q4 2021. Profit warnings in the region also fell by 50% quarter-on-quarter, down from eight in Q1 2024.

Yorkshire’s declining profit warning figures were in line with the national trend, with a total of 49 profit warnings issued in Q2 across the UK – 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.

Tim Vance, EY-Parthenon UK&I Turnaround and Restructuring Partner in Yorkshire, said: “The significant fall in profit warnings seen in Yorkshire across the first half of 2024 is encouraging and reflects the resilience of businesses in the region. While the UK has seen a stronger start to the year from an economic perspective in comparison to last year, growth remains modest, which continues to pose challenges for businesses throughout the UK, including in Yorkshire.

“Inflation is now at a much lower level than it has been in the recent past and, given interest rates are expected to fall later in the year, a brighter, more buoyant period of economic activity and growth could be ahead for businesses in the region. However, as always, the possibility of a range of external, volatile factors impacting the UK economy remains, so companies should still be prioritising stress testing and striving for consistently healthy balance sheets to ensure the best chances of stability and growth going forward.”

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).