Outsourcers set the pace for UK profit warnings

OUTSOURCERS have issued more profit warnings than other sectors during the first three months of 2013 as they were hit by cancelled or delayed contracts and reduced government spending.

British listed companies issued 72 profit warnings during the quarter, just one less than the same period last year, according to Ernst & Young.

However, this was still 14 fewer profit warnings than in the last three months of 2012, and the accountancy firm expects even fewer during the rest of this year as businesses shrug off the lingering effects of the economic downturn.

Companies offering support services (13) and computer services (11) topped the list as businesses demand better deals on contract renewals.

“Although UK companies are issuing profit warnings at the same rate as 2012 there are good reasons to believe that this year will pan out more positively than the last – business confidence is returning and consumer spending should keep UK GDP in positive territory for the remainder of 2013,” said Ernst & Young’s Alan Hudson.

“While this still only adds up to a marginal recovery, with growth well below par, profit warnings should fall, if expectations remain in balance and the global economy avoids a repeat of recent setbacks.”

Six miners issued profit warnings during the quarter as concerns over China’s growth rate and growing industrial unrest hit bottom lines. The report says small miners are seeing their share price fall while finding it harder to access the capital to cover for unexpected breaks in production.

In 2008, at the peak of the financial crisis, 449 profit warnings were issued by listed firms. By 2012 this had reduced to 287.