Strong pound takes its toll on company profits

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The Independent Online

The strong pound has taken a severe toll on company profits, according to a new survey. Profitability fell sharply in the second half of 1999 as productivity gains failed to offset the higher exchange rate's impact.

The average return on capital fell for the third quarter running, dropping to 13.14 per cent from a peak of 14.18 per cent in the first quarter of 1999, according to Experian, the information services group.

Peter Brooker, a spokesman for Experian, attributed some blame to higher interest rates and the surge in the price of oil.

The survey found that of the 23 industry sectors analysed - excluding financial services - only four had increased profitability in the last quarter. These were building and construction, alcoholic beverages, food retailing and utilities.

Of those which recorded a fall in profitability, eight had dropped more than 10 per cent, including information technology, food manufacturing and pharmaceuticals. The IT industry does not cover internet companies, but includes many firms affected by Y2K preparations.