Strong growth in profits forecast

BA forecast of the British economy published today says that company profits will strengthen dramatically in the next two years, leading to rapid growth in executive pay.

The forecast from the Chartered Institute of Marketing, foresees a 97 per cent rise in the five years to 1997 as a result both of the business cycle and long-term structural changes.

The author, Professor Doug MacWilliams, director of the Centre for Economics and Business Research, argues that the breakdown of barriers to international investment has forced British companies to compete for capital in global markets. Managers have been compelled to take advantage of increased flexibility in the labour market to keep costs in line with those of overseas competitors.

The Institute forecasts profits growth of 14 per cent this year, 13 per cent next year and 12 per cent in 1997: ``The rise in profitability graphically illustrates an important feature of the economic world in the late 1990s - a dramatic shift in the balance of power between capital and labour.''

One consequence is likely to be more rapid increases in executive pay, which is usually linked to profitability. Workers are unlikely to benefit, as companies continue to push for productivity increases; job insecurity will be a lasting phenomenon.