Listed companies in the Midlands issued five profit warnings in the first quarter of this year, according to new research.
The number is nine fewer than the final quarter of last year, representing a decrease of 64 per cent which is the lowest number of warnings since quarter two of 2021.
The data is contained in the latest Profit Warnings Report by EY-Parthenon, the global strategy consulting arm of financial services group EY.
Nationally, profit warnings issued by UK-based listed companies between January and March 2023 reached their highest first quarter total since the early stages of the pandemic in 2020, with 75 warnings issued.
Persistent economic uncertainty had played a significant role in many of these warnings, EY said.
More than a third of profit warnings cited delayed, reviewed or cancelled contracts, up from 21 per cent in the same period in 2022, as customers paused or cut spending amid volatile and unreliable demand.
The report found that, since the start of 2022, 98 companies had issued at least two profit warnings, while a significant cohort of UK companies have faced particularly challenging conditions after entering the three warning 'danger zone'.
Of the 31 companies that have issued three warnings since the start of 2022, 29 per cent have since delisted or are in the process of being sold.
Dan Hurd, a partner at EY-Parthenon in the Midlands said: "While the Midlands has seen a fall in the number of profit warnings this quarter, uncertainty remains across industries. Inflationary pressures in energy, labour and other input costs continue to have an impact across the supply chain.
"Businesses that took on increased borrowing during the pandemic may now find themselves particularly vulnerable to higher interest rates."
Partner and UK and Ireland turnaround strategy leader Jo Robinson added: "Economic forecasts may have seen some improvement in recent months, however the extraordinary strength of headwinds over the last two years has left some businesses facing recession-like conditions.
"This has taken its toll on business confidence and, as pressures move through the supply chain, we've seen a higher number of companies warning of delayed or cancelled contracts in comparison to the last quarter. This economic uncertainty risks prolonging recovery, even as forecasts improve.
"Many companies may struggle to build momentum as they contend with increased working capital demands and finance costs.
"We would normally expect to see insolvency activity peak nine to 12 months after a profit warning peak so the coming year will be crucial.
"While the UK economy appears to be turning a corner, recovery is not guaranteed. Businesses should continue scenario planning and building solid operational and financial foundations to withstand further shocks and capitalise on growth."
