WIREDGOV

Increase in wealth created by UK firms

News Release issued by the Government News Network on 26 June 2009

The 2009 Value Added Scoreboard uses ‘Value Added’ by companies to measure the amount of wealth they create. In particular it reflects the ability of companies to provide their customers with what they want and are prepared to pay for. This year’s scoreboard (using data from 2007/08) shows that UK companies are amongst the top three performing countries across Europe. Of all wealth created in Europe 58% of was produced by UK, German and French companies.

Science and Innovation Minister Lord Drayson said:

“The marked increase in the value added by companies for 2008 was achieved in largely benign economic conditions, but it is pleasing to see UK firms continue to rank among the best in Europe.

“The UK is still one of the best places in the world for innovation and we will continue to support companies who innovate and invest in the future.”

The Scoreboard lists the value added, or wealth created, by the top 750 European Companies and the top 800 UK companies. It provides a broader perspective on a company's economic contribution than operating profit.

Key findings include:

· The £757 billion of Value Added in the UK800 is concentrated with 67.1% in the top ten sectors (out of 38) and 56.7% in the top 50 companies.

· The Value Added by the UK800 increased by 8.2% in the last year.

· The E750 companies generated Value Added of £2,717 billion: this was concentrated in a few of the 27 countries (58.2% of Value Added was produced by UK, German and French companies) and the top ten sectors (59.8% of Value Added).

· The E750’s Value Added increased by 6.0% over the last year.

· The 153 UK-owned companies which added the most value in the last year (UK153) are also part of the E750. The Value Added by the UK153 increased by 8.6% in the last year.

· The top 20 companies in both the UK800 and E750 remain largely unchanged from the previous year.

. This is the eighth annual edition of the Value Added Scoreboard. The Scoreboard can be found at http://www.innovation.gov.uk/value_added along with an online value added calculator for companies.

2. Value added (VA) is defined as the difference between sales and the cost of bought-in materials, components and services. An alternative but equivalent formula is used to calculate it from company accounts:

Value added

Operating Profit + Employee costs + Depreciation & Amortisation/impairment

3. US and Japanese companies are not included in the Scoreboard because they do not give enough information in their annual reports to allow VA to be calculated.

4. Financial markets tend to reward companies showing consistently high value added performance with a high market capitalisation to value added (MC/VA) ratio, which represents expectation of future value.

5. The Scoreboard doesn't say that value added is the only or best measure of company performance, or that it is a complete set of value added information - it only includes the largest companies.