Company profit warnings soar - survey
A new survey says the picture is not all rosy for UK businesses, which are sending out an increasing number of alarming profit warnings to the City.
Ernst & Young's report on profit warnings shows that in the last quarter alone, there were 77 warnings issued to the City - a 4% hike on the previous quarter, which was in turn a massive 64% jump on the quarter before.
The accountancy firm says a worryingly high number of the 77 warnings came from technology companies, with nearly a quarter from software and computer services groups.
Corporate finance partner John Harley says: "We are always concerned when over 5% of companies in a given sector issue profit warnings."
The tech troubles also skewed the geographic locations of the profit warnings, with 64% of alerts coming from London and the South East - the base for many software and IT groups. In contrast, the North West, Yorkshire and the North East and Scotland saw warnings more than halved on the previous quarter.
Retailers were looking slightly chirpier. While shopkeepers dampened analysts' expectations in the run-up to Christmas by voicing concerns about the weather, e-shopping and the rail crisis, profit warnings during the year as a whole were down by around 50% on the previous year.
But Ernst & Young warns that tougher competition and continued price pressure means retailers must change the nature of their operations, consolidate, or leave the high street, and some upheavals may lead to a hike in retail profit warnings this year.
The survey also shows that worries over a US slowdown played a part in a number of warnings, with a number of the companies issuing alerts in the last quarter citing low or declining sales in their US markets.
Alan Bloom, head of corporate restructuring at Ernst & Young, says: "I'm not alarmed, but the quarter before last was a lot higher - and to see a second quarter in a row at the same level means this is something of a trend rather than a blip. Roughly 15% of those issuing warnings named the US, which is quite high."
He says a cut in interest rates would help: "A lot of people have said there should have been a cut of a quarter point already. A drop ought to have an impact."
