THE strength of sterling against major currencies such as the US dollar and the euro has led to a fall in revenues at FTSE-350 companies.

Annual revenues at UK plcs dropped by 1.7 per cent fall to £111.8 billion, with the currency factor knocking £2.7bn of annual sales for firms with year ends up to the end of September.

And larger, internationally focused businesses felt the biggest impact, according to the latest Profit Watch UK report.

Imperial Tobacco saw revenue fall by six per cent £892m, Thomas Cook by eight per cent or £727m, and Compass Group by three per cent drop or £500m, according the survey. There was also a three per cent or £373m revenue at Associated British Foods.

According to the Share Centre, the research analyst which crunched the data, the revenues of FTSE-100 companies to fall by 2.1 per cent on a like for like basis. This compared with a 0.7 per cent drop for companies in the FTSE-250.

Stripping out currency losses, firms in the FTSE-350 would have seen revenues grow year on year.

The turnover drop was reflected in gross profit numbers, found the report, which suggested overall gross profit had declined by two per cent in like for like terms to £26.9bn.

Imperial Tobacco saw the biggest drop in gross profit with a £504m decline. While sterling was a factor, the tobacco firm also encountered trading difficulties in parts of its business, as did Smiths and Thomas Cook, The Profit Centre said.

Mid-cap firms performed better in gross profit terms, according to the report: while FSTE 100 gross profits dropped by 2.5 per cent, they fell by just 0.3 per cent for mid-caps, meaning their gross profit margin expanded slightly.

Investors had better cheer on the pre-tax profit front, which soared by 20.8 per cent to £8.1bn compared with last year, although this was buoyed by lower write downs and exceptional costs.

The rise was also the result of improvements in the way companies finance themselves, the report suggested. Meanwhile, net profits climbed by 30 per cent to £6.4bn because of lower tax charges and exceptional costs, the survey said.

Helal Miah, investment research analyst at The Share Centre, said: "UK plc has struggled to move up a gear, despite the domestic economy growing at its fastest annual pace since 2007 last year. Lacklustre growth on a global scale has weighed on sales, while the strength of the sterling acted as an albatross around the neck of the FTSE 100's largest companies.

"That said, companies exposed to the UK consumer have bucked the general trend, with low inflation boosting discretionary spending."

"The year ahead looks rather different to the year behind us. The strengthening of the dollar against the pound will add to the UK's bottom line, improving the fortunes of exporters and those with the greatest international exposure, although the weak euro will continue to act as a drag. Oil prices have halved, and while this will be a challenge for commodity firms, lower fuel and energy costs will boost the profitability of many UK companies and turbocharge consumers' spending.

"With this in mind, the outlook for earnings is broadly positive, but we anticipate that domestically orientated companies will continue to outperform."