UK construction firms steady despite rising pressures
The number of listed UK construction and materials companies issuing profit warnings in the first six months of 2022 fell to equal a record low.
Just three profit warnings were issued by UK-listed construction companies over the half-year according to EY-Parthenon, the strategy consulting arm of accountancy firm EY. The last time profit warnings reached such low numbers in the sector was in 2015 and 2016.
Ian Marson, EY-Parthenon UK&I construction leader, said the low numbers showed that the “unprecedented level of cost, labour and supply chain stress” have not “affected all companies equally”.
The number of listed UK construction and materials companies issuing profit warnings in the first six months of 2022 fell to equal a record low.
Just three profit warnings were issued by UK-listed construction companies over the half-year according to EY-Parthenon, the strategy consulting arm of accountancy firm EY. The last time profit warnings reached such low numbers in the sector was in 2015 and 2016.
Ian Marson, EY-Parthenon UK&I construction leader, said the low numbers showed that the “unprecedented level of cost, labour and supply chain stress” have not “affected all companies equally”.
He added: “Large companies with diverse portfolios have fared far better than small to mid-sized companies as they can absorb price increases and leverage their buying power in tight markets. Diverse portfolios held by larger companies have also helped buffer against slowdowns in one sub-sector or region.
“While the two main drivers of construction growth – housebuilding and government contracts – remain strong, sustained price increases could delay projects and it can take a while for the sector to feel the full impact of the economic slowdown. The sector also needs to ensure it guards against complacency: it still has work to do to improve operational efficiency and to meet its own sustainability goals – as well as helping others achieve theirs.”
Across all sectors there was a 66% rise in profit warnings issued year-on-year, to hit 136. In the 64 profit warnings in Q2, 58% of companies cited rising costs as one of the main drivers, whereas 19% of companies pointed to labour market issues.
Of 1,222 UK-listed companies, 70 have issued at least two consecutive warnings in the past 12 months. On average, one in five companies delist within a year of their third warning, most due to insolvency, said EY-Parthenon.
Travel and leisure companies had the highest number of warnings, followed by retailers and personal care, drug and grocery stores.
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