UK profits slump to nine-year lows

Manufacturing companies have suffered

The profitability of UK companies has fallen to its lowest level for nine years.

The Office for National Statistics (ONS) said the rate of return by private corporations outside the financial service sector dropped to 11% in the three months to the end of September.

It is not just a reflection of weak global demand but also competition from places such as China

John Butler
HSBC

This compared with 11.7% in the previous three months of 2001.

The ONS said it was the worst figure since the end of 1993 and reflected a drop in profitability across all the main sectors of the corporate world.

Taxes and regulations

Manufacturing companies saw their rate of return slide to 6.8% from 7.6%.

Service firms saw a 13.1% rate of return compared with 14.2% in the previous three months.

Oil and gas companies operating on the UK continental shelf saw a return of 31.8%, but that was lower than the 32.8% achieved in April, May and June last year.

The Conservatives blamed the poor figures on higher business taxes and new regulations imposed by the government.

Tough competition

"Today's figures are a chilling warning about the prospects for British business in 2003," said shadow trade secretary Tim Yeo.

"Business is struggling under £15bn a year of extra tax and regulations imposed by the Labour government."

But a treasury spokesman said the figures reflected the state of the world economy.

John Butler, an economist at HSBC said: "This is primarily a manufacturing story - it is not just a reflection of weak global demand but also competition from places such as China."