Retailers could be facing a tough Christmas despite profit warnings from the region's quoted companies stabilising, according to research published today.

Four West Midlands-based quoted companies issued warnings in the third quarter of 2006, the same figure as Q2 2006 and one less when compared to the same period last year.

Nationally, 85 profit warnings were issued by quoted companies, one more than the second quarter 2006 and a decrease of 18 per cent on quarter three of 2005, the study by Ernst & Young has revealed.

"Sales short of forecasts" accounted for two of the region's profit warnings, with "difficult trading conditions" and "write down of assets/investments" also being blamed. Across the UK, "difficult trading conditions" were once again blamed for profit warnings by over 40 per cent of the companies involved.

Just over a fifth (21 per cent) reported "contract delays and cancellations", the majority of these coming from the under £200 million turnover bracket; and 16 per cent cited "increased costs and overheads", up from 11 per cent last quarter, as primary reasons for warning.

Warnings in the region came from companies in general retail, personal goods, fixed line telecoms, and industrial engineering.

On a national basis, the highest warning sectors were support services with 17 warnings, media companies with 13, the highest in the past four years, and software companies, with ten.

Ernst & Young has predicted the uncertain economic environment is likely to cause companies, especially in the retail and chemical sectors, further problems in future quarters.

The number of general retailers who issued a profit warning in Q3 2006 remained constant with six warnings compared to five in the last quarter.

This though is a common issue amongst many retailers - there seems to be little change in the tough trading conditions they face.