The largest UK owned companies continue to dominate their European counterparts when it comes to the creation of wealth. According to the 2008 Value Added Scoreboard, released recently by the Department for Innovation, Universities and Skills (DIUS), the top 185 UK companies continue to be more efficient at creating value – or wealth – than their European peers. The Scoreboard shows that almost 23% of all European ‘value added’ came from UK companies.
The annual scoreboard uses the ‘value added’ metric to measure the amount of wealth companies create. This, says DIUS, reflects the ability of companies to provide their customers with what they want and are prepared to pay for.
According to the Scoreboard, the top 800 UK (UK800) companies generated more than £646billion of value added in 2007 – 9% more than in the previous year. Value added is defined as sales revenue, less the cost of goods and services bought in. Companies boost their ‘value added’ in a number of ways, including: developing innovative new products; selling more existing products; paying less for components; and improving productivity.
In the seventh issue of the Scoreboard, the performance of the top 800 UK companies is compared with that of their top 750 European counterparts.
Minister for Science and Innovation Ian Pearson said: “The UK continues to be one of the best places in the world to do business. I would like to congratulate those UK companies that have performed so successfully in this year’s Scoreboard and look forward to working with the business community to build on this success and to achieve even greater Value Added for the future.”
Whilst companies are analysed individually, the Scoreboard also makes sectoral comparisons. Mark Ambler, who produced the report for DIUS, said: “There are only 14 UK firms in the electronics sector, and only 10 in the European list, of which Siemens stands apart. Electronics is the 27th largest sector in the UK and the 22nd largest sector in Europe.” The electronic and electrical equipment sector of the UK185 generated £1067million of value added, whilst those in the UK800 generated £3.954bn of value added. However, the UK185’s contribution has declined by 5.4% since last year and by 44.3% since 2003. For the remainder of the UK800, value added grew by 1.2% over 2004 and has increased by 18.8% since 2003. Ambler noted: “The change in Value Added over time shows a sorry tale in the UK, but is a bit healthier in Europe as a whole.”
Two other measures used in the Scoreboard are P1, the value added per employee, and P2, the ratio of value added to the major costs. Electronic and electrical equipment companies in the UK185 generated a P1 figure of £38,391; those in the UK800 created £39,287 per head. Looking at the P2 figure, the UK185 had a ratio of 126%, whilst the UK800 had a P2 figure of 128.1%.
