Page last updated at 09:10 GMT, Sunday, 13 July 2008 10:10 UK

Sharp rise in UK profit warnings

A housing development
Almost half of listed house builders issued warnings in the period

There are fresh signs of a slowing UK economy with the number of companies warning their profits would be lower than expected at a seven-year high.

There were 98 profit warnings from UK-listed companies in the three months to 30 June, according to Ernst & Young, the most in that period since 2001.

Retailers and building companies were the hardest hit by the consumer slowdown and shortage of mortgages.

The number of warnings was 11% up on the same period of last year.

Almost half of UK stock market listed house builders issued profit warnings in the three-month period.

'Recession a real possibility'

"The credit crunch, declining consumer confidence and squeezed discretionary income have come together to create the perfect storm for house builders and, as the rain falls, and the floods rise, investors are waiting nervously to see who has built their house upon the sand," the report said.

Among general retailers, 13% issued profit warnings, including Marks and Spencer, which made an unexpected announcement at the beginning of the month.

"It is clear that the ripples from the credit crunch have spread far beyond the financial sphere," said Keith McGregor from Ernst & Young.

"At best, flat line growth is a certainty, at worst, recession a real possibility," he added.

Former prime minister John Major warned of problems ahead for the economy, although he added, "some of the talk of Armageddon is overdone".

"There are going to be some more redundancies; there are going to be some bankruptcies," he told Andrew Marr on Sunday AM.

"How liquid the banking system is and how available loans are will be absolutely crucial to determining how bad the situation is."

"Fear is toxic and it is spreading."

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