JO Hambro Capital Management calls for a ‘hot recovery’ for UK plc as businesses gained momentum in the first quarter amid economic recovery from the Covid crisis.
The bullish prognosis comes from the JO Hambro UK Profit Index, which analyzes the latest quarterly and half-yearly results published by all UK companies listed on the main market, excluding investment funds and Reits on a basis of 12 rolling months.
The results, released on Wednesday, revealed that the company’s revenue had fallen by nearly a fifth in the 12 months to March 2021, equivalent to a turnover of £ 349 billion.
The impact of the Covid crisis has been more severe than any slowdown in recent history and eight times greater than the global financial crisis, which wiped out £ 42 billion in peak-to-trough revenue, has noted the JOHCM. It was also more prevalent, with half of all UK companies reporting declining sales for four consecutive quarters.
Falling sales and rising costs related to Covid gave way to a substantial drop in profits, which plunged 61% year-on-year to £ 55.3 billion in the first 12 months of the pandemic.
57% of companies reported higher profits in the first quarter
But JOHCM research suggests the worst is over, with the investment team predicting UK profits to roughly double to £ 110 billion by March 2022.
Results from companies covering Q4 2020 and Q1 2021 showed activity is rebounding rapidly in almost all sectors, according to the index.
Even with the Easter lockdown, UK plc’s first quarter revenue was only 5.8% lower than in the first quarter of 2020, the last quarter before the pandemic.
In addition, 57% of companies reported higher profits than a year ago with banks, oil and mining companies, some of the sectors hardest hit in the first months of the pandemic, leading the charge. .
The JOHCM predicts that the next round of results covering the three months to June, expected in the summer, will be even stronger and will reveal a “an unprecedented recovery in UK corporate profits, both in scale and speed ”.
By March 2023, he expects UK profits to return to pre-pandemic levels.
Alexandra Altinger (photo), CEO of UK, Europe & Asia said: “After the shock of the pandemic, the change in mood in UK meeting rooms is palpable. The recovery is now very strong: High government spending, low interest rates, strong consumer demand, resurgent employment and a vibrant real estate market mean that profits are now growing very rapidly, much faster than market expectations.