Profit warnings at six-year high

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Research by Ernst & Young shows that in 2007 the number of companies warning of disappointing profits was up by more than 10% on the year before - to almost 400.

The retail industry suffered badly with a record 47 profit warnings, and the leisure trade was also hit, due in part to the smoking ban in pubs.

The impact of the global credit crunch, which began to take hold towards the end of the year, saw warnings in the final quarter alone up by more than 20% on 2006, the BBC reported.

The figure of 384 profit warnings in 2007 is the highest since the dot com bubble burst in 2001.

One in five warnings blamed the fallout from the US sub-prime mortgage crisis and the credit crunch. Most of those were from firms outside the financial sector.

In the final quarter of 2007, support services issued 22 profit warnings; the retail sector 12; media firms 10; software and computer services nine; and travel and leisure companies eight.

Andrew Wollaston, of Ernst & Young, told the BBC that while Christmas was not a "complete disaster", some firms suffered more than others - especially clothing, footwear and electrical retailers.

He told the broadcaster: "On the winners' side, department stores appear to have held up well, along with grocery sales, while games console retailers were buoyed by demand for the must-have present this Christmas.

"The era of easy credit is over and I think in 2008 retail sales growth will stall as the discretionary spending comes under pressure. Corporate activity and restructurings of poorly performing retailers look inevitable in the year ahead."