A NUMBER of leading industry sectors face huge challenges in maintaining profitability in Brexit Britain, a new study has warned.
The caution from analyst group The Share Centre came as its latest Profit Watch UK report revealed supermarkets have seen sales drop below the £100 billion mark in a quarter for the first time in six years.
Aggressive competition leading to price deflation and tough trading conditions have caused collective revenues in the sector to drop 3.1 per cent to £99bn.
With supermarkets accounting for one third of all spending, overall revenues among companies that reported annual results between April and June were dragged down 2.2 per cent to £341.7bn.
Helal Miah, investment research analyst at The Share Centre said companies exposed to UK consumer spending had been bolstered by a “burgeoning” UK economy, but this lift would be short-lived as the Brexit vote “turned this on its head”.
“The implications of the economic slowdown will mean lower demand for sectors such as housebuilders and retailers, while the travel industry is already feeling the effects,” he said, noting that Easyjet saw its costs soar by £40 million within four weeks of the referendum.
“Financial services may suffer too, if passporting to the EU fall by the wayside. Profits in these sectors will be harder to come by in Brexit Britain.”
Falling sales were not universal across the companies reporting. More than half of companies in the top 350 saw revenues increase, with stronger performances from both the industrial and retail groups.
And pre-tax profits, which had previously been battered by large asset write-downs from the likes of Tesco, jumped to £17.5bn, up 45 per cent on an adjusted basis
Mr Miah added that the devaluation of the pound will boost the sterling value of overseas businesses, whether via exports, or from translating the value of overseas operations back into pounds.
“This is more than just accounting. For sterling investors, that will mean extra dividend income from those supercharged profits,” he said. “This is mainly why the FTSE 100 has performed so well since the referendum.”
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