UK profit warnings hit four-year high in 2019

Changing consumer habits mean firms affected by discretionary spend were hardest hit

epa08130157 (FILE) - A general view of the City of London in London, Britain, 09 August 2019 (reissued 15 January 2020). Reports on 15 January 2020 state according to the Office for National Statistics, the inflation rate in United Kingdom fell to 1.3 per cent in December 2019, the lowest figure since November 2016. The December inflation rate that is below the Bank of England two per cent target, increases the prospects of a possible rate cut early 2020. EPA/ANDY RAIN *** Local Caption *** 55386441

People on a bridge with a view of the city of London behind them. Profit warnings by UK firms hit a four-year high in 2019 as businesses dependent on discretionary consumer spending - such as retail, leisure and travel - took a hit. EPA

Bloomberg

Jan 19, 2020

Changing consumption habits caused by new technology contributed to more British companies warning they were falling short of profit forecasts last year than at any time since 2015, according to a report by consultants EY.

British firms issued 313 profit warnings in 2019, with consumer discretionary businesses — including retail and travel and leisure — industrial support services, software services and construction and materials hit the hardest.

The number of listed companies warning in 2019 was also the highest in 18 years, marginally above the figure of 2008, the report showed.

“The UK economy isn’t in recession,” Alan Hudson, head of EY’s UK and Ireland restructuring division, said in the report. “But we could argue that several sectors are, due to rapid structural changes that are amplifying economic stresses.”

While last year proved to be tough for many industries, 2020 might bring a silver lining, he added.

“The easing of domestic political tension, combined with additional fiscal spending, should boost earnings, helping more companies to meet depressed earnings expectations,” according to Hudson.