Third-quarter corporate profitability falls to 13.9 pct

LONDON (Reuters) - Corporate profit margins fell in the third quarter of last year despite record returns from North Sea oil and gas, after companies started to feel the impact of the economic slowdown.

The Office for National Statistics said Wednesday that the net rate of return by private non-financial corporations fell to 13.9 percent in the third-quarter, the lowest since the second quarter of 2007, from a downwardly revised rate of 14.0 percent in the second quarter.

Net profitability had hit a series high of 14.7 percent in the first three months of last year.

"If you take the second and third quarters together, you've got a fairly significant movement, and where we are in the cycle suggests this figure is going to decline further," said Philip Shaw, economist at Investec.

Profitability rates are pushed up by oil and gas production in the North Sea, and the profitability of this rose to 74.4 percent from 70.7 percent in the second quarter, the highest since the series began in 1989.

But oil prices have fallen by two thirds since the peak of nearly $150 a barrel set in July, and profits on the scale of those achieved by Royal Dutch Shell and BP in the third quarter are unlikely to be replicated soon.

Lower North Sea profits are bad news for public finances, which have benefited heavily from tax revenues from oil and gas companies.

Manufacturers' net rate of return fell to 4.4 percent from 4.6 percent, and service companies' profitability fell to 15.5 percent from 15.7 percent, the ONS said.

Excluding North Sea profits, British corporate profits fell to 11.6 percent from 11.9 percent.

(Reporting by David Milliken; Editing by Erica Billingham)