Almost half of UK companies are failing to earn good return on investment.
That's the view of analyst Butler Group - and other countries in Europe are even worse off.
Butler associate Paul Strassmann analysed the capital investments, including IT, made by 3398 European companies, and found an average knowledge capital of Eur542 million. Strassmann defines knowledge capital as a company's capacity to generate profits, or economic profit divided by the cost of capital.
"There is a very large number of corporations in the EU, and specifically the UK, that don't earn a good return on their knowledge capital," said Strassmann. "That means they're in a bad position to create new knowledge capital which is the lifeblood of the 21st century.",p>Analysis of 1152 UK companies showed that 667 had positive knowledge capital. These companies created an average of Eur737 billion from their capital investments in 2000.
The remaining 485 companies with negative knowledge capital made only Eur235 billion capital from their investments. These businesses burn capital faster than they can make profits.
Strassmann says users with positive knowledge capital will be best placed to move forward after the economic downturn. "Knowledge capital is created by managers who deploy investments effectively, and IT should be seen as a strategic tool," he said.
Strassmann says bad asset management, executive arrogance and project over-spending all stop UK companies getting the most from their investments.
But the UK is doing a lot better than some. Germany produced just Eur48 billion positive knowledge capital in 2000 - less than 10 per cent of that produced in the UK.
"If the UK joins the EU, it will be the marriage of a rich woman with a poor partner," said Strassmann.
SUMMARY
- Many UK companies are failing to earn a good return on investment
- Most of Europe is in an even worse position
