Profits warnings rise 20 per cent in first quarter

The number of profits warnings issued by British companies rose 20 per cent in the first quarter of the year, led by media companies and retailers.

The number of profits warnings issued by British companies rose 20 per cent in the first quarter of the year, led by media companies and retailers.

The accountancy firm Ernst & Young said UK-listed companies announced 85 profits warnings between January and March, 14 more than in the first quarter of 2004.

Media and entertainment companies was the worst-hit sector with 13 warnings, followed by retailers, which issued 11. Support services companies accounted for nine warnings, while the household goods and textiles sector suffered eight.

Garry Wilson, a corporate recovery partner at Ernst & Young, said: "On the back of the high level of profits warnings, the first quarter saw high numbers of retailers go into receivership or administration, showing just how tough the UK retail market has become."

Last week, Boots became the latest major retailer to complain about bleak prospects on the high street when it issued its second profits warning this year.

This week, Marks & Spencer is expected to report another sales slump in its fourth quarter as it continues to struggle under its chief executive, Stuart Rose.

Andrew Wollaston, a corporate restructuring partner at Ernst & Young, said: "A UK economy growing at about 2.5 per cent a year with full employment and low inflation looks healthy, so why doesn't it feel it? Consumer confidence seems to be faltering and has not been helped by concerns over the property market and fears of post-election tax increases."

After five interest rate rises from the Bank of England and a slowdown in the once-booming housing market, there is growing evidence that consumers are tightening their belts.

Mr Wollaston said the strong pound had caused problems for exporters, while rising input costs, such as raw materials and wages, have also had a negative effect.

He added that retailers and media companies were potential indicators of a recession as they were dependent on consumer spending.

"If these are joined next quarter by transport and logistics companies, or if there is an overall increase in the spread of sectors issuing warnings, we could anticipate that UK plc is in for a rough ride," he said.