The number of profit warnings issued by North East listed companies increased by eight times in 2020, new research shows.
The 16 warnings in 2020 compares with just two in 2019, according to EY’s latest Profit Warnings report. The figure is at a similar level to the peak of the financial crisis in 2008, when 17 warnings were recorded in the region.
Almost all of the warnings cited the coronavirus pandemic as a reason for falling profit levels.
Hunter Kelly, EY-Parthenon turnaround and restructuring strategy partner, said: “The majority of North East businesses issuing profit warnings last year did so in the first quarter and 94% of all profit warnings issued during the year cited Covid-19 as a factor, many in the wake of the initial shock of the first lockdown in March.
“Since then, businesses have continued to be impacted by the pandemic, but profit warning levels fell as the year progressed. This reflects management teams being cautious with their forecasting, as well as the help available from the various government support initiatives being extended.
“Many businesses have been reliant upon Government for a number of months now. While there is speculation these measures could be extended until the summer, the countdown has started, and in weeks or months we’ll find out how many companies have the headroom and business model to stay afloat.”
Nationally, the highest levels of profit warnings were issued by companies in the retail and leisure sectors, but in the North East they were seen across a range of sectors.
Across the UK, a total of 583 profit warnings were issued by UK listed companies in 2020, this is the highest annual total in 21 years of EY research.
