A new report has revealed the damage that swelling costs are causing to the already crippled profit margins of UK companies, with experts issuing stark warnings on the likely consequences for the broader economy.
What did the report say about UK firms’ profit margins?
As detailed by an article published by BusinessMatters, the new report – released by a leading global strategy consulting organisation – showed that the volume of profit warnings sounded by UK-listed companies went up by 66% in the first half of 2022, compared to the equivalent period last year.
Specifically, the number of profit warnings increased from 82 in 2021 to 136 this year. Furthermore, 58% of firms – a record – cited rising costs as the primary factor behind sounding the alarm on profits, compared to 43% in the first quarter of 2022.
These are all further signs of the extraordinary pressure being heaped upon UK businesses by ongoing high inflation, with the report indicating that the country’s corporates are being impacted by the deteriorating economic health of the UK as a whole.
It is unsurprising, then, that the BusinessMattersreport cited experts as saying the UK is set to tip into recession in a short space of time.
Consumer-facing sectors have been especially hard-hit
BusinessMattersadded that the ongoing cost pressures were exacting an especially harsh effect on pubs, bars, restaurants, and supermarkets. Indeed, consumer-facing sectors were the source of more than half of the profit warnings.
With consumers tightening their belts to reduce their expenditure on the backdrop of the sustained cost-of-living crisis, 2022 has seen shares in retail and hospitality businesses plummet.
There has been a 9.1% increase in consumer inflation in the last year alone – the steepest acceleration in the last 40 years – while producer price inflation also reached 15.7% in May. The latter is a measure of the costs that businesses have to face.
Is your business in the best possible position to weather the storm?
All of the above is painting a continued bleak picture for firms across the UK – so if you are on the lookout for tax, accounting and payroll services in Wellington, Plymouth or Newton Abbot right now, you will want to partner with a firm that you can trust.
TS Partners stands ready to be that company for a wide range of businesses operating across the southwest of England and beyond. Get in touch now with our closest office to you for a more in-depth discussion of how we can assist you through the provision of a range of specialised services.