Despite an improving economic outlook, the number warnings issued rose from 255 in 2013 to 299 in 2014 for comapnies listed in Britain, the firm said in its latest Profit Warnings report. This increase was reflected throughout the FTSE 350, with just three fewer than the 2008 record level of 90 warnings in the FTSE 350. The number of notices flagged by the FTSE 100 rose to 38.
A strong pound and weakening emerging market currencies were cited as threats by 17% of companies issuing warnings in 2014. A further 20% said contract delays or cancellations were threatening prospective profits. This rose to 27% in Q4 of 2014, as global uncertanties increased, the firm said. Companies in the support services, computer and software and media were particularly vulnerable.
The rise in profit warnings, said EY, is “more consistent with a period of low growth or global shock than an improving macro outlook”. Rising geopolitical concerns and falling oil prices have challenged forecasts, despite the general improving outlook in the UK.
Profit warnings from oil and gas and ancillary sectors have risen in the early part of 2015, the firm added.
“The falling price of oil — and other commodities — adds to the pressure on contractors and suppliers, already under pressure from falling capital expenditure budgets.”
Alan Hudson, head of restructuring for EY UK & Ireland said, “It’s been a breathless start to 2015, full of surprises and volatility. The underlying forecast is for improved, albeit below par, growth, boosted by cheaper oil.
“However, the low oil price isn’t without complications and it’s not enough to compensate for weaknesses elsewhere, which look set to dampen confidence and limit global investment and consumption yet again. This mixed global outlook – and a relatively strong pound - will leave the UK economy once again reliant on domestic momentum in 2015.”