Page last updated at 10:56 GMT, Sunday, 24 January 2010

Ernst and Young warns UK firms of 'bumpy ride'

Shoppers on Oxford Street
Shoppers are beginning to return to the high street

UK companies should brace themselves for "a bumpy recovery", despite a fall in the number of profit warnings in the final quarter of 2009, a report says.

Accountancy company Ernst and Young says only 50 companies issued profit warnings in the fourth quarter, the lowest level in six years.

The firm said the economy had picked up quicker than expected but "2010 is when we start paying [for the recovery]".

Figures due out Tuesday are expected to show Britain has exited recession.

Experts predict the data will show the UK economy grew at about 0.4% in the three months to December 2009.

In January of last year the UK entered recession for the first time since 1991, after experiencing two consecutive quarters of negative economic growth.

It is one of the last major economies still in recession, with the French and German economies exiting recession last summer.

Fragile growth

I'm sure the figures will show we are out of recession this week, but with the belt tightening for most households, the recent weather and temporary Christmas jobs being laid off, I am almost certain we will go back into recession
Alan, Birmingham

Keith McGregor, restructuring partner at Ernst and Young said: "Growth in the first part of the year could sit in contrast with economic stagnation or even a second dip later on."

"The events in Dubai at the end of 2009 amply demonstrate how quickly situations can still deteriorate. The coming years could contain more of these shocks" he added.

The report also pointed out that in 2010 budget constraints will mean the government pulls back from pumping extra money into the economy.

The Bank of England's 'quantative easing' scheme, in which assets are bought up to increase the amount of money flowing in the economy, is also due to come to an end.

Overall in 2009, most of the profit warnings came from fixed line telecom firms, the oil industry and banks.

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