Profit warnings hit seven-year peak

8:41am Sunday 12th October 2008

UK firms issued 111 profit warnings between July and September as the credit crunch hit retailers, media and support service firms, it emerged.

The figures from Ernst & Young are the highest for the third quarter since the same period in 2001 and almost a third higher than in 2007.

Keith McGregor, restructuring partner at Ernst and Young, said the findings from stock market listed firms were "deeply concerning."

He added: "The end of the third quarter and the start of the fourth brought some of the most turbulent weeks for banks and financial markets in a generation; weeks that have completely redefined the banking landscape and reminded us that the credit crisis is far from over."

Support services saw the most warnings to investors with 23 out of 209 companies in the sector, the highest ever recorded for this part of the UK economy. It comprises companies ranging from recruitment agencies to engineering services and Government contractors.

The research said the sector was exposed to industries currently in turmoil, such as the financial and property sectors. The Office for National Statistics recently said the service sector as a whole failed to grow for the first time in six years during the three months to July 2008.

General retailers are also expecting to be a casualty of current economic turmoil.

The sector issued 13 profit warnings out of 78 companies, almost double the number issued in the third quarter of 2007.

E&Y said retailers will struggle to make a profit this Christmas as they need increase their prices to balance escalating overheads at a time when consumers are spending less.

One fifth of the media sector has issued profit warnings in the year to date.

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