UK-listed firms issued 75 profit warnings in the first quarter of 2023, the highest first-quarter number since the start of the pandemic, reveals an EY-Parthenon report.
This marks five consecutive quarters of profit warnings, surpassing the 10-year quarterly average, excluding 2020.
Economic uncertainty has driven 35% of the profit warnings, as contract delays or cancellations have risen due to cautious customer spending.
Since 2022, 98 companies have issued at least two profit warnings, and 31 companies entered the risky "three warning" zone.
Consequently, 29% of these companies have delisted or are being sold, indicating a higher-than-average market dropout rate.
The technology and telecoms sectors experienced a three-year high in warnings, with 22% of first-quarter warnings coming from these industries.
Uncertain demand and cost-cutting measures have led to 69% of contract issues cited in these sectors. Access to capital has also been challenging due to higher interest rates and global banking market turbulence.
Despite an improvement in economic forecasts, the impact of past headwinds has left some businesses struggling with recession-like conditions. The coming year will be critical, as insolvencies usually peak nine to 12 months after a profit warning peak.
Retail experienced a slight reprieve with only five warnings in Q1 2023, down from nine in Q4 2022 and Q1 2022.
However, ongoing inflation, high interest rates and tightening consumer spending continue to challenge the sector, with 30% of listed retailers issuing two or more profit warnings since 2022.