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Manufacturing profits suffer in 2007

Britain's manufacturing sector saw its profitability almost halve during the first quarter of 2007.Manufacturing companies' net rate of return for the opening three months of the year was 5.3 per cent, down from the 9.8 per cent profits reported for the fourth quarter of 2006.The slip, recorded in figures released today by the Office for National Statistics (ONS), is reflected further by the average net rate of return for 2006. At 7.7 per cent, this surpasses this year's first-quarter performance.By contrast the service sector saw its profitability increase to 21.1 per cent from 20.6 per cent in the October-December 2006 period.Overall, private non-financial corporations saw their net rate of return fall by 0.1 per cent to 15.1 per cent. But in recent years improvements have been noted – between 2005 and 2006 profitability rose by 0.4 per cent to 14.5 per cent.Recent indications suggest the UK economy looks likely to continue to expand, but businesses are becoming more and more pessimistic about their future prospects.The current raft of interest rate hikes and growing inconsistencies of shortening deficits and falls in manufacturing output are contributing to "jittery" feelings among UK companies, the most recent Lloyds TSB business barometer shows.

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