Company profitability and finance

Quarterly Bulletin 1992 Q3
Published on 01 September 1992

This article reviews the performance of UK industrial and commercial companies during 1991. The main points include:

  • Total company income fell by 3% in 1991, largely owing to a 12% decline in income from abroad.
  • Gross trading profits were 5% lower than a year earlier (or 0.6% lower if the newly privatised electricity companies are included); but profitability remained higher than in previous recessions.
  • Despite the fall in income, industrial and commercial companies reduced their financial deficit from £24 billion in 1990 to £11 billion in 1991.
  • This has been achieved through stringent cost control measures. Employment levels have been reduced and spending on investment and stockholdings has been cut back.
  • Companies have also repaid bank borrowing and increasingly turned to the capital markets for finance.
  • Consequently the net liquidity of the corporate sector has improved, reducing worries about financial fragility.
  • Company insolvencies, however, have continued to rise, increasing by 45% in 1991.

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