In the second of an annual series of articles, the results of the National Statistics First Release, ‘Profitability of UK Companies’ are analysed. This release measured the profitability of corporate sector operations in the United Kingdom, using rates of return on capital employed. For the first time, a quarterly measure of profitability was calculated. This article reports these data, but also analyses the financial position of non-financial companies in 1999 and in the first quarter of 2000.
In 1999, the UK corporate sector was not able to maintain its profitability and the net rate of return on capital fell by 0.8 per cent from 1998. Margins for manufacturers have been cut, both in home and export markets. As a result, profitability fell sharply. Despite competitive trading conditions, rates of return for service companies declined only slightly. In the first quarter of 2000, manufacturers continued to find it difficult to pass on higher input prices and productivity in manufacturing fell back for the first time since the third quarter of 1998. Rates of return earned were below 7 per cent, around one-half the rate earned two years previously. Rates of return earned by UK Continental Shelf companies rose in the first quarter to their highest levels since 1996, reflecting rises in crude oil prices and cost savings achieved by these companies.
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