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Profits And Money Supply

Volume 978: debated on Monday 11 February 1980

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asked the Secretary of State for Industry whether he will publish in the Official Report a table showing for manufacturing industry, or the nearest equivalent (a) trading profits, before and after tax, and retained profits in both current and 1975 prices, (b) the percentage of capital funds derived from retained profits, bank advances, capital issues and overseas borrowing and (c) the real rate of increase in the money supply, in each case for each year since 1970.

The data given in columns 1 to 8 of the table below have been obtained from the Department of Industry's regular analysis of large companies' annual published accounts, of which 1,000 to 1,300 have been companies whose main activity is manufacturing.The profits and income figures given, and the figures of depreciation used, are on the basis of recorded (that is historic) costs. Figures at 1975 prices are not compiled.The figures in columns 1 to 4 are on an accruals basis; those in columns 5 to 8 have been calculated on the basis of receipts and payments during the year. Overseas borrowing is not separately identified.There is no ideal way of calculating the growth of the real money supply between years. The figures in column 9 are for mid-year on mid-year changes of £3 million deflated by the implied index of total domestic expenditure prices. The results are sensitive to the exact definition

LARGE MANUFACTURING COMPANIES
£ million
Gross trading profitTotal income before taxTotal income after taxRetained earnings
(1)(2)(3)(4)
1970*3,5514,1173,155789
19713,9704,4643,469839
1971*3,9374,4193,433830
19724,8625,3614,1731,250
1972*5,126†5,622†4,440†1,239
19736,4787,1675,1471,676
1973*6,4717,1555,1391,676
19747,1537,8425,6041,491
1974*7,1877,8855,6501,520
19757,5878,3156,0011,339
1975*7,5318,2605,9551,311
197610,08011,2237,9642,612
1976*10,00911,1437,9132,593
197710,94512,0288,8042,283
* Comparable in coverage to the following year.
†Above the line the figures are after deducting short-term interest.
Notes:
Column (1)—before deducting interest, hire of plant and machinery and tax; depreciation and stock appreciation.
Column (2)—column (1) plus income from investments, prior year adjustments other than tax, other revenue income and other capital receipts.
Column (3)—column (2) less current United Kingdom and overseas tax, transfers to deferred taxation and prior year tax adjustments.
Column (4)—total income after deducting hire of plant and machinery, depreciation and amounts written off, accruals of taxation, interest and dividends and transfers to asset renewals and replacement reserves.
Source:Various issues of annual Business Monitor MA3—Company Finance.
PROPORTIONS OF TOTAL SOURCES OF FUNDS
Internal funds less depreciationDepreciationBank borrowingOther external fundsPercentages Annual Percentage change in real money supply
(5)(6)(7)(8)(9)
197024·744·319·511·5
197134·551·4-7·021·1+1·0
197251·038·50·79·8+12·4
197344·728·319·77·3+13·6
197436·429·131·13·4-2·4
197545·537·0-1·018·5-12·9
197651·124·611·213·1-5·2
197750·228·68·612·6-5·1
1978n.a.n.a.n.a.n.a.+5·5
1979n.a.n.a.n.a.n.a.+0·2
Notes:
Column (5)—income retained, other than depreciation provisions, after the payment of interest, tax and dividends.
Column (8)—cash from ordinary and preference shares and long-term loans.
Column (9)—mid-year on mid-year, seasonally adjusted £M3 deflated by implied index of total domestic expenditure prices.
Sources: Annual articles "Structure of company financing" published in Trade and Industry (now British Business) based on data in Business Monitor MA3; for column (9), Financial Statistics and Economic Trends.