UK profit warnings reach record high

<p>The amount of profit warnings issued in the UK has hit a record high, according to new figures.</p>

The amount of profit warnings issued in the UK has hit its highest rate since 2008, according to a new report.

Research from EY's latest Profit Warnings report found that UK quoted companies issued 69 profit warnings in the third quarter in 2014. It represented the highest third quarter figure for six years and had increased by 13 compared to the same period 12 months earlier. EY believes the figures highlight firms struggling to adapt to new economic challenges driven by a rise in demand.

A number of high profile companies have issued profit warnings over the past year, most notably in the supermarket sector. Tesco has been one of the firms involved, with the nation's biggest retailer overstating its profits by £263 million. This led to a 6.5 per cent drop in shares and chairman Sir Richard Broadbent announcing his departure.

Supermarkets have been under increased pressure in recent months thanks to the rise of discounters such as Aldi and Lidl. The two have been gaining market share on their more traditional counterparts putting the squeeze on the entire sector.

It is something that EY noticed in its report with the organisation seeing profits warnings from quoted retailers jumping from two in the second quarter of the year to six in Q3, the highest summer total since 2011. EY noted that the overall outlook for the sector still remains "benign" with profit warnings growing year-on-year but they are still way below the peak and are only focused on a small group.

Alan Hudson, EY's head of restructuring for UK and Ireland, said: "The pressure on sales and margins is largely focused on established supermarkets, struggling to adapt to the move away from the big weekly shop and the challenge posed by an expanding group of warehouse, supermarket and high street discounters.

"This group met consumers’ austerity needs in the recession and have succeeded in resetting their value expectations in the recovery."

Find up to date information on the FTSE 100 and spread betting strategies at City Index.

Build your confidence risk free
Join our live webinars for the latest analysis and trading ideas. Register now

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.