Profit warnings issued by UK-listed companies increased by 50% in 2022

Of these, 152 were due to rising costs – double the share in 2021 – while 17.7% of the UK’s 1,193 listed businesses issued a profit warning, equal to the proportion of companies issuing warnings during the global financial crisis in 2008.  

Meanwhile in the second half of 2022, 169 warnings were issued – the second highest total since 2015, with there being 83 profit warnings issued in the fourth quarter of 2022. Of these, 41% cited rising costs while 24% were due to delayed or cancelled contracts and 20% were due to weaker consumer confidence.  

Additionally, 2022 saw 31 listed companies issue their third consecutive profit warning in 12 months, with 13% of these already having gone through a restructuring process, 19% havinf breached covenants and 35% having changed chief executive or chief financial officer as of mid-January 2023.  

Responding to this, EY-Parthenon partner and UK and Ireland restructuring strategy leader Jo Robinson said: “2022 was a challenging year for UK companies with rising operational costs, changing consumer behaviour, and the cost-of-living crisis having an acute impact on consumer-facing sectors.  

“We are now seeing stress deepen and spread into other areas of the economy, such as industrial sectors, which saw the biggest rise in warnings in the fourth quarter. Cost pressures are passing through supply chains, business confidence is weak, and credit markets are tightening.” 

Looking at the figures by sector, more than a third – 36% – of those in consumer facing sectors issued profit warnings, up from a fifth of companies warning of this in 2021. This included 48% of FTSE retailers, 60% of FTSE personal care, drug and grocery store companies and 30% FTSE food producers.  

Increasing costs featured in 63% of consumer warnings, with 33% citing falling consumer confidence, 22% supply chain problems and 20% labour market issues.  

EY turnaround restructuring strategy partner Sam Woodward said: “Although festive trading was better than expected for many businesses, the bar was set low by exceptional levels of consumer sector profit warnings in 2022. The ‘golden quarter’, a vital period for consumer companies, included a winter World Cup along with the disruption from train and postal strikes.  

“This backdrop created a further complex layer of challenges and opportunities in addition to ongoing cost, labour, inventory, and confidence issues for consumer-facing companies. Supermarkets appear to have been the main winners of Christmas 2022, while many omnichannel retailers managed to flex their offering to adapt to the impact of industrial action and performed well.

 
“However, as EY’s latest Future Consumer Index underlines, it will be critical for companies to keep adapting and reflecting customer priorities, which for most consumers in the short-term, will be a compelling price proposition.”