British private sector hit by declining profitability and worker productivity

BRITISH companies saw their profitability deteriorate in the first three months of 2009 for a fourth successive quarter to hit the lowest level since the autumn of 2003, official data said yesterday.<br /><br />The Office for National Statistics (ONS) said that the net rate of return by private non-financial corporations in the first quarter of 2009 was 12.3 per cent, less than the 13.1 per cent net rate of return in the last three months of 2008.<br /><br />Manufacturing companies were particularly hard hit, only managing 6.8 per cent net rate of return compared to services companies&rsquo; 13.8 per cent.<br /><br />IHS Global Insight&rsquo;s Howard Archer said: &ldquo;While the rate of economic contraction has clearly eased substantially recently and the economy may even have stabilised in the second quarter, this is unlikely to be sufficient to prevent further deterioration in profitability.&rdquo;<br /><br />&ldquo;Meanwhile, companies&rsquo; weakened profitability is likely to weigh down on investment and employment,&rdquo; he added.<br /><br />These concerns were exacerbated by ONS productivity data, also released yesterday, showing worker productivity falling in the first quarter of 2009 by 4.2 per cent. <br /><br />The fall was particularly pronounced in the manufacturing sector, which saw a decline of 8.3 per cent on an output per job basis compared to the previous quarter.