Volatile sterling price hits businesses hard
January 19, 2017

Overseas troubles, rising commodity prices, higher wages and the slump in the pound hit has had a negative impact on corporate Britain, with some of its biggest companies issuing profit warnings. Pearson, one of the world’s leading educational publishers, has slashed its profit forecast and warned of lower dividends in future after admitting that it had misread its key US market in an update that sent its shares plunging by nearly 30 per cent to 573p. It set the tone for a tough day in the City, where shares in Premier Foods and Mitie were also hammered after both readjusted their profit forecasts, the latter issuing a third profit warning in four months. The wide-ranging nature of the problems that have beset the three companies will only increase real concern that British business is facing its most challenging year since the recession as it grapples with rising costs and wage inflation. In the wake of the vote to leave the European Union, companies have had to cope with a steep fall in the value of the pound and deal with the uncertainty of a hard Brexit. Goldman Sachs warned that the pound could have even further to drop, possibly to $1.20, $1.18 and $1.14 over the next three, six and twelve months, respectively, “with the risk that this forecast materialises sooner rather than later”.

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