3 stocks to buy despite the fall in UK business output

Highlights 

• The UK business output has fallen to 103.35 from 105.23 in previous months, the lowest level since March 2021.
• The industry experts are optimistic and anticipate that the growth will be back across industries in the last two months of the year.

Business output in the UK declined in October 2021. The UK business output had fallen to 103.35 from 105.23 in previous month, which is the lowest level since March 2021, when the second lockdown was enforced in Britain, as per the latest survey by the business advisory and accountancy firm BDO.

Businesses across the manufacturing and service sector reported lower growth mainly due to a combination of factors:

• The supply chain crisis has impacted multiple industries across the countries as companies struggled because of a shortage of heavy-goods vehicle drivers, which disrupted the production output as companies struggled to find raw materials and deliver finished products to customers.
• The rise in fuel and energy prices due to consistent increases in crude oil and gas prices in the global market also impacted the growth.
• Shortage of skilled workers and labourers after the Brexit and pandemic led to a record rise in job vacancies in the UK, particularly impacting the service sector leading to lower business output.

Other than the above factors, the UK-based companies continue to face inflationary pressure, caused primarily due to increases in prices of energy, raw materials, and transportation which has impacted the business confidence. The rise in inflation is a big concern for the UK government and the central bank as it has already reached 3.1%, above the Bank of England’s 2% target.

3 stocks to buy despite the fall in UK business output

However, the industry experts are optimistic and anticipate that the growth will be back across industries in the last two months of the year, led by the Christmas spirit. Also, the supply chain constraints are temporary and are expected to get resolved soon.

Let us take a look at FTSE listed 3 industrial and manufacturing stocks and explore their investment prospects:

Aston Martin Lagonda Global Holdings Plc (LON: AML)

The company operates as an automobile manufacturer selling luxury cars in the UK and other countries. It reported higher wholesale volume and revenue in the first nine months of 2021 despite multiple issues. The company and other carmakers in the UK continue to face disruption led by supply chain problems, especially the shortage of computer chips which has impacted the total cars production in the UK. The company reported revenue of £736.4 million, while its operating loss was at £68.2 million.

Aston Martin’s last close was at GBX 1,741.50 on 5 November 2021, with a market cap of £2,023 million.

Rolls-Royce Holdings (LON: RR.)

FTSE100 listed company operates as a diversified industrial group that provides its engineering and manufacturing expertise to other companies from the defence, aerospace, and energy sector.

The company reported revenue of £5,159 million, while its gross profit was £814 million in the first six months of 2021. The company has been on the recovery phase after the pandemic, but its revenue and profit growth are impacted and are lower than the prior years impacted due to supply chain disruption. However, the ease in travel restrictions and the start of the commercial airline are expected to benefit the company’s business as civil aerospace contributes a major part of the revenue.

Rolls-Royce Holding’s last close was at GBX 142.94 on 5 November 2021, with a market cap of £11,960 million.

Chemring Group Plc (LON: CHG)

The company operates in the industrial segment supplying sensors and high technology products to defence and security companies. It reported good business performance despite the challenging environment. As a result, the company is expected to report revenue and operating profits in line with previous expectations. The company’s current order book stands at £502 million as of 31 October 2021.

Chemring Group Plc’s last close was at GBX 304.50 on 5 November 2021, with a market cap of £862.19 million.