This article reviews the performance of UK industrial and commercial companies (ICCs) during 1988.
Among the main points are:
- The rapid increase in demand in 1988 ensured that the UK corporate sector continued to flourish. Profitability was at its highest level for twenty-five years.
- Although most manufacturing companies were operating at a relatively high level of output, they were able to respond to the increase in demand. However, the labour market remained tight.
- The investment performance in 1988 was exceptionally strong, largely owing to the rapidity of output growth in the previous year and the high levels of capacity utilisation.
- Companies moved into financial deficit, mainly on account of buoyant capital expenditure and rising dividend payments. It is likely that the sector will remain in deficit in 1989.
- Company liquidity has deteriorated rapidly since the crash; equity issues have been subdued, and there was a substantial outflow of cash from the sector associated with the high level of takeover activity.
- The combination of strong bank borrowing and the rise in interest rates increased income gearing in the second half of the year. Capital gearing also rose sharply.