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Friday, 5 October, 2001, 11:38 GMT 12:38 UK
UK has 'three-speed' economy
North Sea oil rig
Oil firms thrived, while firms in the manufacturing and service sectors suffered
The UK economy, long noted for the profitability divide between service firms and manufacturers, is now a three-speed affair - with oil companies leading the earnings race.

Profits at UK manufacturing firms, beset by recession, plunged in the April to June quarter to a nine-year low, a survey by the Office of National Statistics said.

Even earnings at companies in the UK service sector, which have proved relatively resilient to the economic downturn, fell to their lowest levels since 1993, Friday's survey said.

But oil and gas firms saw their profitability, in terms of earnings gained compared with the value of company assets, soar to a record 42.3% over the quarter.

"This was mainly due to the continuing strength of crude oil and higher gas prices," the ONS said.

The profitability of oil firms was more than three times the UK corporate average of 12.0%, a six-year low.

Oil giant BP in August reported second quarter profits of $3.8bn (2.7bn), with Shell earning net profit of $3.5bn.

'Competitive conditions'

Technology firms, and drugs companies, led the decline in manufacturing sector profitability, the ONS said.

In the service sector, profit margins were eroded by "competitive trading conditions".

But Friday's report nonetheless found a growing earnings gap between the two sectors.

A profitability level of 12.4% in the service sector compared with a 4.5% figure for manufacturers.

See also:

25 Sep 01 | Business
UK economic growth revised upwards
24 Sep 01 | Business
UK growth 'to fall sharply'
21 Sep 01 | Business
Terrorist toll on the UK economy
07 Aug 01 | Business
BP's profits fall from record high
02 Aug 01 | Business
Shell profits continue to gush
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