Mid-caps show signs of UK recovery

City of LondonThe performance of FTSE 250 companies reflects the UK's economic recovery despite sluggish headline figures for a broader range of listed businesses, an analysis of company reports shows.

Companies in the FTSE 250, a mid-cap index, saw sales rise 4.5% in the year to the end of June when adjusted for a large acquisition by packaging firm DS Smith. Unadjusted, the FTSE 250 sales figure is 9.2%.

Meanwhile, the FTSE 100, which is less tied to the UK economy, saw a 3.2% fall in sales.

Mid-cap firms are more reliant on the domestic economy so are often a better bellwether for growth than their FTSE 100 peers, says Helal Miah, investment research analyst at The Share Centre, which carried out the research.

The 4.5% adjusted sales growth figure for the FTSE 250 is the fastest sales growth for a year – and though adjusted post-tax profits were roughly flat, they were still an improvement on recent declines, according to the research.

Adjusting for large losses at miner BHP Billiton, sales for the whole FTSE 350 were up 8.2% and profits were up 13.9%.

Overall revenue for UK plc saw a “sluggish” 1.3% year-on-climb to £100.8 billion (€120.8 billion).

“Brighter economic skies have begun to appear in a whole range of official data, and it seems patches of blue are showing up in UK company results too,” says Miah.

However, Miah adds: ““We should be careful of drawing too many positive conclusions, as problems remain. Company margins are still under pressure. Managers will have to focus on driving profitability higher as sales return. The consumer still faces a brisk headwind in the form of falling real incomes, so a new consumption boom seems some way off. Nevertheless we are hopeful of reporting a steadily improving picture over the coming quarters.”

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