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UK company profits hit record highs in 2006

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The profits made by UK companies outside the profitable financial sector have hit record highs in the last three months of 2006.

The net rate of return on firms’ UK investment outside the financial arena was 15.5%, up from 15.2% in the previous quarter.

The Office for National Statistics (ONS) said profits in 2006 were the highest since 1965 – the year records begun – rising to a rate of 15.1% for the whole year from 14.3% in 2005.

The increase was led by service firms, with the manufacturing sector following. The service sector increased its net rate of return in the fourth quarter of 2006 to 20.9% from 19.5% in the third quarter.

Manufacturers also put in a stronger performance over the same period, with earnings ballooning to 10%, higher than the average 8.5% for the entire year in 2006.

“Profitability is at record levels, buoyed by a very strong world economy, record UK investment and booming financial markets,” said Adrian Cooper, economic adviser to the Ernst & Young ITEM Club.

“This is at last feeding through to UK investment in business, which is now the most dynamic driver of Gross Domestic Product growth.”

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