UK-listed firms post weakest performance in three years
UK plc posted its weakest set of results in three years during the second quarter of 2019 – and the figures would have been worse had it not been for the weak pound.
Revenues of companies listed on the UK main market grew by 1.6 per cent in the three months to June, while profits rose by 3.1 per cent, according to the latest Profit Watch UK report from investment firm, The Share Centre.
The report blamed the weak performance on a slowdown in the world economy, compounded by a deteriorating picture at home, and said growth was only made possible by a lower exchange rate, which boosted the sterling value of revenue and profit earned overseas.
There was a notable divide between the big multinational companies, which generate most of their earnings abroad, and more domestically exposed firms.
While the biggest 40 listed companies managed to grow slightly, firms outside this group – which tend to have a greater exposure to the UK economy – saw revenues fall for the first time in five years.
The biggest 40 stocks posted profits of 13.3 per cent, while firms outside the top 40 saw profits slump by almost a third, the fifth consecutive quarter of declines.
Richard Stone, chief executive of The Share Centre, said: “Profit growth has become increasingly dependent on a narrower group of companies over the last year. The increasingly sharp divergence between the multinationals and those more dependent on the domestic UK market is part of this picture.”
He added: “UK plc has endured a painful margin squeeze. Part of this reflects the structurally tougher economic conditions experienced since the pre-crash boom years ended in 2007 but it also reflects regulatory change, particularly in the financial sector. Another contributing factor is disruption in a number of industries from new competitors or new technologies.”
Over the last 12 months, companies have made £2.04trn in sales and generated profit of £192.5bn on those sales – a margin of 9.5 per cent. This is in line with the average for the last 18 months but below the seven-year high reached just under a year ago, and well below profit generated in 2007.