Record levels of profit warnings issued across the North East and Yorkshire

A new report from EY reveals that profit warnings issued by listed businesses across the North East and Yorkshire reached a record-breaking high in the first three months of 2020 – higher than any previous quarter in the last 20 years.

A record 31 profit warning were reported by EY between January 1 and March 31 across the North, more than three times the number issued in the same quarter last year. This represents a 210 per cent increase year-on-year.

The increase in warnings was attributed to the COVID-19 crisis, which has temporarily paralyzed many businesses, with few firms immune to its effects.

In the North East and Yorkshire, profit warnings were spread across a wide range of sectors, with FTSE retailers bearing the brunt, accounting for nearly 30 per cent of the total number.

Hunter Kelly, restructuring partner at EY, commented: “The sectors and businesses issuing the highest number of profit warnings were those most exposed to the impact of national lockdowns and their significant impact on sales levels, and in many cases, they were already showing signs of stress pre-COVID-19.

“COVID-19 has created new problems, but it has also accelerated existing structural change and exacerbated weaknesses.

“When lockdown lifts, it will create new stresses and strains on weakened balance sheets as working capital pressures increase and businesses will find it difficult to phase staff and production processes back in an efficient and economical manner.”

Across the UK as a whole, 301 profit warnings were issued by listed businesses in Q1 2020. That’s almost the same amount issued in the whole of 2019 (313) and 5 per cent higher than the total for 2018 (287).

Although 77 per cent of profit warnings blamed COVID-19, it is thought that significant parts of UK plc were struggling before the pandemic.

In January 2020 alone, EY recorded warnings had increased by 43 per cent year-on-year, indicating that many UK firms were marginal going into this crisis.

COVID-19 is expected to deliver the biggest blow to UK GDP since the First World War.

EY’s economic forecasting group, the EY ITEM Club, estimates a fall of 6.8 per cent in 2020, and that is only if the UK lockdown measures are eased at the end of May.