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Company profit warnings hit 7 year high

One of the true warning signs that the economy is in trouble is the number of profit warnings issued by companies on the stock market and this year has been no different. We have seen 111 warnings of lower profits between July and September this year and there are fears that this is not the high of cycle with many more to follow. However, when you consider that this is a 7 year high for profit warnings we really are in trouble.

One of the more alarming factors is the spread of industries which the current downturn has taken in, from banking to the high street and everything in between. We are not just seeing revisions in profit forecasts in many cases we are seeing a move from large profits to large losses and a destruction of many balance sheets.

The other concern is the fact that the longer this goes on the longer it will take for companies to recover as they simply won't have the strength in depth to hit back as soon as the economy picks up. It will be interesting to see what assistance the authorities give them when the economy does pick up as this would need to be balanced against the state of the UK public books and reduced tax income until the economy starts growing again.

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