UK PLC revenues rise but gap to top companies grows
According to the Share Centre’s latest Profit Watch UK report, revenues for UK plc have grown for the tenth successive quarter, rising by 8 per cent. Despite this growth overall, this rise was not shared evenly across UK companies; profits from the UK’s largest companies grew by 11.2 per cent but those outside this group saw profits fall by 17.6 per cent.
Despite this disparity in profits, revenues reversed this trend, with growth of 7.7 per cent recorded for the top 40 companies and 8.8 per cent for those outside this group.
The report studied the first quarter of the year, from January to March, and found that profits continued to rise overall by a rate of 4.4 per cent. The rate of this increase however has decreased compared to last year when profit was rising at double digit rates.
The disparity between the profit performance of the top 40 companies and the rest continues to grow. For the eight consecutive quarter the top 40 continues saw growth in their profits compared to the fourth consecutive quarter of declining profits for those outside this group.
Out of the 20 sectors that featured in the report, 11 saw declining profits with the hardest hit sectors being general retailers, industrials and asset managers.
The banking sector saw a significant increase however, rising nearly 75 per cent from the rate recorded in 2007. For the entirety of 2018, banking profits were at their highest level since 2007, reaching £27.7 billion.
Richard Stone, CEO of The Share Centre said: “UK plc profits are growing and that’s a good thing. The rate of improvement is decelerating as wider global economic trends are becoming less supportive however, and the market is slowly reducing forward-looking expectations as a result.
“The divergence of late between the performance of the largest 40 companies and those outside the super-league is quite stark. The one sixth drop in profits for the latter group in the latest set of results was exaggerated by big losses at a handful of companies, but even without the more extreme cases they still underperformed.
"Sharp declines in profit like those in the latest quarter are unlikely to repeat in our view, but there is work to be done to reverse the margin squeeze being felt across a number of sectors. This narrowing of profit growth to fewer and fewer companies is common late in the economic cycle.”