Companies in the South-East are at greater risk of issuing profit warnings than other parts of the country, it has been revealed.

More businesses in the region issued warnings in the second quarter of 2004 than in the first three months of the year, bucking the national trend.

A survey by accountancy firm Ernst & Young revealed 64 profit warnings were announced across the UK in the second quarter of 2004, compared to 71 in the first three months of the year, a drop of ten per cent.

But 23 firms based in the South-East issued warnings in the second quarter compared with just 15 in the first three months of the year.

The survey found these companies also saw a sharper fall in share price than in the first part of the year.

Businesses issuing a profit warning in the second quarter of 2004 saw an average drop of 15.9 per cent in share price, compared with 10.59 per cent in the previous quarter.

Ian Best, of Ernst & Young, said: "This is a little disappointing for companies in the South-East as many have managed the unpredictable changes in the market well, both in terms of maintaining competitiveness and managing cash in difficult trading conditions.

"The overall decline in warnings in the second quarter of 2004 appears to reflect a relatively healthy economy. However, the decline in warnings was accounted for by mainly one sector, general retailers, which issued only three warnings in this quarter.

"This indicates consumers are paying little heed to the Bank of England's efforts to stifle spending. Significantly higher interest rates may have a knock-on effect for service industries especially those selling to the corporate market.

"Many companies in the South-East will need to monitor their businesses and particularly their cash flow in the next few months."

Nationally, software and computers services were most affected with nine warnings each.

The construction and the building sector recorded seven warnings, up from one in the previous quarter.

Information technology hardware companies accounted for six warnings, followed by the leisure and hotels sector with five.

Mr Best said: "The next few months will be particularly testing for some companies."

Tuesday July 13, 2004