UK construction grows while optimism falls

UK construction managed to come back to growth last month. However, with the falling new orders, business optimism dropped. This is the first time since June that the activity expanded in September, as shown by S&P Global’s construction purchasing managers’ index (PMI).

From 49.2 in August, the value of the index surged to 52.3 during the period, representing a return to normalcy with the easing of supply chain constraints. Nevertheless, business optimism reached the lowest level witnessed since July 2020 as orders fell, interest rates soared, and the fears of a recession rose.

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Housebuilders said that activity increased, and growth hit a five-month high. Meanwhile, there was a slight rise in commercial work and a drop-in civil engineering activity for the third consecutive month. According to construction firms, the rising inflation fears, constrained budgets, and the darkening economic outlook made clients slow, or even reluctant, to sign off on new projects.

Purchasing activity in the construction sector went down slightly due to restrained client demand. The survey also indicated that inventory building dropped due to a turnaround in supplier performance. However, this came with the easing of supply scarcities last month.

Meanwhile, despite overall employment growth over the month, construction firms kept citing labour shortfalls amid rising wage pressures. Amid these developments, UK investors can keep an eye on the construction stocks listed on the London Stock Exchange.

Balfour Beatty plc (LON: BBY)

Balfour Beatty plc is a British infrastructure group offering construction and support services. BBY shares were trading at GBX 304.80, experiencing a dip of 0.20%, on Friday at 9:50 AM (GMT+1). The market capitalization of the FTSE250-listed company stands at £1,837.58 million at the time of writing. With a P/E ratio of 10.50, the company’s EPS (earnings per share) stands at 0.21 at present. BBY has given YTD returns of 16.34% as of 7 October, its annual return stands at 13.48%. 

Ibstock plc (LON: IBST)

Ibstock plc is a British manufacturing business focused on clay bricks and concrete products used in construction activities. IBST shares were trading at GBX 168.60, experiencing a fall of 1.23%, on Friday at around 9:50 AM (GMT+1). At the time of writing, the market capitalization of the IBST stands at £678.29 million. On a YTD basis, IBST’s return as of 7 October stands at -17.27%. Meanwhile, its annual return stands at -12.51%. 

CRH plc (LON: CRH)

CRH plc is a global group of diversified companies providing building materials. CRH shares were trading at GBX 2,937.50, experiencing a decline of 1.51%, on Friday at around 9:50 AM (GMT+1). At the time of writing, the market capitalization of the CRH stands at £22,409.64 million. With a P/E ratio of 10.07, the firms EPS stands at 3.29 at present.