‘Green shoots of recovery’ emerge as FTSE profit warnings fall on last year
The number of profit warnings issued by London-listed firms dipped in the first quarter of 2024, according to new data, in another sign that the “green shoots of recovery” are starting to appear in the UK economy.
According to EY-Parthenon’s latest profit warnings report, 70 firms issued profit warnings between January and March. This was seven per cent lower than the same period last year and below the 77 warnings issued in the final quarter of 2023.
The most common reason for profit warnings were contract cancellations and delays, which made up 29 per cent of warnings. Higher costs and weaker consumer confidence accounted for 17 per cent each.
The economy has been buffeted by a range of shocks over the past few years, including the pandemic, high inflation and rising interest rates. The impact of these shocks are now receding, contributing to a return to growth following last year’s shallow recession and rising consumer confidence.
Although the outlook is improving, the number of profit warnings still remained above its financial crisis peak showing the pressures still faced by firms.
“Whilst the green shoots of recovery can be seen, companies cannot afford to ignore the warning signs and rely on economic resurgence,” Jo Robinson, EY-Parthenon Partner and UK&I turnaround and restructuring strategy leader said.
“Macro-economic pressures, while less intense, have not relented in 2024 and the full impact of interest rate increases is yet to be felt by many businesses,” Robinson continued.
Firms in the consumer discretionary sector accounted for a third of all profit warnings with consumers still unwilling to spend on big-ticket items.
The biggest growth in warnings came in the personal goods sector – including luxury brands – where over half of the sector issued warnings in the first quarter alone.
By the end of the first quarter, 39 firms had issued three or more warnings in the past year. Over a fifth of these companies have de-listed or are in the process of doing so.