UK companies to brace themselves

UK companies

Those UK companies who had hoped for a smooth ride in 2010 aren't going to get their wish, it seems. Despite a fall in the number of profit warnings in the final quarter of 2009, UK companies should brace themselves for a "bumpy recovery," a new report has found.

The report, conducted by leading accountancy company Ernst and Young stated that only 50 companies issued profit warnings in the fourth quarter, the lowest level in six years.

Andrew Wollaston, restructuring partner at Ernst and Young, said, "Given the depth of the slump, recovery has certainly come quicker than we might have anticipated.

"This rapid economic recuperation, along with previously depressed earnings forecasts, is helping companies beat expectations and keep profit warnings low. Good news for UK plc, but this is not the end of the story. Rapid recovery costs and 2010 is when we start paying. Brace yourselves for a bumpy recovery."

Exiting recession

However, figures due out Tuesday are expected to show Britain has exited recession, the BBC state.

Experts have predicted that the data will show the UK economy grew at about 0.4 percent in the three months to December 2009.

January 2009 saw the UK enter recession for the first time since 1991, after experiencing two consecutive quarters of negative economic growth. In fact, Britain is one of the last major economies still in recession, with the French and German economies exiting recession last summer.

Keith McGregor, restructuring partner at Ernst and Young said: "Growth in the first part of the year could sit in contrast with economic stagnation or even a second dip later on."

"The events in Dubai at the end of 2009 amply demonstrate how quickly situations can still deteriorate. The coming years could contain more of these shocks."

2010

The UK may be on the verge of coming out of the recession, but the report points out that in 2010 budget constraints will mean the government pulls back from pumping extra money into the economy.

The Bank of England's 'quantitative easing' scheme, in which assets are bought up to increase the amount of money flowing in the economy, is also due to come to an end.

With the UK economy only just on the edge of recovering, the withdrawal of extra money could have disastrous effects, sending it tumbling back into recession. Only time will tell to how well the UK economy can recover.

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