High inflation fails to boost most UK companies’ profits

Britain’s highest inflation in four decades failed to boost company profits last year, with the exception of oil and gas extractors who benefited from a surge in energy prices, official figures showed on Tuesday.

The average net rate of return on capital employed by British companies not involved in oil and gas extraction was 9.5% in 2022, its lowest since 2011 and down from 10.0% in 2021, the Office for National Statistics said.

British consumer price inflation peaked at 11.1% in October 2022, its highest since 1981, and has been slower than expected to fall since then, dropping to 8.7% in April, the joint-highest rate among the world’s seven largest advanced economies.

However, the Bank of England has said that there is little evidence so far that excessive company profits – sometimes known as ‘greedflation’ – are to blame for high inflation, in contrast to concerns from central bankers in the euro zone.

Looking at the fourth quarter of last year, when inflation was highest, net rates of return outside the oil and gas sector were 9.6%, up from 8.9% in the third quarter but below their level of 10.9% three years earlier before the COVID-19 pandemic.

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