UK firms show healthy profits

Tim Wallace
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BRITAIN’S firms benefited from growing economic confidence and a spell of stability in the Eurozone, issuing an unusually low number of profit warnings last month, Ernst and Young analysis showed yesterday.

Dividend payments rose in the first quarter of the year, according to a Capita study out today, and Bibby Financial Services data showed business turnover hit a five-year high in the period.

However, all three reports remained cautious on the overall outlook as economic growth is weak and risks from the Eurozone remain.

The first quarter saw 73 profit warnings from UK quoted companies, down from 75 in the same period of 2011 and from 88 in the final three months of last year.

March saw just 16 warnings, and Ernst and Young believes “European Central Bank liquidity injections and a Greek settlement radically eased Eurozone concerns, helping to inject a little confidence back into the UK economy.”

Dividends hit a first-quarter record of £18.8bn – a 25 per cent jump on the same period of 2011.

The FTSE 100 led the way with a rise of 27.6 per cent to £17.7bn, although remainder of FTSE 250 dividends fell nine per cent to £915m.

However, Ernst and Young said that firms will struggle through the year as conditions will remain volatile, and that the Eurozone remains terribly weak in the face of strong deleveraging pressures on banks and the ongoing sovereign debt crisis.

“It’s still a tough consumer environment and the high oil price and uncertain impact of the Olympics and Jubilee on the travel sector in particular makes 2012 a tough year to predict,” added the firm’s Alan Hudson.