UK profit warnings reach record high

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

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By :  ,  Financial Analyst

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."

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