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EY report warns North East and Yorkshire firms against complacency

More North East and Yorkshire businesses issued profit warnings in the second quarter of 2017 than they did in the first three months of the year, according to a new study.

EY’s latest Profit Warnings report saw the number rise from 2 to 5 firms and while the number remains relatively low, the big four accountancy firm has warned against complacency in the market.

The seemingly stable picture in the regions however masks falling expectations and significant changes beneath the surface that reflect the UK’s changing economic balance, according to EY.

Across the UK, quoted companies issued 45 warnings in Q2 2017, 40% lower than the previous quarter, almost a third lower than Q2 2016 and well below the post-crisis second-quarter average of 58. According to the report this is the biggest single quarterly percentage drop in profit warnings since the second quarter of 2009.

A stronger than expected global economic backdrop have resulted in significantly lower warnings, according to the report. A fifth of warnings cite internal operational problems, with external factors, such as exchange rates and price pressures, slipping down the list.

Hunter Kelly, EY’s head of restructuring for Yorkshire and the North East, comments: “A low level of profit warnings should not lead to complacency.

“The reality is that corporate earnings forecasts have reduced and combined with the economy’s relative outperformance compared to expectations this has enabled more companies to meet their forecasts.

“It is possible that compared to expectations profit warnings may not rise dramatically without an economic downturn, given that companies seem to have come to terms with forecasting in the current economic climate.”

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