This article presents estimates of company profitability since 1985 derived from the published accounts of a fixed sample of the largest UK companies. Measures of capital gearing, interest cover and dividend payments are also shown. These estimates complement and supplement those based on national accounts data which were published in the August 1990 Bulletin.
The figures show that the return on net assets of large non North Sea industrial and commercial companies declined slightly in 1989, reflecting the first effects of the slowdown in economic growth in the United Kingdom. The most notable feature was the divergence between manufacturing and non-manufacturing: whereas the profitability of the former rose slightly, that of the latter fell back to the level of 1987, suggesting that the initial impact of the tightening of monetary policy was mainly on non-manufacturing sectors. Overall, capital gearing rose in 1989, although for manufacturing companies this coincided with a rise in interest cover, whereas non-manufacturing companies experienced a fall in interest cover. Dividend payments, as a proportion of earnings, rose marginally in 1989.
Profitability of large companies