British businesses are facing a challenging economic environment marked by soaring costs, contract delays, and a bleak outlook. A record number of profit warnings were issued in 2024, raising concerns about the health of the U.K. economy.
Rising costs continued to exert pressure on British businesses in 2024, leading to a surge in profit warnings and casting a shadow of pessimism over the economic outlook. A new report by EY-Parthenon, the consulting arm of accounting giant EY, revealed that one in five U.K.-listed companies issued profit warnings in 2024, marking the highest proportion since the height of the Covid-19 pandemic in 2020.
This wave of warnings was driven primarily by contract and order delays or cancellations, cited in 34% of the warnings, and increasing costs, which accounted for one in five. The impact of rising costs was particularly pronounced in certain sectors. EY-Parthenon reported that 38% of FTSE-listed retailers lowered their profit guidance, while a staggering 75% of companies in the personal goods sector cautioned investors about their profit outlook. The Confederation of British Industry (CBI), representing 170,000 U.K. firms, also echoed these concerns, stating that the private sector anticipates another significant decline in output in the coming three months. This decline could lead to further price increases and a reduction in hiring.The government, while asserting its commitment to growth-friendly policies, has faced criticism for its recent fiscal decisions. The CBI pointed to the increase in employer National Insurance (NI) payments as a significant blow to businesses, prompting them to review budgets, raise prices, trim investment plans, and even cut headcount to manage the additional costs. Economists have expressed skepticism about the government's ability to turn the tide, with some arguing that the measures taken are too little, too late. Marc Ostwald, chief economist and global strategist at ADM Investor Services, stated that the government's efforts to send a positive message on the economic outlook are inadequate and require more concrete action. The ongoing pressure on profit margins due to inflation, a rising minimum wage, and increased NI payments continues to pose a serious challenge for U.K. companies
Profit Warnings UK Economy Inflation Rising Costs Contract Delays CBI Government Policies Business Sentiment
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