Rise in level of profit warnings sparks plea by business experts
A senior partner at EY has urged companies in Northern Ireland to identify restructuring opportunities as early as possible to prevent worst case scenario situations during Brexit.
Andrew Dolliver, restructuring partner at EY, which was involved with parties associated with the restructuring processes for Harland & Wolff and Wrightbus recently, was speaking after it revealed 18% of UK businesses have issued a profit warning in the first nine months of 2019, the highest figure since the recession.
The professional services provider said UK firms issued 235 profit warnings in the nine months to the end of September this year. The highest to date was 323 in 2008 at the beginning of the recession.
The EY Profit Warnings Report also revealed that just over one-third of profit warnings issued in Q3 2019 explicitly cited Brexit as the reason behind the warnings.
Mr Dolliver said: "Restructuring is a bellwether for the economy and worryingly the pick-up in 2019 is across a broad range of sectors and geographies. This is in line with in-year surveys such as the PMI and the Chamber of Commerce quarterly survey, which suggest much more challenging trading conditions.
"Many of the challenges reported by PLCs in our UK survey translate directly to local firms with Brexit and weakening global growth both drivers of local distress."
The report shows that 22% of the profit warnings issued in Q3 2019 by UK quoted companies cited Brexit, compared to 10% in Q1 2019 - the quarter before the March exit deadline.
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Around half of the Brexit-related warnings issued in the last year have come from FTSE sectors heavily exposed to market volatility and discretionary spending.
Mr Dolliver added: "The one caveat is that where there are profit warnings people have been given advice.
"I'm always saying the earlier someone attempts a restructure or identifies options there is a lot more that can be done. The longer you leave it the more narrow the options become. Most people hope for the best and leave things a little too late."
While Mr Dolliver believes the 'flextension' granted to Brexit will see an increase in profit warnings, he added: "It would be wrong to lay all of the blame for the increased levels of economic distress at the Brexit door.
"Structural change in a number of sectors such as transport and retailing, heightened global geo-political concerns and evolving consumer tastes are all factors in the uptick of firms needing to restructure."