British corporate dividends hit a record total in the second quarter of the year, although underlying growth is slowing compared to previous predictions, a study showed yesterday.
Second-quarter payouts by UK firms hit ￡25.3 billion (US$38.61 billion), the largest ever quarterly total, with media, financial services and food producers all exhibiting double-digit dividend growth, research by Capita Registrars showed.
Although underlying dividend growth accelerated by 9.5 percent, its fastest in a year, it was not enough for Capita to maintain its full-year target, reducing it to 7.7 percent growth from 8.6 percent, a ￡500 million reduction.
“A record quarter is well worth cheering, and Q2’s ￡25bn total is a staggering amount. It is however part of a wider picture that is seeing the pace of dividend growth slow down as we warned earlier this year, following a profit squeeze on UK firms,” Capita Registrars chief executive Justin Cooper said.
“Dividends are not falling, they are merely growing more slowly, but slow enough for us to further trim our underlying forecast for the year,” he added.
Special dividends came in stronger than Capita expected, at ￡1.2 billion in the second quarter due to Antofagasta PLC, Standard Life PLC and cash-rich ITV, although still down on last year’s quarterly figure of ￡1.5 billion.
Capita forecasts a total dividend payout of ￡81.4 billion for this year, with the changes to underlying and special dividends taken into account.
This is a 1.1 percent year-on-year rise compared to last year, the slowest headline and underlying growth rate in three years. However, at the end of the first quarter Capita had said that year-on-year growth would be flat.
Separately, a properly run financial services industry would generate a quarter of a million new British jobs by 2020, oiling the wheels of sectors such as manufacturing and retail, a new report says.
Research published yesterday by PricewaterhouseCoopers (PwC) suggests that robust regulation and benign economic conditions that help the embattled financial sector to recover would also spur growth of between 2 and 3 percent in the economy by the end of the decade.
An alternative scenario, in which the financial services sector continues to languish, would bring an unimpressive 0.2 percent rise in GDP and create only 12,000 more jobs, the report said.
“In addition to providing credit, [the financial services industry] creates demand in other sectors and helps improve the flow [of] capital around the economy,” said Nick Forrest, an economist at PwC.
“A well-functioning financial services sector improves both capital efficiency and overall UK productivity,” he added.
The report says that good regulation coupled with a robust economic backdrop would generate 47,500 new jobs in financial services such as banking and insurance by 2020.
The knock-on effect of a recovery in the financial industry, would be 45,900 more manufacturing jobs, 41,600 in retail and 67,400 in general services, it said.
The region benefiting most from this level of job creation would be London, with 132,800 new jobs by 2020. The region to benefit least would be Northern Ireland, creating only 2,900 new jobs.