Throughout her shimmering political career Labour's Dianne Abbott has taught us all so much. Do you remember that classic moment when she tried to add up 5 and 7 on Radio 4's Good Morning programme and got a swan? Then there was that time she tried to persuade us all that Labour's plans to re-nationalise the railways would cost each of us £1.28, as she divided the numbers into themselves, took away, er, the number she first thought of, multiplied by a fraction of 100 and, er um, subtracted by a larger sum than normal.
Over the weekend she outdid herself on racism and prejudice, but taught us that we can say whatever we like as long as we later send out a Tweet that says: "I wish to wholly and unreservedly withdraw my remarks and disassociate from them." Even though the NTI newsroom is confident we will say everything we mean to say about business profit warnings in this article we will be sending out such a Tweet at teatime. Just in case.
EY reliably tell us that the number of profit warnings issued by UK-listed companies in 2022 increased by 50 per cent year-on-year, with record levels of warnings citing rising costs. In total, 305 profit warnings were issued in 2022, an increase of 102 from 2021 when 203 warnings were issued. One of the many reasons this matters is that those in our glorious profession will often take note of such warnings as a relaible portent of the future.
Moving into 2023, the Financial Times today (Monday 24 April) reports that UK-listed companies issued 75 profit warnings in the first three months of the year, their highest first-quarter number since the onset of the Covid pandemic in 2020. A total of 98 companies have warned on profits more than once since the beginning of last year, according to researchers. The coming year will be crucial, as insolvency usually spikes about a year after a profit warning peak.
Inflation, higher borrowing costs and a tightening in consumer spending will continue to add pressure on a sector that is already under stress. Nearly a third of the UK’s listed retailers have warned on profits at least twice since January of last year, well above the 8 per cent cross-sector average. Almost 30 per cent of the 31 companies to have posted three such announcements since the start of 2022 have delisted, or are in the process of being sold. Typically, one in five companies delist within a year of their third warning, mostly because of insolvency.
Economic uncertainty was a factor that led companies to warn on profits, the research found, with more than a third of businesses citing delayed, reviewed or cancelled contracts in their updates to investors. Much of the turmoil has been transferred from hospitality, leisure and retail and is now haunting tech companies, who are reporting the greatest difficulties.
That glimmer on the horizon is not the sheen emanating from the blush on Diane Abbott's forehead, but Standard & Poor’s reworked and revised credit rating for Britain, changing the outlook to 'stable' from 'negative', affirming our AA rating. The ratings agency cut its outlook to 'negative' after last year’s mini-budget as it judged then-prime minister Liz Truss’s plans to cut taxes would cause debt to keep rising. Within ten minutes of the budget announcement Standard & Poor said, of the UK-rating:
"Give us a letter, any letter ... but it can't be A or B."