Sector Focus

Finance Alert as profit warnings sweep the UK

Profit warnings are on the up across the UK – with the Brexit fiasco playing a big part, according to accountancy giant EY. According to EY’s latest Profit

Warnings Report, 12 profit warnings were issued by listed companies based in the Midlands in the first quarter of 2019, double the number recorded in the same quarter last year. The 12 warnings – slightly down

one compared to the last quarter of 2018 – were made across ten sectors, including the electronic and electrical equipment, household goods and home construction, and general retailers. The first quarter of 2019 also

represented the highest number of warnings recorded in the region in the first quarter since 2016, when 13 were issued. This mirrored the national

picture, where profit warnings increased year-on-year in Q1 2019 to 89 – 22 per cent higher than the same quarter last year and the highest number issued in the first quarter since the global financial crisis a decade ago.

‘It is hard to split out Brexit stresses from mounting global trade and growth concerns’

Dan Hurd, EY’s head of

restructuring in the Midlands, said: “Protracted uncertainty is taking its toll. The ‘no-deal Brexit’ countdown was especially disruptive for businesses exposed to blows to consumer, corporate and investor confidence – as well as those reliant on cross-border EU supply chains and regulation. “However, it is hard to split out

Brexit stresses from mounting global trade and growth concerns, including the recent weakening of the global economic outlook, and rising concerns over US-China trade relations.” The UK FTSE sectors issuing the

most profit warnings in Q1 2019 were general retailers (12), financial services (10) and travel and leisure (eight). According to EY’s report, the first sector was hit by continuing sales volatility, although they

requiring continuous investment when margins are tight, and consumers are still reluctant to pay full-price.” The report also found that the

number and percentage of profit warnings citing Brexit has risen throughout the last year, from no- related warnings in Q1 2018, to nine – or ten per cent of profit warnings – in 2019, and 12 per cent in the period to 10 April. So far in 2019, the most

Dan Hurd: No profit warnings are on the rise

surprisingly rose at the start of the year, with consumers bolstered by wage rises that continue to outstrip inflation and low employment. Mr Hurd said: “Improving disposable incomes and sector

restructuring may provide some breathing space, but retailers can find their core markets turning sour incredibly quickly. Online growth and development is relentless,

Milestone for first Islamic bank

The UK’s oldest Islamic Bank, Al Rayan Bank, is celebrating its 15th anniversary. Founded in 2004 as the first

Islamic retail bank in Europe, the Birmingham-based bank has grown in appeal to both Muslim and non-Muslim audiences alike and currently serves more than 85,000 customers, more than a third of which are believed to be non-Muslim. With assets of almost £2bn, Al

Rayan Bank is the UK’s largest Islamic bank and has become a significant rival to mainstream banks, frequently topping the independent ‘best-buy’ savings charts. The bank’s Sharia-compliant

finance principles mean that it is able to provide Islamic finance to many thousands of Muslim households in the UK, which would otherwise be excluded from the mainstream financial system due to their faith. The bank has also contributed significantly to putting Britain at the forefront of Islamic finance globally and last year became the first ever bank to issue a public Sukuk (Islamic bond) in a non- Muslim country. Al Rayan chief executive Sultan Choudhury said: “As the UK’s oldest Islamic bank, Al Rayan Bank is a pioneer of British


frequently cited reasons for making a profit warning were: falling sales, contract issues, and increasing costs and overheads. Mr Hurd said: “Our business

community in the Midlands is certainly feeling the effects of these national and international pressures at a local level. Businesses are playing catch-up in an era of unprecedented structural change, when great investment is required just to keep up. “Balance sheet restructuring has

brought some breathing space, but unless companies can invest to adjust to new sector dynamics, they’ll hit the buffers again.”

Barclays fund will help SMEs to grow

Barclays has announced a £14bn lending fund as part of a series of initiatives to help small and medium-sized businesses (SMEs) survive Brexit. Alongside the funding, the bank

will also be supporting 100 SME Brexit clinics and seminars and establishing a network of relationship management experts and industry specialists across the UK. The initiatives are designed to

Sultan Choudhury: Ethical offering

banking and will continue to champion the UK as a global financial hub, confirming the country’s standing as a leading global centre for Islamic finance and expertise. “Consumers today have more

choice than ever before when it comes to their personal finances, but it’s Al Rayan Bank’s highly competitive and ethical offering that sets us apart from other players in the market. “Over the past 15 years, we’ve

seen Islamic banking transform from a faith-based niche into a genuine alternative form of finance, and I am proud of the

instrumental role that Al Rayan Bank has played in this change.” The Bank’s first branch opened

on Edgware Road, London, and one of the first people to open an account was Ms Hiba Ibrahim, still a loyal customer of the bank today. She said: “I set up a savings

account with Al Rayan Bank at its Edgware Road branch in London 15 years ago and later opened a current account with them. “I liked the fact that I was able

to look after my finances ethically, in a Sharia compliant way, without compromising on competitive rates of return, and this is still important to me today.”

help SMEs with issues around cash- flow and working capital, exporting goods abroad, labour, supply chain management, and broader issues of preparedness for when the UK is expected to leave the EU. Barclays group chief executive

Jes Staley said: “Barclays stands ready to help local businesses in towns, cities and rural communities, up and down the country, during this period of uncertainty. “This £14bn fund, along with our

broader package of support, shows our commitment to the local businesses that are the backbone of the UK economy – we are here to help them plan for the future. “It is the entrepreneurs, the

farmers, the manufacturers, the house-builders, the new tech firms, and countless other businesses, that will help the country deal with – and capitalise on – this period of change. Barclays is here to help SMEs to do exactly that.”

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