Listed companies across the Midlands issued 37 profit warnings in 2024, a 19% (six) year-on-year increase, according to the latest EY-Parthenon Profit Warnings report.
In Q4 2024, 13 warnings were issued by companies in the region, four more than Q3 and the highest quarterly total since Q4 2022, when 14 warnings were issued.
In the Midlands, companies within the FTSE Consumer Discretionary sectors issued the highest number of profit warnings in Q4, totaling nine. This trend has been consistent throughout 2024, with Consumer Discretionary sectors accounting for 54% of all profit warnings (20 warnings in total).
Dan Hurd, a Partner at EY-Parthenon in the Midlands, said: “Cost pressures caused by uncertainty continued to drive an increase in profit warnings in 2024, particularly within the region’s retail sector.
“As concerns about how rising costs, driven partly by increases in National Insurance and national living wage, become a reality, it is important that businesses look at how they can offset these increases through efficiency savings or price adjustments.
“A weaker-than-expected end to 2024 means that UK economic growth in 2025 will be slower than previously predicted. EY’s ITEM Club Winter Forecast predicts that GDP will likely struggle to accelerate beyond 1% in 2025, however real incomes should continue to rise as interest rates fall, leaving consumers more confident and likelier to spend.”
One in five UK-listed companies issued a profit warning in 2024
Across all sectors, one in five (19%) UK-listed companies issued a profit warning in 2024, the third highest annual proportion in 25 years, behind only the 2020 pandemic (35%) and the impact of the dot-com bubble burst and 9/11 in 2001 (23%).
By the end of 2024, 274 profit warnings had been issued – including 71 in Q4 – down slightly from the 294 issued during 2023.
The leading factor behind profit warnings in 2024 was contract and order cancellations or delays, cited in 34% of warnings, including 39% in Q4 – the highest quarterly percentage for this reason in more than 15 years. Increasing costs triggered nearly one in five (18%) warnings in the last 12 months.
Jo Robinson, EY-Parthenon Partner and UK&I Turnaround and Restructuring Strategy Leader, said: “It’s clear that companies have faced an extraordinary succession of forecasting challenges since the pandemic, contending with interconnected disruptions to supply chains, material and energy costs, and the labour market, as well as higher interest rates.
“2024 was also an exceptional year for global geopolitical uncertainty and policy upheaval, with a record level of profit warnings linked to contract and spending delays as businesses held back from recruitment and investment. As a result, companies’ forecasting strategies need to respond to both short-term policy changes and deeper structural issues.
“Ordinarily, a sustained increase in company earnings pressures would be followed by a significant rise in insolvencies. But this cycle has been different. The availability of cheap, long-term debt and pandemic support provided breathing space for both businesses and stakeholders to explore consensual solutions and new restructuring options.
“However, more companies are now reaching a tipping point as cumulative pressures build. We don’t expect a huge uptick in insolvency levels in 2025, but we are now seeing more distress, and more stakeholders viewing insolvency processes as a real option in finding the best path forward.
“While the pace of profit warnings has eased slightly in early 2025, we’ve seen the recruitment sector continue to grapple with a downturn in activity across key geographies and sectors, before the increases in employer National Insurance Contributions and the National Living Wage take effect. Across the board, the road ahead remains rocky with challenges around trade, geopolitics, interest rates, and more.”
