Record Number of UK Firms Warn Rising Costs Could Hurt Profits: Report


A record number of UK-listed companies have issued warnings to shareholders that rising costs could hurt their profits, a new report shows.

The number of profit warnings issued in the first quarter of 2022 rose by 44 percent compared to the same period last year, according to the report from accounting firm EY.

Some 43 percent of listed companies that warned profits could be lower than anticipated said it is owing to rising costs as commodity and energy prices surge.

This compares to just 27 percent that said so in the last three months of 2021 and an average 10 percent that cited it as the main cause across the past decade.

Alan Hudson, partner at EY, said: “The war in Ukraine has contributed to greater supply-side pressures and raised questions about confidence and demand in 2022.

“We are now looking at a year with ongoing COVID-19 disruption alongside higher inflation, greater uncertainty, and faster monetary tightening than we expected just a few months ago.”

Meanwhile, the Confederation of British Industry (CBI) said firms might need further support before the autumn budget to help tackle rising costs.

Alpesh Paleja, the CBI’s lead economist, said, “While private sector growth seems resilient so far, near-term challenges are growing.”

He said that “strong inflationary pressure is hurting businesses through higher costs” and will “weigh on the economic outlook for this year.”

Noting that the government has announced support for low-income households, he said, “To combat rising cost pressures, firms may also require further support prior to the autumn budget, not least energy intensive firms.”

According to a new survey conducted by the Institute of Directors (IoD), another UK business group, optimism among business leaders in prospects for the UK economy remained very low in April after it “collapsed” the previous month.

Kitty Ussher, chief economist at the IoD said, “The invasion of Ukraine sent shockwaves around British boardrooms as firms grappled with the impact on their own organisations and those of their trading counterparties.”

The survey of 575 of IoD members showed that their confidence in the prospects for their own firms partially recovered in April from March’s low as business leaders came to terms with the impact of the Ukraine war.

But Ussher said the optimism in the UK economy “remains very low.”

“Business leaders see no early prospect of an improvement in inflation and the overriding mood is one of heightened risk and uncertainty,” she said.

PA Media contributed to this report.

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