British companies are creating more wealth than their European competitors and returning a greater proportion of that wealth to shareholders, according to research published today.
The latest analysis by the Department of Trade and Industry shows that "value-added" - defined as total sales less the cost of bought-in materials and services - rose 5 per cent for the UK last year, but only 1 per cent across Europe as a whole.
The DTI's 2004 value-added scoreboard reveals that the total wealth created by Europe's 600 biggest companies reached £1,326bn last year. Of that, the 165 UK companies represented in the top 600 contributed the biggest single share - £315bn. Germany came second with £295bn, and France third with £246bn.
This makes the UK 12 per cent more efficient at creating wealth than its continental counterparts, according to the study.
The way that wealth is distributed between shareholders, employees and taxes varies widely between the UK and the rest of Europe. UK companies pay out more in dividends and corporation taxes but significantly less in employee costs.
Shareholder dividends, for instance, soak up 12 per cent of the wealth created by UK companies, but only 3-5 per cent of value added in Germany and France. UK companies also have higher amortisation costs, largely of goodwill on acquisitions.
Dr Mike Tubbs of the DTI's business, finance and investment unit and one of the authors of the report, said one of the explanations for the UK's superior wealth creation last year may have been the strength of the euro and the impact this had on the competitiveness of European companies.
The top wealth creator among UK companies was the oil giant Shell which, despite its current crisis over the misbooking of reserves, created £18.3bn of value added. In Europe, the best performer was the German car manufacturer Daimler Chrysler, with wealth creation totalling £24.2bn.Reuse content