Profits to slide at UK firms

Profits warnings have gone up 35 per cent in the last three months and there is worse to come as the downturn bites in British industry.

That is the warning from a study of UK quoted companies by Ernst & Young, the accountants, which found most firms were already missing targets before the US attacks.

The survey found that 25 companies issued profits warnings before 11 September, mostly in the hi-tech or media area. Of the 10 that have warned on prospects since, four are in insurance, with the other six being knock-ons from the fall-offs in business in the leisure, hotels and media sectors as a result of the terrorist attacks.

Andrew Wollaston, senior partner in E&Y's corporate restructuring division, said: "Consumer confidence is the once single thing underpinning the UK economy at the moment. Over the next two to three months we are going to see consumer confidence knocked at a time when companies operating on the high street make all their money."

Mr Wollaston was even more bearish as he pointed out that many companies may not know the extent of their problems. He argues that as most companies manage for profit rather than cash – using a consolidated profit and loss account and balance sheet – they might not be aware how tight things are becoming in the short term.

"We've had 10 years of a bull run," said Mr Wollaston. "Many finance directors and chief executives weren't around in the last recession and so do not have experience of tough times."