• Mark Watson-Mitchell

Profit warnings abound

Updated: Mar 8

Within the last few weeks I have started to notice that various companies are coming out with profit warnings - is this a trend that will be increasing over the next month or two?

With China now accepting that it does have a massive epidemic on its hands, its delayed actions to counter the rapid acceleration of coronavirus have shown just how much the State controls everything inside the country.

Now we are seeing borders being closed, transport being contained, air flights massively restricted and population movements being hemmed in so much that the Chinese economy is suffering.

Not that it wasn't before the spread of covid 19, the Chinese economy was already falling off from its previous levels of momentum. Its growth rates had started to slip and now, with such devastating impacts being felt across all walks of its industrial life, those rates are doomed to fall even faster.

Already we have seen that the global energy markets have suffered as demand has weakened, with China pulling back, that has hit the whole sector by a massive 20%. Furthermore, I understand that China has declared 'force majeure' for its importation of liquified natural gas, which clearly shows that industrially it really is slowing down.

The pandemic, as it is now, has not yet peaked so it would be foolish to call the market's lows.

There is more agony to endure for companies importing product from China - industrial manufacturing has slowed markedly. With transport restrictions now in place that means the suppliers cannot get their product out of the country at anything like the previous delivery schedules.

Even Jaguar Land Rover was reporting in the last week that it has been stuffing important and much needed vehicle parts into suitcases and flying them out of the country so that it can keep its production lines in operation.

The implosion that this can all cause could be disastrous to the Chinese economy. Which, in turn, will hit other countries across the world - after all China has spread its tentacles into practically every, if not all countries across the globe.

So the Chinese slowdown will cause effects into all walks of our UK industry, whether importing or exporting, or even expecting inward investment.

China has big problems - let us hope that its leadership will accept that it has done wrong and cope very quickly with its remedies.

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