Profit warnings by UK companies go up 23% in 2005 |
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Mon, 16 Jan 2006 14:05
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LONDON: As many as 381 U.K.-listed companies issued profit warnings in 2005, representing an increase of 23 per cent over 2004 and the highest number in four years, according to accounting firm Ernst & Young.
Weak consumer spending and slowing economic growth are the main reasons for this, said Andrew Wollaston, head of corporate restructuring at the accountants' London office.
"The increase is due largely to the decline in consumer confidence during 2005 as a result of concerns over growing levels of debt and the slowing housing market, and because U.K. economic growth has halved to 1.6 per cent, the lowest annual rate since 1993," he said in a statement.
Support service sector appeared to be the worst affected as in the final quarter of 2005 alone, there were 16 warnings. General retail sector came next with nine, followed by engineering, insurance and computer services with seven each. December saw the collapse of several retail sector companies, including crisp maker Golden Wonder, fashion retailer Kookai, DVD chain MVC and wine-seller Unwins. Companies like French Connection Group and Metalrax Group have come out with statements saying their fourth quarter earnings would fall short of expectations.
The pressure on retailers will continue to remain through the first quarter of 2006, the firm said.
Some 23 per cent of the companies, which issued the warnings, blamed it on increasing costs and overheads. The high oil prices could be one of the factors.
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