Signs of recovery as profit warnings continue to fall

A report by accountancy firm Ernst & Young has found that the number of profit warnings fell in the first quarter of 2010.

According to E&Y, profit warnings by UK companies fell to a decade low in the first three months and will boost hopes that the economy is recovering.

The accountancy group said the number of profit warnings by quoted firms fell to 54 in the three month period, compared with 117 during the same period a year earlier, which was the lowest for a first quarter in 10 years.

The first quarter is usually the annual peak for profit warnings, the company said.

However, Alan Hudson, restructuring partner at E&Y issues caution: “Despite this exceptionally low level of profit warnings, we continue to question the real strength of the recovery and to question the private sector’s ability to take up the slack, once the significant props of government spending and stimulus fall away.

“The road to recovery is rarely straight or flat and this holds more bumps and twists than most. Companies still need to be watching their backs due to the very real chance that growth will stall, while also planning for the eventual recovery so they don’t miss the boat,” he added.

In January, the firm reported that the number of profit warnings fell by 37% (a six-year low) in the final quarter of 2009.

Discuss this in the Finance Markets forums

Story link: Signs of recovery as profit warnings continue to fall