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Nearly a third of UK profit warnings in Q3 blame Brexit, says EY

'Hard Brexit' will cost the UK

Nearly a third of the 68 British companies that issued profit warnings in the third quarter have put the blame on Brexit, according to professional services firm, EY, which says the full effect has yet to feed through to many other companies.

Although the total number of profit warnings of 11 is lower than in the same period last year, EY's Head of Restructuring, Alan Hudson, told CNBC's Squawk Box that it's important to remember the bar is now lower.

"We're seeing reductions in the mid-teens in terms of overnight adjustments to value," he said.

"Actually compared to some of the shocks we've seen in the past, that's not so bad but also you have to recognize that the market has already priced in lower earnings expectations and yet we're still seeing a shock over and above that."

EY

Sectors most exposed to business uncertainty and the weaker pound have led on the negative outlook, with support services counting six warnings and four apiece for travel & leisure and real estate investment and services.

EY's Hudson says it is "still very early days" and that he thinks we have not yet seen many of the ramifications from the referendum's outcome.

"In truth I think the impact is yet to really hit us," he said.

Hudson highlighted retailers as a sector with clear risks on the horizon.

"They are already battling a number of price pressures but at the moment they are largely hedged, going into next year they're going to have to withstand quite significant currency swings and those that source from overseas are going to be even more challenged than they are today," he cautioned.

A potential response to the difficult conditions created by what is widely expected to be ballooning import and raw materials prices in the year ahead is that retailers' output will shrink – or in Hudson's words, "Your chocolate bar will just get smaller."

Another recent report from EY recorded that a third of British business anticipate cutting investment by 20 percent over the year ahead. However, despite the uncertainty caused by Brexit and the problems regarding sterling weakness and an awaited spike in inflation, EY believes the solution is not for companies to sit on their hands.

According to Hudson, "Brexit is but one disruption in the market. You can't stand still - depending what business you're in there is probably someone in Silicon Valley or in China who is out-innovating your business right now."

"Otherwise when Brexit plays out you'll have been out-innovated by someone else," he warned.

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