UK Businesses Anxious about Growth

Olivier and Mann - UK Businesses Anxious about Growth
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Olivier and Mann

The decreasing value of the pound has led to an upturn in profit warning being issued and could signal the end of the good times according to analysts at EY, formerly Ernst and Young.

Listed companies made 73 profit warnings in the last quarter of 2016, which is 5 more than in the previous 9 months.

In January, 27 companies including heavyweights such as BT and Premier Foods issued their own warnings.

Experts see this as a possible signal that the time of stable corporate earnings could be nearly over.

The UK anticipates 2017 to be a contrast to 2016 and for many of the businesses a particularly difficult year following on from the better than expected weathering of the Brexit storm last year.

There is a chasm building between struggling companies and those doing well and most of those differences are unrelated to Brexit and have more to do with individual companies’ structural failings. This also includes those companies that benefit from a devalued currency and those that don’t.

The problems being experienced by UK companies include issues relating to the exchange rate and the delays or termination of contracts.

The most number of warnings posted from any one sector were companies engaged in support and services who posted 17 profit warnings in the months from October to December 2016. This may imply that other businesses are cutting services related costs.

Retailers came in second with 7 warnings even though the sector experienced strong demand from consumers.

Consumer spending is on the rise, however, the income margins of retailers are tightening.

Experts anticipate that the economic difficulties anticipated by the end of the year will expose more areas that need improvement as increasing costs and rising inflation will put the incomes of both retailers and consumers under pressure.