Profit warnings 'seven-year high'

E&Y expects 2009 to be equally as bad, if not worse

The number of profit warnings by UK-listed companies hit a seven-year high in 2008, research shows.

Warnings by firms listed on the London Stock Exchange hit 449 last year, said the study by accountancy group Ernst & Young (E&Y) - 17% more than in 2007.

E&Y said the situation in 2009 would probably be just as bad, if not worse.

Its study of 2008 found that the house building and car industries were most affected, with 60% of listed firms in both sectors having warned on profits.

'Falling confidence'

"With credit markets still frozen and confidence continuing to deteriorate, the next 12 months look set to be equally dramatic, if not more so," said E&Y restructuring partner Keith McGregor.

It would be difficult to predict anything other than a deteriorating economic climate in the UK over the coming months E&Y partner Keith McGregor

Looking at the retail sector in particular, E&Y said there were 52 profit warnings last year, the highest for the industry since it started collecting figures in 1999.

The falling profits came as a number of retailers went into administration towards the end of the year, including Woolworths, MFI, Whittards and Zavvi.

In the services sector, E&Y said there were 67 warnings, including 39 from software and computer firms.

"It would be difficult to predict anything other than a deteriorating economic climate in the UK over the coming months," added Mr McGregor.

"Fears over rising unemployment will do nothing to boost consumer confidence, one of the vital ingredients in the recipe of recovery."

However, Mr McGregor said there were likely be a number of takeover opportunities, with cash-rich firms able to buy struggling but "fundamentally sound" rivals.

"Fortune will favour the brave," he said.

E&Y's report comes after a think tank said the UK economy probably shrank by 1.5% in the last three months of 2008, its worst performance in 28 years.

The National Institute of Economic and Social Research (NIESR) also warned the economic downturn was worsening.