Profits at top UK companies reach new record level
Higher oil prices gave a boost to some of the biggest British firms.
Profits at the UK’s listed companies have hit a new record for the first time in seven years thanks to a run of high oil prices, a new report showed.
According to research by The Share Centre, profits from UK companies on the main stock market reached £217.9 billion over the last 12 months.
This breaks the all-time high last set in 2011.
All listed companies have also delivered revenue of just over £2 trillion between them for the first time on record.
Despite smashing the record, UK plc earnings growth this year is now expected to be lower than previously thought.
The market sees median or typical earnings growth of 5.4% this year, down from 6.7% three months ago.
Helal Miah, investment analyst at The Share Centre, said: “Two notes of caution leaven the good news in the latest set of figures reported by UK companies. First, the majority of current profit growth is relatively low quality, since it largely reflects the impact of higher oil prices, which are outside the control of individual companies.
“And secondly, profit growth was focused in fewer companies, indicating that many businesses are finding trading conditions challenging.”
Some of the biggest winners in the past 12 months have been in the oil sector, which is the largest generator of revenues on the UK stock market.
Oil prices have jumped from 50 US dollars a year ago to around 80 dollars in current trading, giving a huge boost to the industry and firms such as BP and Royal Dutch Shell.
Consumer goods and housebuilding also performed well, while utilities revenues were pushed higher by energy price increases.
But the picture was less rosy for the mining sector, which has suffered as a result of global trade tensions. The industry has recently been a core driver of UK plc growth, but revenue was flat in the most recent set of results.
Meanwhile, the well-publicised pressures on the high street affected the retail sector, in which profits collectively fell 35%.
Mr Miah added that uncertainty over Brexit has been holding back the UK’s listed companies.
“It’s also clear that the UK stock market looks cheap relative to global peers, and to its own medium-term average,” he said
“A key factor is the uncertainty caused by Brexit which has resulted in slower economic growth and international investors reducing their weighting to UK stocks.”