UK company profitability hits record high

LONDON (Reuters) - British corporate profitability outside the financial sector hit a record high in the fourth quarter of 2007 helped by stellar profits for North Sea oil companies, official data showed on Tuesday.

The figures suggest firms have generally coped well with the credit crunch. However, with the economy likely to slow sharply this year, many analysts think profitability may have peaked.

The Office of National Statistics said the net rate of return on non-financial companies rose to 15.5 percent from a downwardly revised 15.4 percent in the third.

The net rate of return for 2007 as a whole was 15.2 percent, also a record.

"This indicates that healthy economic growth through most of 2007 lifted firms' sales and supported their pricing power," said Howard Archer at Global Insight.

"However, the best of the profitability news is almost certainly behind us now as the fourth quarter of 2007 seems very likely to prove the peak."

North Sea oil companies' net rate of return leapt to 49.8 percent in the fourth quarter, reflecting soaring oil and gas prices.

The rate of return of service companies was 20.9 percent, in line with the average for 2007 as a whole which was 21.0 percent -- the highest annual rate of return on record.

Manufacturers fared less well, however, with a net rate of return in the fourth quarter of 8.1 percent. Over 2007 as a whole, manufacturing profitability was 6.8 percent, the lowest annual rate since 1991.