Company Profitability

Oral Answers to Questions — Trade and Industry – in the House of Commons am 12:00 am ar 23 Ionawr 1991.

Danfonwch hysbysiad imi am ddadleuon fel hyn

Photo of Mr David Nicholson Mr David Nicholson , Taunton 12:00, 23 Ionawr 1991

To ask the Secretary of Stale for Trade and Industry if he will make a statement on the rise in the profitability of non-North sea industrial and commercial companies during the 1980s.

Photo of Peter Lilley Peter Lilley Secretary of State for Trade

The profitability of non-North sea industrial and commercial companies recovered strongly during the 1980s and is now back to the levels of the early 1970s. The net real rate of return on capital employed was 8·3 per cent. in 1989, nearly half as high again as in 1979. The restoration of profitability has made possible increased investment in plant, research and development, and training.

Photo of Mr David Nicholson Mr David Nicholson , Taunton

I thank my right hon. Friend for that reply. Does he agree that that achievement has been brought about largely by the massive improvement in productivity in the past decade, which for manufacturing has been better than that of any of our competitors? Does he also agree that the 45 per cent. improvement in business investment during the first three years of this Parliament bodes well for future profits? Will he confirm that a recent survey by 3i shows that 80 per cent. of the 750 largest companies thought that they were in better shape to prosper now than they were in the 1980s?

Photo of Peter Lilley Peter Lilley Secretary of State for Trade

My hon. Friend is absolutely right. Productivity rose by half in the past decade, which was faster than the position in any other major country in the world, including Japan. Profitability is the key to success, and the restoration of productivity leads companies to spend more on investment, research and development, and training.

Photo of Mr Dale Campbell-Savours Mr Dale Campbell-Savours , Workington

Would not the profitability of car manufacturers increase if they could sell more vehicles in Japan? What is the position? Is a British manufacturer of cars allowed to sell motor vehicles in Japan directly through a distributing agent to the public or does the British manufacturer have to go through a trading company, in the same way as Nissan at present has to go through one in the United Kingdom?

Photo of Peter Lilley Peter Lilley Secretary of State for Trade

Our exports in total to Japan have nearly doubled in the past three years. That includes a rapid rise in exports of motor cars, not least by the Rover company whose share of total imports of cars into Japan has risen significantly in the past five years and is rising at least as fast as that of other manufacturers. By and large, they are free to use whichever distribution channel they wish. There is a proposal by the Japanese Government to refer sole agencies to their anti-trust procedures. Last week I protested to them that they should not take that course, unless they also refer restrictive distributive practices by domestic manufacturers.