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Finance


Profit warnings are on the rise, says new report


Listed businesses in the West Midlands recorded a 46 per cent increase in the number of profit warnings in 2020, according to a new report by accountant EY. The firm’s ‘Profit Warnings


Report’ says that in total 38 profit warnings were issued by the region’s listed businesses, compared to 26 in the previous year. The overwhelming


majority of profit warnings from West Midlands listed companies (82 per cent) were attributed to coronavirus. Nationally, the


number of UK listed companies at risk of insolvency has doubled in the last 12 months, according to the new report. 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 – 15 per cent higher than the previous record of 506 in 2001. This historic high contrasts with


very low levels of corporate insolvency. Of the West Midlands’ listed businesses that issued a profit warning in 2020, six issued their third or more within a 12 months period. The sectors with the highest


percentages of companies issuing


profit warnings in the UK last year, were those most affected by the implications of lockdown restrictions on consumer behaviour – for example retail, travel and leisure. In 2020, 19 per cent of FTSE


retailers issued their third or more profit warning, while the equivalent figure for FTSE travel and leisure was 16 per cent. Retail has been one of the hardest hit sectors of the pandemic, having reported the worst sales figures on record. The final quarter of


2020 concluded with FTSE retailers surpassing the highest annual total of


profit warnings for the sector by reaching 53 – two more than the previous high set in 2008. Dan Hurd (pictured), head of


turnaround and restructuring strategy at EY in the Midlands, said: “Many UK businesses have been treading on thin ice for months with government support propping them up. “While there is speculation


these measures could be extended until the summer, the countdown has started, and in the comings weeks or months we’ll find out how many of these companies can keep their head above water.”


Firms are looking to invest in their future


Two-thirds of mid-sized firms in the Midlands believe now is the right time to invest in their business – despite the current lockdown and ongoing economic challenges facing the region. The latest BDO ‘Rethinking the


Economy’ survey of 500 mid-sized businesses, found the top three Midlands investment priorities in 2021 are investing in technology and new processes to increase business efficiency, developing initiatives to support employee wellbeing and hiring graduates and apprentices. However, Midlands businesses


have called on the Government to do the same, in order to make significant progress in ‘levelling up’


the UK regions over the next three years. When asked about the top three


investment priorities for the region, company leaders are calling on the government to invest in 5G and internet connectivity (50 per cent), develop more commercial space for business (40 per cent) and mandate more devolution to local government (40 per cent). Tim Foster, partner at BDO, said:


“It’s very clear that managing the impact of ongoing Covid-19 restrictions is still a number one priority for businesses, but companies are looking ahead. It’s encouraging to see a real appetite for investment among the region’s mid-sized businesses.”


March 2021 CHAMBERLINK 57


Sector Focus


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