Listed companies within the Midlands recorded seven profit warnings in the first three months of the year as they came to terms with rising inflation and the war in Ukraine.
The number was one up on the previous quarter but still down on the start of the last three years, according to the latest EY-Parthenon report.
Nationally the UK’s listed companies issued 72 warnings in the first quarter of 2022, with 43 per cent due to concerns over rising costs.
The cost crunch is expected to tighten its grip later this year when the energy price cap is revised again, with warnings that inflation could peak at 9 per cent or even double digits in the autumn.
As households and businesses tighten their belts, UK growth is set to suffer with the Bank of England likely to trim its outlook for the economy and hike interest rates on Thursday to their highest level for 13 years in a bid to slow the rise in prices.
The EY-Parthenon report suggested the economic impact of the war in Ukraine accounted for 11 per cent of all profit warnings, with most referencing potential hits from sanctions and withdrawal from Russian markets.
Meanwhile, the EY analysis suggested supply chain challenges eased slightly at the start of 2022, although profit warnings from consumer-facing sectors reached their highest level since the second quarter of 2020.
Dan Hurd, a partner at EY-Parthenon in the Midlands said: “The general downward trend in profit warnings across the region is perhaps a welcome sign that many businesses are beginning to see the results of careful navigation during the pandemic.
“However, the region’s manufacturers are likely to continue to be affected by supply chain issues and all sectors will feel the effect of higher energy prices.
“Businesses in consumer-facing sectors, such as retail and food services, have some difficult decisions to make, choosing to pass additional costs on to customers, at a time when they have little room for further manoeuvre.
“2022 was always going to be a difficult year for companies, particularly overcoming the challenges of inflation, with many having already dealt with the pressures on company margins and consumer real incomes and restructured their businesses accordingly.
“However, the war in Ukraine has contributed to greater supply-side pressure and raised questions about confidence and demand in 2022.
“We are now looking at a year with ongoing Covid-19 disruption alongside higher inflation, greater uncertainty, and faster monetary tightening than we expected just a few months ago.
“The post-pandemic recovery should continue in 2022 but will be slower than expected with greater downside risks. Volatility and uncertainty have become the standard backdrop to operations, and companies need to ask themselves when ‘crisis as usual’ becomes the norm for which they plan.
“Businesses will need to start thinking about how their operations and wider ecosystem will fare in sustained headwinds, and how they can reshape in response to long-term change.”
