Businesses in London top UK league table for profitability
Businesses in London are leading the way in profitability, according to a new league table published today by accountancy and business advisory firm BDO.
The study of 220,000 UK businesses shows that London’s businesses are on average the most profitable in the country, operating with average profit margins of 8.1%, above the national average of 6.7%.
The profitability of businesses in London is boosted by the financial services industry, which has an average profit margin of 14.4% and employs 750,000 people.
Mark Lamb, business advisory partner at BDO, says that the figures demonstrate the need for progress on the government’s ‘levelling-up agenda’ so businesses outside London can catch up with those in the capital.
Mark Lamb, adds “It’s heartening to see City businesses still performing so well after the turbulence of the past few years particularly with concerns around the financial services sector post-Brexit, but outside of London other industries are seemingly lagging behind when it comes to profitability.
“The ‘levelling up’ agenda is central to what the government wants to achieve, however there is a real difference in the type of businesses that survive and thrive in each region. The recovery from the pandemic is the perfect opportunity for targeted policies and investments to make a big impact on regional economies and support the overall recovery of the UK.”
Looking at regional variations in profitability, the South West and North East lead the way after London, reporting average profit margins of 6.2% and 6.1% respectively. The West Midlands lags behind at 2.8%, however this perhaps reflects a reliance on manufacturing in the region, an industry with lower average profit margins of 3.1%.
Mark Lamb adds: “The last 18 months has brought a myriad of challenges for businesses, not least of which a global pandemic and Brexit uncertainties.
“As businesses look ahead to their post-pandemic recovery and growth, they should be considering how to maximise profitability. Driving down costs like rent and utilities, increasing sales from existing customers and minimising the holding of unnecessary stock are steps that should be automatic. Beyond that, incentivising sales staff on the basis of margin rather than volume and an increased focus on improving governance can have an impact on profitability in the longer term.”
