£20bn is wiped off value of North firms

Jul 23 2008 by Karen Dent, The Journal

MORE than £20bn has been wiped off the value of the North East’s top 40 quoted companies in the last 12 months, reflecting the significant impact of the credit crunch on the region.

The Journal North 40 had an approximate total market capitalisation of £92.15bn a year ago but by the end of June this year, this had fallen to £69.7bn – a 24.3% deterioration. In the same period, the FT All Share Index fell by 16.1%.

If pharmaceuticals giant GlaxoSmithKline – which is headquartered outside the region – is excluded from the calculations, the percentage fall rises to 39.3% – from £17.83bn to £10.82bn.

Today The Journal publishes its half-yearly round-up of the performance of the region’s listed companies, compiled by stock broker Brewin Dolphin in Newcastle. They reflect how the economic climate has continued to deteriorate since the start of the year with the regional share index falling 28% compared with 13% for the FT All Share index.

Just five North East companies have shown a positive share price return in the six-month period, led by energy, waste and minerals company Hargreaves. Wellstream, working in oil and gas exploration, agricultural food manufacturers Carrs Milling, medical kit maker Immunodiagnostic Systems (IDS) and pub equipment monitor Brulines made up the other risers. Four of the five are either manufacturers or work in the oil and gas or energy sectors. Paul Mooney, chief economist with One NorthEast, said the statistics reflected the impact of the credit crunch – which is generally understood to have begun in August last year – on the region.

“Clearly, the North East isn’t immune to the effects of the global slowdown and the current economic uncertainty, although the region is facing this after a strong and sustained period of growth and with a broader business base,” he said. “This, combined with ongoing work to help businesses to maximise their competitiveness and productivity, will help the regional economy during this time.”

Liz Smith, CBI assistant regional director, said: “These figures need to be looked at in the wider context. Looking at last week’s Journal’s Top 250 list there has been an increase since last year in both employees and turnover in the companies listed so we are well placed to weather the storm.”

George Rafferty, chief executive of NOF Energy – the business development organisation for the oil, gas and energy-related sectors in the region, said the findings were not surprising.

“We are definitely seeing just how buoyant the oil and gas sector actually is,” he said. “That even extends to businesses supplying the wider energy sector. They are experiencing extremely buoyant trading conditions.”

He added: “This worldwide demand for energy is helping companies in the North East and alternative energies as well, not just oil and gas.

“We do have some fantastic businesses here in the North East involved in the oil and gas sector. Some are truly world leaders.”