Profit warnings fuel recession fear
There has been fresh fear over a potential recession after the number of firms issuing second-quarter profit warnings soared to a seven-year high.
Advisory firm Ernst & Young said there were 98 warnings during the three months to June 30, 11% up on the same period last year. This is the highest second-quarter total since 2001.
The firm said the retail and building sectors were experiencing the most pain thanks to a consumer spending slowdown and a mortgage famine that has hit housing sales.
E&Y restructuring partner Keith McGregor said: "After a pivotal quarter, it is clear that the ripples from the credit crunch have spread far beyond the financial sphere."
He added: "This still has a long way to play out. At best, flat line growth is a certainty, at worst, recession a real possibility. Businesses and consumers, many of which have not experienced either, will feel the harsh reality."
A further 15 companies stopped short of issuing a full profit warning during the period, E&Y added, warning they would need to lower expectations if conditions did not improve.
Last week the British Chambers of Commerce warned the UK was "at serious risk" of recession as falling orders and rising costs tightened the squeeze on business.
Profit warnings from retailers numbered 29 during the first six months of the year - the highest level on record - and three-quarters of housebuilders alerted investors about lower earnings.
Among the firms issuing profit warnings during the second quarter were housebuilder Bovis Homes, newspaper publisher Trinity Mirror and department store chain Debenhams. Marks & Spencer joined the list this month with a shock announcement that like for like sales had fallen 5.3% during the quarter to June 28. .
A total of 14 companies with turnover over £1 billion warned during the period, E&Y said, double the number compared to the previous year.
