Norfolk Limited: New report shows how rising costs have hit profits at county's biggest businesses
PUBLISHED: 17:17 16 October 2018 | UPDATED: 18:41 16 October 2018
Gary Rowsel Photography
Norfolk's biggest companies have seen growth in turnover, staffing and investment in the past year - but profitability has not kept pace.
That is among the findings from a major new report on the state of the county’s businesses, which found that rising input costs have eaten away at profits despite top-line growth outstripping the national average.
The Norfolk Limited 2018 report, compiled by Grant Thornton, identified the 100 biggest companies operating and managed within the county and analysed their performance from their most recent financial statements.
It found that while total turnover growth was 7.6%, operating profit across the 100 companies had dropped by 12.2% – though once the volatile oil and gas sector companies were stripped out, the figure improved to a modest 0.8% increase.
Just three sectors reported an increase in operating profit – motor retail and services (16.1%), manufacturing and construction (7.9%), and services (5.3%) – while there were big drops in the oil, gas and energy (-104.5%), and retail and leisure (-32.1%) sectors.
Tim Barnes, who led the compilation of the report, said: “It’s generally a positive picture. The top line is up significantly ahead of GDP, while at a headline level profitability is down.
“There has been an increase in input costs – they are driving increases in the top line but also driving up the cost base so there remains that pressure on margins.”
Toby Wilson, Grant Thornton’s head of audit in Norwich, said another theme had been the shortage of skills for many businesses.
That resulted in the average wage rising 4% to £25,406 – but it could have been higher had it not been for rising costs.
“Wage rises have not matched the skills shortage,” he said. “In reality, many businesses can’t afford to because they have got increased costs to manage.”
Mr Wilson said the report showed businesses were investing, but many firms were still holding off until the longer-term picture on Brexit became clear.
“Investment is being made, which is being seen in the assets, but there’s a lot of cash on the balance sheet not being invested.
“People don’t have any certainty in the future. The most probable level of certainty you can put on Brexit is still pretty low. That’s inhibiting business from making capital investment and people investment.”
The report also identified the need for businesses to make the case more vocally to Norfolk about the range of opportunities in the county.
James Hunter, head of the Norwich office at law firm Mills and Reeve, which was a partner on the report, said he was encouraged by the overall results.
“However, the challenge for businesses across all sectors is translating growth in turnover into growth in profits, and the performance there is patchier,” he said.
“Our theme at the launch this year is how a vibrant economy and innovation can fuel growth and help businesses reach what we call ‘innovation velocity’. Mid-sized business ought to be nimble and able to face disruptive challenges in their markets head-on. However, the key is innovating and moving at pace, to stay ahead of competition.”
Norfolk’s image was once more the subject of discussion as the Norfolk Limited 2018 launch event at Norwich Research Park.
Panel member John Potter, owner of Potters Resort, recalled how he was nicknamed ‘Carrot’ in his first London job – a reference to his ‘carrot-crunching’ Norfolk roots.
“That was 30 years ago and there are pockets of brilliance and vibrancy but I’m not sure that image of Norfolk and Norfolk people has changed all that much,” he added.
But Minnie Moll, chief executive of Jarrold Retail, said the county needed “to change the narrative”. And she warned: “And don’t any of us go to do presentations anywhere and start with a joke about being at the end of the line, or Alan Partridge.”
Marcus Hemsley, a founder of digital marketing firm Fountain Partnership, said any inferiority complex had to be cast off. “It doesn’t matter where we’re based. Because we’ve got the internet, ignorance is a choice.”
Toby Wilson, Grant Thornton’s head of audit in Norwich, said he believed word about Norfolk’s strengths was spreading to other parts of the UK, but more efforts had to be made closer to home.
“People in the county don’t necessarily understand the variety, depth and vigour we have in our businesses,” he said.
“As a county we don’t understand ourselves that well. And if we don’t, how can we tell the rest of the world?”