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Odds stacked against region's retailers as critical Christmas period approaches

PUBLISHED: 10:00 23 October 2019

Profits warnings are up as retailers look towards the critical festive period  Picture: DAVE VINCENT

Profits warnings are up as retailers look towards the critical festive period Picture: DAVE VINCENT

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Profit warnings in East Anglia have hit a three year peak as high street pressures and Brexit take their toll, a study has found.

EY regional spokesman Stuart Wilkinson Picture: EYEY regional spokesman Stuart Wilkinson Picture: EY

Accountancy firm EY said companies will need to react quickly to changing conditions as its latest Profit Warnings Report showed retailers in particular are feeling the strain.

It revealed that in the nine months to the end of September, quoted companies in East Anglia issued seven profit warnings - the highest total since 2016, when there were also seven.

MORE - Will Brexit lead to food shortages and rising prices?

Over July, August and September, EY recorded four profit warnings from businesses based in the region, in contrast to the last quarter when no warnings were recorded.

There were 77 profit warnings across UK listed businesses in quarter three - an eight-year high, with just over a third of warnings over the period explicitly citing economic volatility, with a further 30% blaming contract delays or cancellations.

So far in 2019, UK FTSE companies have issued 235 profit warnings - the highest total since 2008 (323).

East of England EY partner Stuart Wilkinson warned that continued economic uncertainty would affect local firms' decision-making, which could drive profit warnings further in the remaining weeks of 2019.

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"This summer, in addition to domestic concerns, UK businesses have felt the growing impact of escalating political and trade tensions in the global economy," he said.

"The negative effect of protracted and widespread uncertainty is evident, with warnings becoming more widespread across all FTSE sectors.

"Although the economy is in better shape now than it was in 2008, there are clear parallels in terms of sheer unpredictability. Profit warnings aren't an absolute measure of performance, but they do track a company's ability to meet their forecasts."

Retail profit warnings have hit an eight-year high in run up to the all-important festive season, with 28 warnings recorded between January and September.

"The odds are stacked against some retailers as they go into the all-important final quarter of the year. Sales have slowed, in-store and online, throughout 2019 and dipped further in September," said Mr Wilkinson. "Retail's biggest problem isn't consumers' ability to spend, but their willingness. Despite a strong labour market, rising wages, low inflation, and improving disposable incomes, the public's concern for the broader economy is hitting discretionary spending especially hard."

EY said 22% of the profit warnings issued in quarter three cited Brexit, compared to 10% in quarter one.

Around half of these have come from FTSE sectors heavily exposed to market volatility and discretionary spending.

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