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Weak pound turbo-charges UK revenues

Sterling weakness and better-than-expected economic growth powered mid and large cap revenues in the first quarter.

 
Weak pound turbo-charges UK revenues

Post-Brexit sterling weakness caused UK company revenues to rise for the first time in four years.

Revenues for UK plc grew 4.2% to a combined £1.11 trillion over the first three months of the year. This represents the first increase since 2013. Revenues grew at their fastest rate since 2010, according to The Share Centre’s latest Profit Watch report.

The struggling pound may not have done much for domestically-focused companies, but it certainly provided a welcome boost for Britain’s largest multi-national companies and exporters. Two thirds of companies analysed by The Share Centre report profits and revenue in dollars or euros, which added £77 billion to the top line.

However, when the effects weaker sterling are stripped out, revenues fell overall.

The encouraging performance from UK companies has not gone unnoticed by investors, who piled into UK stocks in March. According to data from the Investment Association, UK All Companies funds were the best-selling sector in March. This was the first time the sector has topped the charts since 2013. Investors ploughed £650 million into the funds, marking the end of a year-long trend of withdrawing money from UK equity strategies.

Oil, miners and banks represent the three biggest sectors in the UK. A drop in the oil price last year caused oil company revenues to fall by £27 billion over the year to £317 billion, marking the fourth year they have fallen. Miners and banks, on the other hand, saw revenues grow. In the mining sector, income rose by 5.9% to £174 billion, with the exchange rate adding £18 billion.

Banking bounce

Bank revenues also climbed 9.6% to £168 billion for the first time since 2009. Of the major banks, HSBC and Standard Chartered benefited from a weaker pound.

‘With the world economy now enjoying synchronised growth, and monetary policy beginning to normalise, the environment for the banks is increasingly positive,’ explained Share Centre analyst Helal Miah.

Consumer goods companies and housebuilders also enjoyed revenue growth, alongside healthcare stocks and pharmaceuticals enjoyed growth after what Miah described as ‘six lean years’.

‘Encouragingly, 13 sectors increased revenues compared to six that saw declines,’ he said. ‘While some of this is due to the effects of the weaker pound, it also reflects improving trading conditions for many companies.’

While the UK’s largest companies, which derive a large portion of their earnings overseas, benefited from the weak pound, mid-caps saw revenues increase the most.

‘Mid-cap revenues rose 6.1%, compared t o 3.9% among their large cap peers, as domestically-focused firms profited from the relative strength of the UK economy.’

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2 comments so far. Why not have your say?

Micawber

May 15, 2017 at 08:44

"However, when the effects of weaker sterling are stripped out, revenues fell overall." The key line.

report this

Anonymous 1 needed this 'off the record'

May 15, 2017 at 19:55

Micawber,I pay my bills in Sterling.

Whilst inflation has notched upwards to 2.6% approximately (a little above the MPC target), my dividend income has increased by over 10%.

I am happy.Whilst the Sterling/Dollar rated is a little lower than it ought to be in terms of Purchasing Power Parity,the Euro rate at about right.

Stop moaning!

report this

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