Poor sales and difficult trading conditions saw profits warnings soar by 23 per cent in 2005 as consumer confidence fell in the UK, figures showed today.
Research from Ernst & Young found that there were 381 profits warnings last year compared with 294 the year before.
It was the highest number since 2001 with retailers in particular suffering from rising levels of debt and the slowdown in the housing market.
In the West Midlands there were six profit warnings for the year to December 31, an increase of four warnings when compared to the same period in 2004, and a slight increase of one warning when compared to the third quater of 2005.
Nationally, in the fourth quarter of 2005 sales short of forecasts were blamed for 45 per cent of the profits warnings, while 42 per cent of firms hit cited "difficult market conditions".
Overheads were also of concern, with 12 companies blaming rising energy costs.
Last week, Goodfella's pizza and Fox's biscuits maker Northern Foods warned profits would be hurt by a 60 per cent, or £6 million, rise in energy bills.
Ernst & Young also blamed the number of profits warnings on a slowdown in the UK economy.
Ernst & Young partner Andrew Wollaston said: "Profits warnings have averaged 95 per quarter in 2005 compared with 65 per quarter in 2004.
"The 23 per cent increase is due largely to the decline in consumer confidence during 2005 as a result of growing concerns over increasing levels of consumer debt and the slowing of the housing market, and because UK economic growth has halved to 1.6 per cent - the lowest annual rate since 1993.
It is clear that companies are still finding it difficult to forecast in the current benign economic climate.
"Additionally, in a rising stock market there is an expectation on corporates to produce continuing improved profitability and this brings added pressure on forecasts."
The most profits warnings in the final quarter came in the support services sector with six recruitment companies delivering bad news.
Ernst & Young also found that retailers had a bad year, highlighted by the number of insolvencies within the sector.
Mr Wollaston said: "This is not surprising given that in the earlier year sales were at a six-year low and retailers were cutting jobs faster than at any time since 1992.
"The collapse of retailers such as Allders, Allsports, Furnitureland, Kookai and Unwins demonstrate that difficult market conditions and competition has made it impossible for some retailers to continue trading."
Insurers also suffered - having their worst year on record - as the number of claims jumped following natural disasters such as hurricanes Katrina, Rita and Wilma.
Keith McGregor, corporate restructuring partner at Ernst & Young, said: "The first quarter of 2006 is likely to see a similar warnings picture, possibly with a heavier bias toward retailers.
"With rents and employee costs on the rise and no opportunity to increase prices, all retailers will be looking to manage out costs and increase volumes."
Commenting on the figures in the West Midlands, Ian Best, Birmingham-based corporate restructuring partner at Ernst & Young, said: "Profit warnings across the West Midlands have averaged nearly five per quarter in 2005 compared to three per quarter in 2004.
"This significant increase is due largely to two facts.
"First, consumer confidence has fallen in 2005 as a result of concerns over growing levels of consumer debt and the slowing housing market.
"And second, because UK economic growth forecasts have been halved to 1.6 per cent, the lowest annual rate since 1993.
"While there appears to be the beginnings of a recovery in the housing market and more positive news of Christmas trading from retailers, it is clear that companies are still finding it difficult to forecast in the current economic climate.
"Additionally, in a rising stock market there is always an expectation on corporate businessess to continue to produce improved profitability and this brings added pressure on forecasts."
The highest number of warnings in the West Midlands came from companies operating in the engineering and machinery, and support services sectors, with two warnings each.
