Businesses in London are leading the nation when it comes to profitability according to data shared exclusively with City A.M.
A study by accounting firm BDO revealed that firms in London have average profit margins of 8.1 per cent, well above the nation wide average of 6.7 per cent.
In the capital the profitability of businesses was boosted by the financial services industry, which was found to have an average profit margin of 14.4 per cent despite concerns about the impact of Brexit on the sector.
Richard Burge, the chief executive of the London Chamber of Commerce and Industry, said the data “highlights the important role that London businesses play in the UK economy.
“The Government must do everything it can to encourage economic growth in all corners of the country post-COVID, but levelling up will have a far greater chance of success if London is treated as the economic engine room of ‘Global Britain’ that can create opportunities and boost growth in all regions,” Burge added.
Scotland ranked in second place after London with average profit margins of 7.5 per cent while the South West and North East of England saw margins of 6.2 per cent and 6.1 per cent respectively. The West Midlands was at the bottom of the league table with margins of 2.8 per cent, a figure which could reflect a reliance on manufacturing in the region, but lower than the industry average of 3.1 per cent.
Raj Kandola, head of policy at Greater Birmingham Chambers of Commerce, said: “the results are disappointing but point to longer term issues related to business productivity in the West Midlands.
“If the Government is serious about ‘levelling up’ and bringing prosperity to all parts of the country, then it’s vital we reduce the huge cost pressures that many businesses are facing right now – many of which have been exacerbated by the pandemic.”
Mark Lamb, a business advisory partner for BDO, also called on the government to offer specialised support to companies in different UK regions under the ‘levelling up’ agenda.
“The recovery from the pandemic is the perfect opportunity for targeted policies and investments to make a big impact on regional economies and support the overall recovery of the UK,” said Lamb.
The study, which collected data from 220,000 UK firms, used accounts from the year ending in September 2020.