Construction profit warnings to rise

Sixty per cent of listed house builders issued profit warnings last year as the number of firms sounding alarm bells about financial performance hit the highest level since 2001.

Research by accountant Ernst & Young show quoted construction companies endured a torrid end to 2008 with six firms issuing warnings – equivalent to 14 per cent of the sector.

Analysts at the firm believe this year will be even worse for profit warnings.

Restructuring partner Keith McGregor said: “The last 12 months have seen a significant leap in the number of profit warnings issued by listed companies in the UK making 2008 the worst year of warnings since 2001.

"With credit markets still frozen and confidence continuing to deteriorate, the next 12 months look set to be equally dramatic, if not more so.

“It would be difficult to predict anything other than a deteriorating economic climate in the UK over the coming months. Fears over rising unemployment will do nothing to boost consumer confidence, one of the vital ingredients in the recipe of recovery.

"The fundamental lack of liquidity in the financial sector, another key component, will mean that even those businesses that have the potential for growth will find their options for increasing investment severely restricted.

“However, amid the wreckage, there will be opportunities. Cash-rich and unleveraged companies will have the chance to acquire fundamentally sound businesses that are struggling under a mountain of debt. Fortune will favour the brave.”