Colin Dempster

The number of profit warnings in the first nine months of 2020 from companies headquartered in Scotland increased by 6%, the smallest increase across the home nations and English regions, with the overwhelming majority (94%) attributed to COVID-19.

Meanwhile, there were 524 profit warnings issued by UK quoted companies in the same period, breaking a 19-year-old record for the annual total. More are expected due to continued uncertainty from COVID-19, Brexit and the easing of government support.

Colin Dempster, head of turnaround and restructuring at EY in Scotland, said: “All but one of the profit warnings from Scottish quoted companies has been attributed to COVID-19.

“Given the overall total for 2020 remains on par with the first three quarters of 2019, these figures indicate relative resilience by Scottish businesses.

“Time will tell if that stability is sustained as pressure mounts on one of the most prominent sectors for Scotland, the oil and gas industry. The dramatic drop in demand for fuel and continuing low oil price is putting strain on the sector and is likely to ripple throughout the supply chain.”

The third quarter is typically the quietest period for corporate reporting and in 2020 this was amplified by the significant fall in earnings expectations earlier in 2020, the increase in activity as COVID-19 restrictions were relaxed and as government initiatives kicked in.

Mr Dempster said: “The summer offered some respite for businesses to prepare for what is expected to be an exceptionally difficult Autumn and Winter. Many businesses have managed to navigate the day-to-day stresses of the current environment by adopting survival tactics.

“However, with government support measures winding down and the reality of Brexit just around the corner, merely going back to basics isn’t enough.”