London-listed companies issued 305 profit warnings in 2022, 50% higher than 2021, according to a report by consultancy firm EY-Parthenon.
“Our latest data shows that stress is spreading across the economy,” said EY-Parthenon.
“Threats to earnings and liquidity are multiplying and engulfing more sectors and companies as the economy faces recession.
“With the percentage of UK-listed companies issuing profit warnings already at 2008 levels, we also expect insolvency levels to rise in 2023.
“When companies spot a problem, it is vital that they act quickly.
“Delay and denial limit the options available for businesses to turn the situation around.
“Keeping stakeholders on board is also essential, so they can work with a business and its turnaround. Stakeholder and market confidence can drain very quickly in a downturn.”
Jo Robinson, EY-Parthenon Head of UK & Ireland Turnaround and Restructuring Strategy, said: “With the percentage of UK-listed companies issuing profit warnings already at 2008 levels, it’s possible that we’ll see more and larger corporate casualties in 2023.
“So, what measures can companies take to navigate another difficult year?
“Consumer-facing companies still led profit warnings in the fourth quarter of 2022.
“Rising costs, changing consumer behaviour, and the cost-of-living crisis will keep the pressure on consumer sectors throughout 2023.
“But it’s clear that stress is now deepening and spreading into new areas. Profit warnings are coming thick and fast from across the economy, as cost pressures pass through supply chains, falling confidence hits spending and contract renewals, and credit tightens.
“Small to medium-sized companies have taken the main brunt of this pressure so far. But in such febrile markets, stress is contagious, and no company or sector can really consider themselves immune.
“Companies need to remain vigilant for issues across their own business, but also their supply and value chains.
“It will be the first time that many management teams have contended with this extent and complexity of challenges.”