Firms’ negative announcements hit record high

The business advisors’ survey suggests that trading conditions are tough across most sectors of the economy, as the number of businesses making negative announcements of any kind reached 1,385 over the June quarter.

The figure marks its highest level since March 2003 and includes announcements such as profit warnings, redundancies and significant restructuring.

“Worryingly, the sector pressures are in conjunction with a rise in the number of consumers struggling with debts and significant increases in energy prices,” said Philip Davidson, head of restructuring advisory at KPMG.

“Although the figures are exacerbated by a major rise in the number of warnings in the health sector, which have risen from 42 in the March quarter to 135 in the June quarter, even without the effect of health the figures are at their highest level since 2004.

“With the Bank of England acting to guard against rising inflation, there is less prospect of any upturn in consumer spending. It will be more important than ever for retailers to price competitively, which means they need to be disciplined over their buying.”

Davidson pointed that retailers had a difficult time at the start of the summer, and the negative effects of the World Cup and the continuing downturn in advertising revenues led to a challenging quarter for the media and marketing sector.

“There had been high hopes that the World Cup would have a positive effect on advertising revenues, but in the end advertisers were disappointed,” he said. “As the internet increases its share of advertising revenues, traditional advertising sectors such as newspapers and radio are under strain.”

Not all sectors fared poorly, however, as the industrial sector recorded little change in the level of warnings. Meanwhile, the building and construction sector showed a drop of 21%.