Warning over finance job losses

Across the UK, the construction industry had the most profit warnings

Scotland's financial sector should brace itself for job losses as a result of the credit crunch, a report warns.

Ernst and Young said the sector had the most profit warnings in the second quarter of 2008. Electronic and food production sectors were also hit.

The report's authors said that in the financial sector transactions were in slowdown or in some cases "dead stop".

The organisation warned against job losses but did stress the "deep pool" of talent in the Scottish sector.

The report found four of Scotland's FTSE firms issued profit warnings in the second quarter of 2008, one up from the first three months of the year.

However, that figure was down one from the same period last year.

Ernst and Young said across the UK, companies were experiencing "treacherous" conditions as profit warnings increased by 11% from the same period in 2007.

'Weather the storm'

The UK's highest warning FTSE sectors in the second quarter of 2008 were household goods and home construction.

In recent months, several UK house builders, including Barratt and Persimmon, have announced sweeping job cuts due to the downturn in the housing market.

However, the report claims the financial sector was suffering most in Scotland.

Colin Dempster, Ernst and Young restructuring partner, said: "The slowdown, or in some cases dead stop, in transactions is hitting Scotland particularly badly.

"We have a disproportionate number of deal-doers in Scotland who operate across the UK, especially in London.

"We must brace ourselves from more job losses amongst Scottish financial institutions."

He said it was "uncertain and challenging times for UK plcs".

However, he added: "The silver-lining for Scotland is that we also have a deep pool of talented professionals in accounting and legal firms and, more importantly, in corporates themselves, who have the skills to help Scottish businesses weather the current storm."