Almost all profits made by blue chip FTSE 100 companies are generated outside the UK, according to a report from financial website, The Motley Fool, which says the sluggish recovery of the UK economy will not affect the performance of blue chip shares.
The research shows 83 per cent of FTSE profits are from overseas, with £120bn of the £144bn of profits made by blue chip companies last year from outside of the UK. Motley Fool director David Kuo says this means the FTSE should not be seen as a barometer of the UK economy. He points to the difference between UK GDP and the performance of the index. Between the last quarter of 2008 and the third quarter of 2009, the UK economy contracted by five per cent, while the FTSE 100 rose 18 per cent.
“Investors betting on a global recovery can do so by exploiting the geographic diversity of the FTSE 100 index. The UK economy may struggle to recover from recession but it’s unlikely to hold back the FTSE.”