§ Mr. Haynesasked the Secretary of State for Trade and Industry what is the average return on capital for (a) industry as a whole, (b) manufacturing industry, (c) industry without Government contracts and (d)industry with Government contracts in the latest period for which figures are available.
§ Mr. ButcherProvisional estimates for 1985 are that the net real rate of return on capital employed was 12½ per cent. for all industrial and commercial companies and 8 per cent. for manufacturing companies. No comparable information is available for individual industries, which could not in any case be sensibly divided into those with and those without government contracts.
§ Mr. Haynesasked the Secretary of State for Trade and Industry if he will list the 10 industries with the highest of returns on capital employed for the last year for which figures are available; and if he will list those rates of return.
§ Mr. ButcherThe results of the DTI's analysis of the published accounts of industrial and commercial companies include the ratios of net income to average net assets for large companies. These ratios are one fairly common measure of rates of return. The ratios are calculated separately for companies with mixed activities in manufacturing, with mixed activities in non-manufacturing and for 27 other industrial groups. The industrial groups with the largest ratios in accounting year 1984 were:
10W
Industry 1980 SIC definition Ratio of net income to average net assets Leather and leather goods manufacturing 44 27.2 Tobacco 429 24.2 Electrical and electronic engineering; manufacture of office machinery, etc. 33 + 34 23.1 Processing of rubber and plastics; other manufacturing 48 + 49 22.4 Agriculture, forestry, fishing 01 to 03 20.3 Textiles 43 19.9 Business services; leasing 834 to 839; 84 19.4 Chemicals and man-made fibres; production of coal, coke and nuclear fuel 11 + 12; 15; 25 + 26 18.6 Retailing; hotels and catering; repairs of consumer goods and vehicles 64 to 67 18.5 Food manufacturing 411 to 423 18.1 Source: Business Monitor MA3 17th Issue to be published early May 1986.
Net income is defined as gross trading profit plus income from investments and other revenue income less interest paid on bank and short-term loans, payments for the hire of plant and machinery ad depreciation provisions. Average net assets is the average of net assets in the opening and closing balance sheets. Net assets includes fixed assets (net of depreciation), current assets and investments less current liabilities.
Estimates for accounting year 1984 include all accounts for periods ending between 1 April 1984 and 31 March 1985. Large companies are those with capital employed of more than £4.16 million at the end of their 1984 accounting period.
The ratios are calculated from amounts shown in companies accounts compiled on the basis of historical costs and will be higher than equivalent ratios calculated from accounts adjusted for inflation. The difference between historic and current cost rates of return varies between industries depending on, for example, the capital intensity of each industry.