REPORTING season has dominated the business news scene in recent days, and the stock market has been replete with bumper profits.

Companies across a range of sectors, from oil and gas and engineering to drinks and banking, have been cheering investors with surging earnings and pledges of handsome dividends, with hefty pay-outs on the way for those fortunate to hold shares in highly cash generative companies.

NatWest Group alone has pledged dividends totalling £2.1 billion as the institution known formerly as Royal Bank of Scotland unveiled a big rise in first-half profits on Friday. It is quite a turnaround for a bank that required a bail-out worth £45.5bn during the Great Financial Crisis around a decade and half ago.

If we were to gauge the state of the economy purely on recent results from UK listed companies such as Shell, BP, Centrica, Weir, Diageo and NatWest, we would be forgiven for thinking that it is in rude health. Many companies have returned to making the kind of profits that they were before the Covid pandemic struck.

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Of course, life is a good deal more complicated than that. What these bald financial figures do not show is the fact the UK economy is teetering on the brink of recession.

The UK is in the midst of a full-blown cost-of-living crisis, with rampant energy prices a key driver of inflation which surged to 9.4 per cent in June.

Wage growth is failing to keep pace, sparking an upsurge in industrial action that has come to be a defining characteristic of the summer.

The Bank of England has been attempting to curb inflation by increasing the base rate, with more expected to come on the that front today, but so far it has seemingly had little effect.

Liz Truss and Rishi Sunak, the two politicians vying for the Conservative leadership and to be crowned the next Prime Minister, may claim to have the solution to the UK’s economic woes at their fingertips. But the reality is there will be no quick fix to the situation.

Smaller businesses are at the sharp end of the malaise as much as consumers.

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Just as consumers are increasingly worried about household energy bills, petrol prices and the cost of groceries, they are facing an inflation crisis of their own, as the cost of energy, goods and labour spirals.

Some companies have reacted to the circumstances by passing through price rises to consumers, which is one factor that has helped lift profits. But as people become ever-more cash-strapped, it is hard to envisage this being sustainable.

Moreover, while it is the primary function of companies to make money and return dividends to shareholders, the question of how moral it is for businesses to be making huge amounts of cash as people struggle is becoming more and more pressing.

That was crystallised by some of the reaction that met the results posted by Shell and Centrica last week, and BP on Tuesday.

Shell posted a record second-quarter profit of £9.5bn as it continued to benefit from strong oil prices, and revealed it would be upping dividends through a $6bn (£5bn) buyback to return some of the cash it is generating to shareholders.

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Centrica, owner of British Gas, said profits in the first half of its financial year increased five-fold to £1.3bn. It too is cashing in on current commodity prices and said it would restore dividends, having suspended pay-outs when the pandemic took hold in 2020.

Meanwhile, BP announced an increase in its dividend by 10% and plans to ramp up its buyback with a further $3.5bn due before the end of September. The energy giant warned it expects oil prices to remain elevated in the third quarter amid the ongoing disruption to supply from Russia, implying there will be no let-up for consumers on the price front any time soon.

As underlined by the huge amount of cash being made by energy companies, a enormous chasm has opened up between the corporate world and ordinary people who are increasingly struggling to make ends meet.

Indeed, it was no surprise to read the comments on Tuesday from Sharon Graham, head of the Unite union, who declared that the “British economy does not work for workers and their families” as she reacted to BP's £6.9bn profit for the three months to June 30.

Highlighting that energy bills will rise to a “calamitous” £3,600 a year, Ms Graham said: “Britain’s real crisis isn’t rising prices it’s an epidemic of unfettered profiteering.”

Yet, while there will be no shortage of people who strongly agree with that sentiment, the perspective of the companies in question does merit some consideration.

Certainly in the case of oil and gas, major companies did sustain heavy losses when activity ground to a halt and oil prices plunged during lockdown. There was little, if any, public sympathy when that happened.

The UK Government, moreover, has acted to impose a windfall tax on the extraordinary profits that companies have been making because of sustained high oil prices, which have been elevated by the ongoing impact of Russia’s assault on Ukraine.

It is also worth noting that companies in all sectors require to make profits in order to invest in their businesses, which is essential for their continued growth and, as a consequence, job creation.

Many people rely on dividends for their retirement income, and in a large number of cases they will have been without those monies over the last two years as a result of distributions being suspended because of the pandemic.

All that said, it is hard to escape the conclusion that the profits currently being made by many major companies are now drastically out of step with the grim financial reality that millions of people are facing.

So far, the UK Government has done very little to mitigate the cost-of-living crisis, which is only going to worsen as energy prices continue to spiral, and nothing has emerged from the turgid Conservative Party leadership contest to suggest that will change in any meaningful way.

The only sure thing, it seems, is that living standards will remain under serious pressure for some years to come.