Over a fifth of the U.K.’s listed companies issued a profit warning in the first quarter of 2020, compared with 17% in the full year of 2008, according to a report by consultants EY.
The economic crisis triggered by the Covid-19 pandemic has pushed up the number of profit warnings in the U.K., with 301 issued in the quarter ending March 31, almost as many as the whole of the previous year, the report stated.
Travel and leisure companies were the most affected, with 70% of the sector issuing a profit warning, followed by industrial materials (63%) and retailers (61%).
EY expects a significant increase in corporate insolvencies when the lockdown lifts. “It will undoubtedly ease some pressures, but these underlying issues will remain – alongside new challenges,” Alan Hudson, EY’s U.K. Head of Restructuring, wrote in an emailed comment.
The country’s gross domestic product will fall by 6.8% in 2020 if the lockdown begins to lift at the end of May, and the U.K. experiences a slow ‘U’ shaped recovery without any major relapses, according to EY forecasting group estimates.
Although devastating, the pain in U.K. Plc cannot be fully attributed to coronavirus. In January, profit warnings increased 43% year-on-year according to EY records.
“Covid-19 has created new problems, but it has also accelerated existing structural change and exacerbated existing weaknesses,” said Hudson.
By Irene Garcia Perez