The number of UK-listed companies issuing profit warnings fell during the second quarter of 2010 to its lowest level for seven years, according to a report.
Figures from Ernst & Young show that 45 companies warned that profits would be lower than expected, eight fewer than the 53 which issued a profit warning in the first quarter. The last time this number fell below 50 was 2003.
The main reason given for the profit warnings was a sudden loss of contracts or contract amendments. Six companies cited delays to or cancellations of government contracts, suggesting spending cuts were already having an impact.
This problem can only worsen as spending cuts continue to take effect, predicts the accountancy firm, which also points to the impending VAT increase to 20% and an expected rise in interest rates as factors likely to see a surge in profit warnings.
"UK plc could be in for another rough ride," says Keith McGregor, restructuring partner at Ernst & Young. "A number of companies have already cautioned that they expect much tougher times ahead when further fiscal tightening reins in public sector and consumer spending."
The travel and leisure sector accounted for six of the 45 warnings, though at least four were connected to the volcanic ash cloud which disrupted air travel in May.
Construction, software and computer services were also prominent among the companies issuing warnings.
