Over $1.58 trillion (£1 trillion) of assets belonging to UK companies are unaccounted for, according to research from valuation consultancy Brand Finance in conjunction with the Chartered Institute of Management Accountants.
The report, Global Intangible Finance Tracker, claims that UK companies are vulnerable to underpriced bids and exploitation as a result of this state of affairs. It also says that many of the UK’s company directors and government ministers are in the dark about the value of the assets that they control and influence, “threatening the government’s long-term economic plan”.
Interestingly, the comprehensive annual study of 58,000 companies across 120 stock markets reveals that, since 2012, undisclosed intangible value has grown 50% to $27 trillion. It now accounts for more than a third of the average firm’s enterprise value, rising as high as 70% in sectors such as pharmaceuticals and advertising.
Furthermore, it also shows that failing to account for intangibles favours short-term economic gains over long-term value and undermines service-sector dominated economies such as the UK.
The UK is particularly good at creating strong brands and is a centre for industries that are heavily reliant on intangible assets such as pharmaceuticals, luxury, aerospace and engineering. As a result, the report ranks it the fourth most ‘intangible economy’ behind the US, Denmark and Belgium.
Brand Finance’s research shows that intangible assets account for two-thirds (64%) of the true, total value of UK companies, a growth of 17% since 2012. Over $1.58 trillion (£1 trillion) of those intangible assets are ‘undisclosed’ on balance sheets, so they are easily overlooked by those who should be protecting them, the research says.
David Haigh, CEO of Brand Finance, commented: “This is an issue that needs a speedy resolution to avoid further national treasures like Cadbury being left to the mercy of foreign buyers and being taken over for less than they are worth.”