10:10am Monday 22nd March 2010
By Gareth Lewis
SOUTHAMPTON’S status as the powerhouse of the south central region’s economy was underlined by a major new report showing that city firms comprehensively out performed local rivals.
More than half the turnover of the top 150 firms across a region, stretching from Bournemouth to Basingstoke and across to Portsmouth, was generated in Southampton, according to the Central South Report from accountants BDO.
Now in its third year, the annual study of the performance of the area’s top companies showed total sales of £77.8 billion for 2008-2009, just under £7billion up on the year before, although much of the increase was down to Hampshire chemicals giant Ineos.
Of that money, Southampton’s cohort of 37 companies contributed an astonishing £39,493,695,000. Despite the recession, the report reveals that the city’s biggest firms, such as Skandia and Southampton Container Terminals, made more than £8 billion on top of their previous entry.
The total dwarfs the contribution of other big regional cities such as Portsmouth, which, despite having 30 firms in the top 150, saw sales of £8.4 billion. Basingstoke’s effort from its 39 companies shrank by more than £1 billion to £13.3 billion.
The destruction wreaked by the global economic slump is laid bare by a collapse in operating profit at the 150 firms, plummeting from £4.5billion to just £1.6 billion. Almost 9,000 workers have been axed from their global workforce of 315,000 and investment too has taken a big hit, dropping by nearly two thirds to £3.2billion.
VT Group chief executive Paul Lester is chairman of the report. He said: “Inevitably, this year’s figures reflect the downturn in the economy in 2008. But, somewhat unexpectedly, the group did not see business decline in the immediate aftermath of the financial crisis: in fact, turnover rose ten per cent.
“While this increase was essentially due to one business, global chemicals group Ineos, it is pleasing to report that the majority of Group companies maintained their trading levels.
“Unfortunately, the profit story was rather different. The main problem has been increased cost of sales, reflected in lower gross profit despite revenue increases. In addition, we faced a 16 per cent hike in operating costs. While raw material costs rose, we could only pass part of the increase on to our customers; and a significant increase in fuel and energy costs increased both distribution and administrative costs. Together, these factors resulted in a £2.5 billion (73 per cent) drop in pre-tax profits. Net profit was £996m, down from £2.7 billion in 2008.”
Kim Hayward, lead partner for BDO in Southampton, said: “We don’t expect the recovery to be swift, but Group companies are expressing cautious optimism. As a region, we are innovative and entrepreneurial and there is little doubt that we are well placed to take advantage of the growth industries of the future.”
• For a copy of the report, email emma.wareham@bdo.co.uk or visit www.bdo.co.uk/centralsouthreport
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