Ernst & Young: UK profit warning rise blamed on faltering economy

Rob Starr, Big4.com content manager

According to Ernst & Young’s latest Profit Warnings report, UK quoted companies issued 68 profit warnings in Q3 2012, a third more than the same quarter in 2011, the highest third quarter total for four years and eight more than the previous quarter. The sectors with the highest numbers of profit warnings this quarter reflect these weaknesses and concerns. FTSE Support Services led the way in Q3 2012 (15 warnings) followed by FTSE Industrial Engineering (6) and Electronic and Electrical Components (5).

Twelve companies cited adverse weather in their profit warning, the highest number of companies blaming the weather since the winter freeze of 2010-11.  However, bad weather was an exacerbating factor in most profit warnings.  Many of these companies had warned before and the majority cited other reasons such as weak UK demand, a slowdown in global markets and the growing risks to the economic outlook.

“While some profit warnings from consumer facing sectors blamed the poor weather, the underlying weakness of the UK economy and global growth concerns landed the heavier blows to profits and expectations,” says Keith McGregor, head of restructuring for Europe, Middle East and Africa. “In the UK, an exceptional series of one-off events has inevitably created dips in demand and productivity which has made it hard to get an accurate fix on the state of the economy. Across Europe, the outlook still appears weak and economic growth will remain slow.”