UK firms issued 111 profit warnings between July and September as the credit crunch hit retailers, media and support service firms, it has emerged in a research study.
The figures from professional services firm Ernst & Young are the highest for the third quarter since the same period in 2001 and almost a third higher than in 2007.
Colin Dempster, restructuring partner at E&Y in Scotland, said: “UK profit warnings continued to come thick and fast during the third quarter. It is deeply concerning to think that the worst is almost certainly yet to come for UK corporates.
“The end of the third quarter and the start of the fourth brought some of the most turbulent weeks for banks and financial markets in a generation – weeks that have completely redefined the banking landscape and reminded us that the credit crisis is far from over.”
Mr Dempster added: “UK Plc is about to enter the perfect storm, arising from the confluence of the financial credit crunch and economic downturn. If we are not already, we are likely to be in recession by Christmas.”
Despite just six of the 111 profit warnings being issued in Scotland, Mr Dempster warned that Scotland is by no means sheltered against the current downturn.
“The Scottish figures do not necessarily reflect what is being seen on the ground,” he said. “Scottish-based companies will be feeling the strain just as much as their UK counterparts.
“There has been speculation that Scotland may suffer particularly badly as a result of the drop in share prices of the Scottish banks. However, it must be stressed that this is an international monetary crisis and not one specific to Scotland.
“For the banks based in Scotland, it is business as usual in this increased time of uncertainty. We are seeing them continue to act professionally and commercially.”
Support services saw the most warnings to investors with 23 out of 209 companies in the sector, the highest ever recorded for this part of the UK economy. It comprises companies ranging from recruitment agencies to engineering services and government contractors.
The research said the sector was exposed to industries currently in turmoil, such as the financial and property sectors.
The Office for National Statistics recently said the service sector as a whole failed to grow for the first time in six years during the three months to July 2008.
General retailers are also expected to be a casualty of current economic turmoil.
The sector issued 13 profit warnings out of 78 companies, almost double the number issued in the third quarter of 2007.
E&Y said retailers will struggle to make a profit this Christmas as they need to increase their prices to balance escalating overheads at a time when consumers are spending less.
One fifth of the media sector has issued profit warnings in the year to date. Eleven of 126 companies issued a warning in the third quarter, compared to four in the previous quarter.
One possible explanation for the warnings is the decrease in spending by major advertisers for retail, finance and consumer products.
The research also predicted that profit warnings would rise in the next year and that defaults and insolvencies are expected to peak in 2009-2010.