Low oil prices triggering rise in profit warnings

The amount of profit warnings has risen in the first three months of the year.

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By :  ,  Financial Analyst

Low oil prices have been highlighted as a defining factor behind a rise in profit warnings from UK-listed companies.

A report from consultancy Ernst & Young (EY) revealed that despite an improving economic outlook the amount of profit warnings reached 77 in the first three months of the year. It was an increase of three from the same period 12 months ago, analysts stated that the figure was "higher than expected".

Oil prices have been falling since summer 2014 and it has been having a negative impact on the business sector. At the turn of the year the price of a barrel of oil fell below $50 (£33) but has shown signs of improvement in recent months. The current figure stands at $65 but it has not prevented the rise in profit warnings.

During the past three months, the low oil price was named as a factor for 16 warnings with eight coming from the oil and gas sector. The support services sector, software and computing and general retailing reported eight, seven and six profit warnings respectively.

EY's Alan Hudson told the BBC: "This is still a tough environment in which to plan and invest. The recovery hasn't increased predictability and companies still have little room for manoeuvre when things go wrong, such as a lost contract, adverse currency movement or price drop."

Among the companies to issue profit warnings in recent months included retailers Boohoo and AO World, construction company Balfour Beatty and outsourcing firm Mitie.

Oil and gas sector facing tough times

A recent report from industry body Oil & Gas UK highlighted a 'bleak' past year for the UK's offshore oil and gas sector. It came after figures from the organisation showed that the sector had performed worse than at any point during the past 40 years. It prompted companies to spend around £5.3 billion more than they earned from sales during 2014.

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