20/12/2001

Business success relies on effective investment

According to the Department of Trade and Industry there is a positive relationship between effective capital investment (Capex) and company performance.

The Capex Scoreboard, the annual report published by the DTI's Future and Innovation Unit, showed that profitability, value added, productivity and total shareholder return all increase with greater investment intensity either as investment as percentage of sales or per employee.

UK Science and Innovation Minister Lord Sainsbury said: "The positive links between sustained investment and company growth and performance, highlighted in this Scoreboard, challenge UK companies to respond to the effective investment strategies of their best international competitors.

"A number of UK companies have taken this route to business success but more need to do so. Despite a steady rise in UK Capex investment over recent years (2000 saw a rise of 12 per cent compared to 17 per cent internationally) at 7.9 per cent Capex intensity (Capex as a percentage of sales), the UK still remains below the international level of 9.6 per cent and particularly so for middle-sized companies.

"If our companies are to compete effectively in the future, it is essential that they continue to strive to close this gap. UK companies must also recognise that those companies which fail to invest in future success during difficult times, will find that they are in a more difficult position when market conditions improve, compared to competitors who have invested and are offering new products and services."

The main findings were that total Capex for the top 500 UK companies at 7.9 per cent of sales lagged behind for the top 500 international companies 9.6 per cent.

UK Capex intensity had fallen from 8.5 per cent in the previous year to 7.9 per cent this year, while international intensity was up slightly from 9.5 per cent last year to 9.6 per cent this year.

Looking at investment intensity linked to company performance the report found that profitability for international sectors rises with R&D plus Capex as a percentage of sales, as does UK value added per employee (with R&D plus Capex per employee).

Author of the report, Dr Mike Tubbs, said it was important to strike the right balance between these elements to ensure effective and balanced investment, which will allow a company to reach its full growth potential.

Published annually since 1998, The Capex Scoreboard from the DTI Future and Innovation Unit is produced in conjunction with Edinburgh-based Company Reporting. (SP)

Related Northern Ireland Business News Stories
Click here for the latest headlines.

22 February 2018
Business Leaders To Present Investment Opportunities In Cannes
More than 70 Belfast business leaders will travel to MIPIM in Cannes, where they will present a portfolio of major real estate investment and development opportunities in the city to a potential audience of over 28,000 international property investors, developers and occupiers.
29 July 2019
132 Jobs As Lisburn Firm Makes £11m Investment
132 new jobs are to be created in Lisburn as a local manufacturing firm invests £11 million in new machinery and facilities. Creative Composites Ltd supplies a range of world leading innovative products to the car, rail and medical industries. Its operations are set to be enhanced by the investment in groundbreaking machinery.
29 October 2018
£14m Secured In Local Investment Programme
More than £14 million in capital investment has been secured as part of the Local Investment Programme (LIF), Belfast City Council has announced.
24 July 2018
Attracting Investment Workshop Announced
Connect at Catalyst Inc have announced a free workshop aimed at showing entrepreneurs and start-ups what they need to do "to successfully attract investment".
11 July 2018
New Funding Call Under Rural Business Investment Scheme
GROW South Antrim has announced the opening of a new funding call under the Rural Business Investment scheme, which is expected to be the final call for Business funding under the current Rural Development Programme (2014-2020).