Currency tailwinds help UK plc report record 2017 profits

● Report hails ‘strongest set of results in years’ but may be hard to surpass in 2018

plc saw profits hit a record high in 2017 after “years in the doldrums”, on the back of a strong revenue performance driven by the weakness of sterling, according to a report published today.

The latest Profit Watch UK from The Share Centre, using data from the UK’S largest 350 listed companies, revealed pre-tax profits soared to £153.8 billion. That marked a yearon-year increase of nearly 160 per cent, with seven out of ten firms seeing their profits rise.

Sales also jumped more than 20 per cent to a threeyear peak of £1.33 trillion and within “touching distance” of the high seen in 2012.

The Share Centre said growth was robustly broadbased, with nearly all companies posting higher sales, “though those with large international operations fared significantly better”. Large multinationals accounted for 70 per cent of UK plc’s revenues in 2017, seeing sales rise by 30.1 per cent, boosted by currency tailwinds in the year after the Brexit vote. However, those reporting in sterling saw just a 3.6 per cent rise.

Overall, companies boosted their profit margins, particularly the mining and oil sectors, which rebounded due to a combination of higher oil and metals prices and major cost efficiencies.

Meanwhile, the banking sector tripled profits despite lower revenues, with a notable improvement at RBS, which returned to profit for the first time in ten years.

The Gogarburn-based lender posted a profit of £752 million for 2017, swinging from a £6.95bn loss a year earlier. However, the lender is braced for potential renewed losses in 2018 due to an impending settlement with the US Department of Justice.

Helal Miah, investment analyst at The Share Centre, highlighted the current backdrop of the flourishing global economy, and said UK plc “has delivered the strongest set of results in years, extenduk ing a period of growth not seen since the recovery in the immediate aftermath of the recession and financial crisis”.

He added: “Strong economic expansion around the world, coupled with positive exchange rate effects and more efficient cost-bases, proved a powerful shot in the arm for multinationals. Home-grown companies may not have matched their international peers, but they too have done well.”

On prospects, Miah said sterling gaining strength means 2017’s record profit may prove hard to beat. “The UK is beset by sluggish growth, and falling confidence while its relationship with Europe is redefined, so strong growth elsewhere in the world is a saving grace for UK plc, providing enhanced opportunities to expand business abroad.”

Separately, regulation and staff turnover are becoming bigger challenges for UK plc, according to the latest ICAEW Business Confidence Monitor. However, it found confidence has turned positive, moving to +7 in the three months to April – from -1 in the prior quarter – its highest level in two years.