UK sees drop in profit warnings

The IT sector saw the most warnings during 2003's final quarter

The number of profit warnings issued by top UK companies fell by 40% last year, a study has found.

The Ernst & Young survey found that companies listed on the stock exchange issued 210 warnings in 2003, down from 353 in 2002.

However, the study also showed that the number of warnings had begun to increase towards the end of last year.

Ernst & Young said it was uncertain whether this was the start of a rising trend or a one-off "blip".

The last three months of 2003 saw 52 profit warnings issued, a 37% jump on the previous quarter's figure.

The report put the increase down to "relatively flat" economic conditions, the increase in UK interest rates in early November, and reports of sluggish trading in the run-up to Christmas.

The highest number of warnings in the last three months of 2003 came from the software and computer services sector, which issued eight alerts compared with three in the previous quarter.

'Downward shift'

Despite the recent rise in warnings, Ernst & Young said the overall message was upbeat.

"These figures suggest that the underlying downward shift in warnings we noted in our two previous reports is being maintained," said Andrew Wollaston, Ernst & Young's corporate restructuring partner.

"Although the 22 warnings issued in December represents the highest monthly figure since February 2003, it is also the lowest December total since 1999."

But Mr Wollaston noted that UK firms still faced several risks to their profit forecasts.

Possible rises in interest rates could damage consumer confidence which "continues to underpin the UK economy".

Firms trading with foreign markets faced the complexities of terrorism worries and the recent fall in the value of the dollar, he added.