Business

UK profit warnings rise on low oil price, says EY

Oil rig Image copyright PA

Profit warnings from UK-listed companies rose in the first three months of the year despite the improved economic outlook, a report has found.

There were 77 profit warnings in the period, three more than a year earlier, consultancy EY said.

The number was "higher than expected", the group said.

The rise was in part due to the low oil price, which contributed to 16 warnings, eight of which were oil and gas companies.

The price of oil has fallen by more than 40% since last summer, and currently stands at $65 a barrel. At the beginning of this year, it was below $50.

'Tough environment'

"Growing competitive pressures" were also a factor in the rise in profit warnings - more than a fifth were due to greater competition and pressure on prices, EY said.

The support services sector also saw eight warnings, with seven in software and computing and six in general retailing.

Companies that issued warnings included retailers Boohoo and AO World, construction company Balfour Beattie and outsourcing firm Mitie.

Overall, the report found that 5.4% of quoted companies issued profit warnings in the period, the highest first-quarter percentage since 2009.

"This is still a tough environment in which to plan and invest," said EY's Alan Hudson.

"The recovery hasn't increased predictability and companies still have little room for manoeuvre when things go wrong, such as a lost contract, adverse currency movement or price drop."

The report highlighted the changing expectations of when interest rates will rise, as well as geopolitical tensions, as factors making forward planning difficult.

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