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Profitability in Northern Europe and the
Baltic Economies
By Richard
Walton
A survey that includes rate of
return data from the world’s largest economies published in the Office of
National Statistics’ UK Economic Trends in October 2002 showed that
Norway had the most profitable companies in 2001 (see the table), driven largely
by companies in the service sector and in oil production and gas exploration.
Despite a fall in the net rate of return from 15.1 percent in 2000 to 14 percent
in 2001, Finnish companies were still the second most profitable in the world,
mainly as result of their mix of information technology companies and
"old" economy industries.
In the United States, overall
company profitability fell from 8.6 percent in 1999 to 6.9 percent in 2001, the
lowest since 1983. Although U.S. service sector companies were the most
profitable in the world in 2001, the profitability of American manufacturing
companies fell dramatically from 20.8 percent in 2000 to just 4.4 percent in
2001. This means that the U.S. manufacturing sector, which had been top of the
international league table, became the second least profitable in the world.
The article also reviews the
profitability of other countries, including the Baltic economies—Estonian
companies’ average rate of return in 2000 was 11.4 percent and Latvia’s was
6 percent)—as well as China and Russia. Profitability is increasing rapidly in
Estonia, which experienced the greatest increase in profitability of any country
that supplied data. The profitability of Estonian nonfinancial companies rose
from 1.6 percent in 1999 to 11.4 percent in 2000, putting Estonia in fifth place
in the world league table. This could be related to domestic investment, which
grew 24.4 percent in 2000, and benefited companies in information technology and
telecommunications in particular. The current level of investment is 25 percent
of GDP. The profitability of Latvian business fell slightly from 6.2 percent to
6 percent in 2000.
The author is an international
adviser on statistics at the Bank of England. This article was published in the
January 2003 issue of the Baltic Economies Bimonthly Review.
Profitability, Top Ranking Countries, 2001
Ranking
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All companies
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Manufacturing
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Services
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1
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Norway
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Belgium
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United States
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2
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Finland
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Australia
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Norway
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3
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Belgium
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Finland
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Finland
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4
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United Kingdom
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Spain
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Spain
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5
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Estonia
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Denmark
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United Kingdom
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6
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Italy
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Netherlands
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Mexico
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