Profit warnings jump 70% in Q4 for UK companies

Warnings on profits issued by UK firms saw the biggest leap in a decade in Q4 2011, driven by difficulties in the retail sector, according to Ernst & Young.

The company's latest quarterly profit warnings report said the number of warnings rose from 51 in Q3 to 88 in the final three months of the year, with the retail sector accounting for 39 warnings.

At 14%, the proportion of listed companies putting out warnings in Q4 reached its highest level since 2008.

The report said the increase may mark an upward trend that could continue into 2012. Retailer Tesco is among the highest profile UK companies to have warned on profits already this year.

The 39 profit warnings from the retailers was greater than the combined number of warnings from the sector in 2009 and 2010 combined. But other economically sensitive sectors such as IT support also suffered in Q4, according to the report.

"Many businesses are still expanding profitably, but others - the zombie companies - remain moribund by debt or defunct business models, unable to build value or gain momentum in these challenging economic conditions," said Alan Hudson, head of UK restructuring at Ernst & Young.

The number of companies warning on profits for 2011 as a whole stood at 278, compared to 196 the previous year, E&Y said. But the figure remains lower than the 282 reported in 2009 and the 449 warnings seen in 2008.