Hit by high values

Further evidence that UK manufacturers’ profits are being hit by the high value of sterling against the euro came today in a survey of company accounts from the last quarter of 1999.

Engineering companies saw return on capital fall by 5% between the end of 1998 and the end of 1999, according to the survey by information consultancy Experian. The chemicals and plastics sector was hardest hit, with a 32.2% drop in the same period. Chemicals is now the third least profitable sector with a return of 8.2%, just ahead of textile manufacturing and transport.

The drop in profits is caused by the strength of sterling and could lead to lower investment, according to Experian. ‘Further heavy investment is required to bring the UK’s productivity up to our competitors’ levels. But the economic case for such investment is not helped by the fact that while overall productivity has risen by as much as 10% over the last year, the pound has risen by 20% against the euro over the same period,’ a spokesman said.