This article reviews the performance of UK industrial and commercial companies (ICCs) during 1987 and considers the implications of their behaviour following October's stock market collapse.
Among the main points are:
- The fall in equity prices appeared to affect only firms' financial behaviour, encouraging a switch from issuing equity towards bank borrowing and, to a lesser extent, eurobonds.
- The recovery in the oil price brought about a substantial improvement in oil company performance.
- The profitability of non North Sea companies also increased markedly in the wake of rapid output growth and wider margins.
- The dividend-payout ratio continued to rise rapidly.
- Total investment by ICCs was quite buoyant; however, there was some variation in the performance of different sectors.
- Considerable acquisition and merger activity persisted throughout the year.