SLUMP IN PROFITABILITY HITS UK JOBS AND INVESTMENT

BRITISH industry could be teetering on the brink of recession as profitability has fallen for the seventh consecutive quarter in the 12 months to December 2000, according to information solutions company Experian.

In their latest Corporate Health Check, Experian revealed that falling business investment and profitability have already resulted in tens of thousands of job losses, factory closures and widespread reductions in forecasts for economic growth this year.

Peter Brooker, author of the report, warned that there now existed a “serious imbalance” between companies and industries serving domestic UK markets, and which are fuelled by consumer spending. In the year to December 2000, profitability fell across manufacturing and service sectors, with 19 of the 23 sectors covered by the report suffering a year-on-year decline. Seven industries – engineering, printing, paper and packaging, textiles and clothing, food manufacturing, media, retailing (non food) and motor traders – have seen their profitability fall by more than one-fifth. The textiles and clothing sector is in such steep decline that it is expected to fall into an overall loss during 2001.

“The decline in profitability by almost one-third in the media sector is particularly worrying,” said Peter Brooker, “especially in the light of recent reports of falling advertising spending on both television and in newspapers. Rightly or wrongly, advertising expenditure is always one of the first expenses to be cut back on or even cut out completely when economies stall or slip into recession.”

The Experian Corporate Health Check is based on the audited financial results of the 2,000 largest companies in the UK and reflects the combined effects of current UK economic policy and marked conditions on the actual financial results of British companies. (MB)