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July 11, 2010    

UK profit warnings fall in Q2

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by Kay Murchie

A report by accountancy firm Ernst & Young (E&Y) has found that the number of profit warnings fell to a seven year low in the second quarter of the year to 45, from 54 in the previous quarter.

It was the first time profit warnings fell below 50 since 2003.

However, according to E&Y, measures introduced by the Government to cut public spending means profit warnings are set to rise.

Commenting on the report, Keith McGregor, restructuring partner at E&Y, said: “UK plc could be in for another rough ride.

“A number of companies have already cautioned that they expect much tougher times ahead when further fiscal tightening reins in public sector and consumer spending,” he added.

In the meantime, the report revealed the travel and leisure and support services sectors issued the highest number of profit warnings in the April to June period - due to the disruption caused by the volcanic ash cloud in May.

Meanwhile, Alan Hudson, also of E&Y, added: “It looks like 2011 will be a crunch year.”

Government spending cuts and the possibility of interest rate hikes means firms could find it more costly to borrow, he said.

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