HL Deb 19 July 1988 vol 499 cc1193-4

Lord Rodney asked Her Majesty's Government:

What are the latest figures on the profitability of British industry, and how they compare with those of the previous year.

The Secretary of State for Trade and Industry (Lord Young of Graffham)

My Lords, the net real rate of return on capital employed for all industrial and commercial companies is estimated to be about 11½ per cent. in 1987 compared with 10 per cent. in 1986.

Lord Rodney

My Lords, I thank the Minister for that Answer. Will he agree that the reduction in the unemployment figures has some direct relationship to the improvement in the profitability of British industry?

Lord Young of Graffham

My Lords, it is true that for some years past increasing profitability in industry has been accompanied by a certain amount of labour shedding. However, profitability has now increased to the point at which the number of new jobs has exceeded the supply in the labour market. In the last two years we have seen a very welcome reduction in the number of unemployed.

Lord Williams of Elvel

My Lords, can the noble Lord tell us how the net real after-tax return on capital employed will be affected by the current rise in inflation?

Lord Young of Graffham

My Lords, the noble Lord will surely realise that the rate of return and inflation are not directly linked but depend very much on many other matters. However, I can satisfy the noble Lord that current company profits are rising and look as though they could well continue to rise.

Lord Williams of Elvel

My Lords, can I remind the noble Lord that I used the expression "real" meaning inflation adjusted?

Lord Young of Graffham

My Lords, I accept that. We shall have to see what the results show. However, the real rate of return looks as though it is keeping pace with the present increase in the rate of inflation.

Lord Peston

My Lords, now that profits have risen so drastically, can the consumer expect a fall in prices in the near future?

Lord Young of Graffham

My Lords, profits rise only if the consumer gets a fair deal. At the end of the day, it is only through satisfying customers that companies can create profits.

Lord Boyd-Carpenter

My Lords, was my noble friend a little surprised when the noble Lord opposite referred to profits rising drastically? Would it not be better to say "satisfactorily"?

Lord Young of Graffham

My Lords, I have long lost my sense of surprise at what the noble Lords opposite say'. However, I must confess that profits have now risen to the level of the 1960s. The very difficult period of the 1970s is now hopefully behind us.

Lord Jenkin of Roding

My Lords, will my noble friend agree that one of the most important changes in the British economy has been a recognition of the importance of the role of profit in the economic process? Can this not be laid very firmly at the door of Her Majesty's Government? Is it not wholly and entirely welcome?

Lord Young of Graffham

My Lords, yes. Even more so, higher profitability is leading to increased investment. It is the increased investment which will lay the foundation of profits and the wealth of our society in the future.

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