Official figures point to growing profit rate for UK manufacturers

MANUFACTURING firms in the UK were at their most profitable for over five years as 2013 ended, with a 12.1 per cent net rate of return pushing the UK’s industry back to 2008 levels.

The rate of return has not been higher since the second quarter of 2008, according to figures released by the Office for National Statistics (ONS) yesterday.

The average for all private non-financial firms was 11.7 per cent in the fourth quarter of 2013, up from a low of 10.8 per cent in 2009, but still some way from 2006 and 2007 levels, when the rate was over 14 per cent.

The bump in profitability is likely to raise hopes that firms will start to invest more, following a consumer-driven recovery in 2013.

Services firms are at the “higher end of the range experience during the last five years”, with a 13.9 per cent rate of return. Companies were more profitable before the impact of the financial crisis, but are recording relatively strong profits in comparison to the rest of the post-crash period.

However, the oil and gas firms in the UK continental shelf are dragging the average figure down: the net rate of return for the companies fell to 30.4 per cent in the last three months of 2013, the lowest since mid-2009.

“The rise in corporate profitability in the fourth quarter fuels hopes that companies will invest at a healthy rate over the coming months, which is critical for sustainable, balanced growth,” said Howard Archer, chief UK economist at IHS Global Insight.