COMPANIES in the South West are making more money than almost anywhere else in the country.

The average return on capital among the region's companies rose from 11.1 per cent in the 12 months to June 2003 to 11.9 per cent in the 12 months leading up to September 2003.

Economic analysts Experian say this is the highest for almost three years, and a report states that "companies in the South West appear to be enjoying a welcome, sustained recovery."

However, while the South West is enjoying its fourth consecutive improvement in profit, UK industry as a whole has hit a slump.

Four major sectors engineering, media, information technology and telecommunications became loss-making in the third quarter of last year.

It means the UK in total has a 4.8 per cent profit rate, about a third of its peak in mid-1999.

Yorkshire and Humberside is the most profitable region in the country, recording a 12.38 per cent figure.

"Like the South West, its profitability is rising.

"However, many areas, including London and the South East, the West Midlands, the North West, the North East and Scotland saw a dip in profitability."

Peter Brooker, author of Experian's report, said: "The year-on-year improvement in profitability among companies in the South West was the strongest yet, with the rate of growth on the previous quarter remaining fairly stable over the last six quarters, which could indicate we are at the start of a long-term improvement .

"Corporate profitability has benefited from the generally more benign economic environment of the last year or so as output, particularly in the service sectors, has picked up along with business optimism."

But Mr Brooker said although the South West had cause for optimism, the country as a whole showed a more worrying picture.

He said: "This is the first time since 2001 that entire industry sectors have recorded negative returns.

"The last time the entire engineering sector saw negative returns was in 1993, at the height of the last recession, and it is unprecedented to have four sectors become loss-making at the same time."