UK Q2 corporate profitability weakest in 8 yrs

British corporate profitability fell to its lowest rate in 8 years in the second quarter of 2009, official data showed on Wednesday, driven by a steep fall in gas prices which hit energy producers.

The Office for National Statistics said the net rate of return by private non-financial corporations was 11.6 percent in the second quarter, its weakest since the same quarter in 2001, and compared with a downwardly revised 12.0 percent in the first three months of this year.

It was the sixth consecutive monthly fall in the measure, and analysts said further falls were likely as the economy sets out on a slow and bumpy path to recovery.

"While the economy may well have returned to growth in the third quarter, recovery seems likely to be gradual and relapses could well occur," said Howard Archer, economist at IHS Global Insight. "Profitability is likely to remain under significant pressure for some time to come."

The ONS said the drop was driven by a fall in the profitability rates of North Sea oil and gas producers, which fell to a four year low of 33.6 percent from 38.4 percent in the previous three months, due to a steep fall in gas prices.

In contrast, the data showed the net rate of return from manufacturing companies — which have been hard it by falling sales in the downturn — rebounded from a 17-year low in the first quarter to 6.7 percent.

Service sector profitability was also up, rising to 15.6 percent from a 16-year low of 13.6 percent in Q1.