Visit the International Products Corporation web site

UK companies add more value

Edited by the Engineeringtalk editorial team Apr 4, 2005

UK wealth creation increased by an unprecedented amount last year - three times the rate in the rest of Europe, according to the 2005 Value Added Scoreboard published by the DTI.

UK wealth creation increased by an unprecedented amount last year - three times the rate in the rest of Europe, according to the 2005 Value Added Scoreboard published by the DTI.

The scoreboard, which lists the value added (wealth created) for the top 600 European and top 800 UK companies, shows that the UK's top businesses are doing very well.

Since last year, value added by the top 167 UK companies has increased by 15% compared with a 5% increase by the rest of the European top 600.

The wealth created by a company, measured as value added, is defined as sales less the cost of bought-in materials, components and services.

The scoreboard ranks companies by their value added, and also gives details of sales, profits, productivity and wealth creation efficiency, cost of funds, investment in R and D and capital expenditure (capex) and market capitalisation.

The UK tops the league with more companies in the European 600 than any other country (167 with a combined value added of GBP 347 billion).

Second is Germany with 91 companies whose overall value added fell by 1% to GBP 297 billion over the year.

France is third with 84 companies increasing their total value added by 5% to GBP 277.5 billion.

This year's Value Added Scoreboard provides in-depth information for companies and investors through its "wealth creation efficiency" measure (value added output divided by the major input costs).

The UK top 167 have a wealth creation efficiency of 163% compared with the rest of the European 600 at 139%.

This means that the UK's top companies are, on average, substantially better at creating wealth from people and equipment than their European competitors.

This is reflected in the UK 167 achieving a market capitalisation per pound of Value Added that is 42% higher that for the non-UK 433 in the European 600.

The importance of the wealth creation efficiency is illustrated by stock market performance.

A share portfolio of 16 UK companies with high wealth creation efficiency and growing Value Added outperforms the FTSE 350 index.

Over the last six years the portfolio of 16 companies has increased its market value by 139%, whereas the FTSE 350 index has decreased by 10%.

Dr Mike Tubbs, a senior industrialist with the DTI Business, Finance and Investment Unit and author of the report, said: "With five years of data the scoreboard is now an essential benchmarking tool for companies to see how they compare to peers in their sector across the UK and Europe and to decide on the most appropriate way to distribute their value added".

"This year we have introduced an online calculator so companies of all sizes can work out their value added and wealth creation efficiency by visiting the DTI Innovation Group website and using the result to compare their performance with competitors in their sector".

"Successful companies make good strategic choices, show operational excellence and make wise and balanced investments and their success is highlighted by a growing value added and a high wealth creation efficiency".

"The wealth created by a company is used to reward stakeholders and to sustain and develop the business".

"UK companies showed an exceptional value added growth this year and have had a higher growth rate for value added and a higher wealth creation efficiency than their counterparts in the rest of Europe for each of the last 4 years".

"This is very encouraging for the UK economy".