EY’s warning over risk of insolvency across UK PLCs

These companies could face a financial cliff edge when various support measures come to an end, according to the latest EY analysis of profit warnings made by PLCs.

The accountancy firm’s analysis shows that between March 2020 and March 2021, 63 UK listed companies issued at least their third profit warning within a 12-month period, almost double the 2019 total of 32.

According to EY, statistically, up to one in five of these firms is likely to enter administration within 12 months of the third warning.

More than half (35) of these companies also claimed furlough support from the government in December, and one third (21) are also claiming at least one other form of government support, such as CBILS.

The analysis showed that amid the uncertainty of the first half of 2020, 42% of FTSE 350 companies withdrew their earnings forecasts.

Alan Hudson, EY-Parthenon UK&I turnaround and restructuring strategy leader, said: “The extent to which some of the UK’s largest firms have had to claim government support through the pandemic is evidence of the challenging environment in which many businesses have found themselves.

“Firms’ dedication to securing their future and continuing to provide for their customers, clients and employees is clear but, as government support comes to an end, many firms could be tested to their ultimate limit.”

EY’s reference to ’heightened risk of insolvency’ refers to the likelihood of a firm going bust after it issued three profit warnings in a 12-month period.