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Profit warning reports at highest since crash

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6th Feb 2013
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Company profit warnings are at the highest level since the start of the financial crash in 2008, according to Ernst & Young. 

In its quarterly profit warning report, the Big Four firm reported 86 warnings from listed companies in the final quarter of 2012. 

This brought the total warnings to investors issued through the stock exchange in 2012 up to 287, the highest level since 2008.

The rise in profit warnings is a result of knock-on effects from mounting eurozone and US risks as well as the slowdown in growth in China, E&Y said.

The sectors with the highest number of warnings were industrial manufacturers and business service companies, hit by corporate cost cutting and contract delays. 

In addition, more than 15% of UK quoted companies issued warnings in 2012, the highest annual proportion in three years. 

Despite the recent administrations and collapses of various high-street retailers, warnings from the FTSE General Retailer sector fell to just 17 in 2012, from 39 in 2012, the lowest number since 2002.  

E&Y head of restructuring for Europe, Middle East and Africa Keith McGregor, said: “Profit expectations dropped sharply in 2012 as economic forecasts fell and escalating risks in key global economies unnerved businesses, leading to delayed investment and purchasing decisions.

“The UK economy lacked the strength to gather momentum against this difficult global backdrop and finished 2012 with nothing more than a low growth landscape on the horizon.”

However, 2013 is expected to yield more positive results, with the report forecasting a fall in profit warnings and negative trading statements this year.

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