UK Construction Industry narrowly avoids recession

The UK construction industry has narrowly avoided a recession by recording growth of 0.6% in Q3. This comes after the 1.2% decline in the previous quarter which had stoked fears that this bellweather of the UK economy was entering its first recession since the financial crisis.

Q3 growth was driven by a 1.4% rise in new work. However, it was offset by 0.8% decline in repairs and maintenance work. With the elongated Brexit crisis, news of a worsening labour market and a wider slowing of the economy, the Construction industry still faces some very challenging near-term conditions.

The IHS Markit Construction PMI was 43.3 for September (falling from 45.0 previously) marking the third consecutive decline for the index. Commercial, civil engineering and residential construction firms are all suffering from rising costs and white-hot competition. The receding threat of No Deal Brexit might pump some temporary confidence into the market but with so much uncertainty that’s far from certain.

With that in mind, Plimsoll, the UK’s leading market and company analysts, have produced a special study on the UK’s 1500 leading Construction Companies highlighting which companies are already in financial difficulty and least able to keep trading while they wait for better market conditions to arrive.

The new Plimsoll Analysis assesses each of the UK’s 1500 leading Construction Companies looking at their short- and long-term financial health, overall trend in performance, future durability and potential for acquisition. Based on the latest financial data for each company, this new analysis shows:

• 417 of the 1500 companies are already rated as Caution or Danger – the former suggests growing issues whereas the latter indicates immediate improvements are required
• 339 of the companies included are ripe for takeover – these companies are independently owned and with a large difference between current and future value. If the market is to consolidate in the short-term, Plimsoll considers these the most attractive targets
• 142 companies have lost more than a quarter of their value – As profit margins are increasingly under pressure, valuations have fallen again in the latest period

The UK Construction industry is being buffeted by strong headwinds. When market conditions and customer sentiment improve, the shape of the industry could have change significantly. The Plimsoll Analysis provides an easy means of highlighting those companies ill prepared to ride out the current storm, those well placed to make a strategic acquisition or two and the players powering ahead in spite of it all.