UK companies outstrip their European counterparts

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Manufacturing News, Source : British Industry
Published : 23 Apr 2007 7:36
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UK companies outstrip their European counterparts

The UK's largest companies are continuing to outperform their European competition, with the greatest success going to those investing more in research and development or new equipment.

The Department of Trade and Industry's 2007 Value Added Scoreboard, released today, shows UK companies dominating the list, with 210 of the 750 biggest value adding, or wealth creating, firms in Europe.

The annual scoreboard uses 'value added' by companies, or the difference between sales and cost of bought-in materials/services, as a measure of businesses' economic contribution. It uses value added per £1 of staff and depreciation costs, or 'wealth creation efficiency', as a key performance measure.

Over the last four years, large UK-based companies have had higher profitability, faster value-added growth and higher wealth creation efficiency than their French and German equivalents.

Secretary of State for Trade and Industry, Alistair Darling, said: "The UK is home to some of the world's best companies and it's a good place to do business. As the recent Budget shows, the Government is backing business and helping the UK to stay on top.

"Of course, innovation is key to business success. That's why we're enhancing R&D funding for business, raising skills and improving access to world markets for UK-based companies."

Analysis shows that the most successful and sustained wealth creation results from ongoing investment particularly in areas like innovation and skills.

One reason for the UK's high performance has been its strength in high-value sectors such as financial services and oil and gas. But strong performances by individual UK companies within these and other sectors have also played a part.

The scoreboard lists the value added, or wealth created, by the top 750 European companies and the top 800 UK companies.

Key findings include:

· Value added based measures continue to provide some predictive power for investors. Shares in 19 high performing companies identified in the 2003 Scoreboard are now worth 166 per cent more on average; the FTSE 350 index has risen by only 89 per cent.

· 55 per cent of value added is concentrated in the top 100 of the 750 European firms, while 45 per cent is found in six out of 39 sectors (Banks, Oil and Gas Producers, Automotive, Fixed-Line Telecoms, Electricity, and Travel and Leisure).

· French companies are ahead of their German counterparts in wealth creation efficiency, but behind UK firms.

Companies of all sizes can use the DTI's value added calculator to check and set a benchmark for their own performance.

US and Japanese companies are not included in the Scoreboard because they do not give enough information in their annual reports to allow VA to be calculated. The 2007 Scoreboard illustrates the Value Added of a handful of Japanese companies that, exceptionally, give sufficient information in their accounts.