Corporate profits at highest since 1999
Company profitability in the UK has increased for the first time since the first quarter of 1999, according to figures released today (Monday) by Experian, the business services group.
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The average return on capital among UK companies rose from 4.7% in the 12 months to December 2003 to 5.0% in the 12 months to March 2004, marking the end of a five-year downward spiral in which average corporate profitability fell by two-thirds.
Peter Brooker of Experian said: ‘The UK economy has grown in every quarter since corporate profitability began to fall away in 1999, but GDP has been boosted during this period by rapid growth in public spending. This has mitigated the fall-off in manufacturing and, more recently, weakness in some of the service sectors covered in the report.’ Brooker added: ‘Although the upturn in the latest quarter is very weak, there are several features that give rise to optimism that it isn’t a one-off blip. The result reflects the more positive global economic environment of the last couple of years, and general UK economic conditions, with interest rates, unemployment, productivity growth and wage inflation all relatively benign.
But he urged business leaders ‘not lose sight of the very real hurdles still to be overcome’, warning that the effects of the recent surge in oil prices could hold back the UK’s nascent recovery and ‘derail the global economy’.