Triple whammy for Yorkshire companies as profit warnings soar

PROFIT warnings from Yorkshire plcs shot up in the last quarter, with almost twice as many listed companies reporting trouble than in the same period in 2010.

Analysis shows 11 firms issued warnings in quarter two, compared to six this time last year.

At a national level, the retail sector sounded 26 profit warnings in the first six months of 2011, more than they issued in all of 2010 and nearly double the number in 2009.

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The rise in alerts is being blamed on the triple whammy of rising inflation, increasing debt and diminishing job security among consumers.

“Future prospects aren’t any brighter,” said Hunter Kelly, a Leeds-based partner at Ernst & Young, which compiled the research.

“The next three months will stretch more retailers to the limit as they approach the September quarter rent day and seek credit to stock up for Christmas.”

The bleak news continued as the latest purchasing managers’ index for Yorkshire and Humber showed that the region is lagging behind the rest of the UK.

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The region reported the weakest average growth in activity of all regions in the second quarter, which is leading to companies slashing jobs for the first time since spring 2010.

Companies reported falling new orders and a strong rise in fuel and energy costs in the last month.

Business activity did grow for the 25th consecutive month, but this growth was “marginal” and below the series average, according to Markit, which looked at output, new orders, employment and prices at a range of companies.

New order growth eased to a nine-month low last month.

Martyn Kendrick, a director at Lloyds, said: “The subdued performance of the Yorkshire and Humber regional economy was evident in both the manufacturing and service sectors.”

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Meanwhile, Deloitte pained a depressing picture of plummeting confidence among national finance directors in its latest report into business sentiment.

The accountancy firm said the fall was the sharpest decline in corporate optimism since the wake of the collapse of Lehman Brothers in autumn 2008.

A third of FDs believe there will be a double-dip recession, according to Deloitte.

Simon Manning, a partner, said: “The continued squeeze on UK consumer spending power seems to be weighing on corporate sentiment.

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“Over the last year, real disposable incomes have fallen by 2.7 per cent, the fastest rate of decline since 1976.”

In contrast, Deloitte said risk appetite was high among corporates, which are buoyed by strong corporate balance sheets, cheap credit and the belief that the current environment also presents opportunities for profitable growth.

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