Brexit finally “got done” in January as the UK left the EU on 31 January. However, with a transition period of only 11 months, the Government is now under pressure to negotiate its new relationship with the EU, and Prime Minister Boris Johnson has stated that the Implementation Period will not be extended beyond 31 December.
- 2019 was the UK’s worst-ever year for retail sales
- The outlook for the UK services sector has worsened
- Political uncertainty accounted for 22% of UK profit warnings in 2019
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Brexit finally “got done” in January as the UK finally left the EU on 31 January. However, with a transition period of only 11 months, the Government is now under pressure to negotiate its new relationship with the EU, and Prime Minister Boris Johnson has stated that the Implementation Period will not be extended beyond 31 December. The British Chambers of Commerce (BCC) urged the Government to “move quickly … to ensure that Brexit is done right”, warning that clarity over the UK’s future trading relationship with the EU was “crucial” to the growth and investment prospects of many UK companies.
“2019 saw “exceptional” levels of profit warnings amongst UK quoted companies”
A survey undertaken by the BCC in the final quarter of 2019 found that found that indicators for most UK industry sectors had deteriorated. The outlook for the services sector – which accounts for 80% of the UK economy – had worsened, undermined by “sluggish” household spending and “crippling cost pressures”. Meanwhile, indicators for manufacturing and export orders proved negative for two consecutive quarters for the first time since 2009 and 2011 respectively.
2019 saw “exceptional” levels of profit warnings amongst UK quoted companies, according to research undertaken by EY. Warnings rose at an annualised rate of 9% to 313 to reach their highest number since 2015. As Brexit-related uncertainty dragged on into the fourth quarter, 22% of profit warnings were attributed to political uncertainties. Retailers led the field with 32 profit warnings, followed by industrial support services and software & computer services with 25 warnings each. For a second consecutive year, one-third of listed UK retailers issued a profit warning during 2019 against a backdrop of weak consumer confidence, higher costs and heavy discounting.
The British Retail Consortium (BRC) found that the UK experienced its worst-ever year for retail sales during 2019, which was the first-ever year to post an annual decline. The BRC cited the impact of Brexit-related uncertainty, political instability, and customers’ changing habits. Fashion retailers Superdry and Joules issued profit warnings during January, while like-for-like sales at Tesco declined over the important Christmas trade period. In contrast, bakery chain Greggs reported stronger-than-expected full-year earnings. High-street chain Next reported better-than-expected sales over the crucial Christmas trading season and upgraded its annual earnings forecast. The FTSE 100 Index and the FTSE 250 Index both declined by 3.4% during January.
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