Profits at the UK’s largest companies slumped to their lowest level in a decade in 2015, with turmoil in the banking and commodities industries weighing heavily on corporate performance.
New analysis from the Share Centre, released today, shows that the FTSE 350 – the UK’s largest 350 listed companies – posted combined pre-tax profits of £84bn last year, down 38 per cent on 2014. That takes profits to their lowest level in any of the last nine years – including the depths of the financial crisis.
The previous low for profits recorded by the Share Centre came in 2008, when the FTSE 350 clocked up £99bn of combined profits.
Companies “have had a turbulent year, fighting global headwinds that have buffeted their revenues and profits. Moreover, the difficult conditions they face have had knock-on effects for other industries that serve them,” said Helal Miah, investment research analyst at The Share Centre.
The dramatic fall in profits came off the back of an 11 per cent drop in revenues. Combined sales for the group of firms was £1.6 trillion in 2015, down from highs of £1.9 trillion recorded between 2011 and 2013.
As the oil price continued its precipitous decline – falling from $56 (£39) to $37 over the course of 2015 – and UK lenders faced a torrid time with new regulations, taxes, unorthodox monetary policy and cost-cutting at investment banking arms, the fall in revenues across the entire group was more than accounted for by weak performance in the oil, mining and banking sectors.
Combined, London-listed banks, miners and oil giants had their revenues drop £202bn over the year. Stripping out these sectors shows that domestic-focused firms in industries like travel, leisure, retail and real estate recorded stronger profits in 2015 than at any point since the crisis.
“The worst is over for most sectors,” Miah said, “but oil and banking face another tough year”.
In the first quarter of 2016 – which is not accounted for in the Share Centre’s analysis – banks in particular come under immense pressure with volatility in the financial markets and slowing growth in both the UK and the US.
Most lenders reported double-digit falls in profits for the first three months of the year. At HSBC, pre-tax takings dropped 14 per cent, while at Barclays they were down 25 per cent and Lloyds registered a six per cent fall.