A drama but no crisis

The drama engulfing Multiplex and the Wembley stadium did nothing to dent the good spell enjoyed by UK contractors of late. While analysts in Australia were busy writing notes on the company and warning it to scale back activities in the UK, panic about the risky nature of construction work had yet to spread to these shores.

Although the FA will be nervous about the prospect of failing to have Wembley ready in time for the FA Cup final next year, the City has been less so. The prospect of project overruns and financial trouble at Wembley has been one of the most common subjects talked and whispered about at business meetings and lunches since the start, and now the 鈥淚-told-you-so鈥� attitude is prevalent.

But that is what protected the UK construction sector from a widespread fall in share price last week. Wembley was, by its very nature, a one-off project that was always going to be highly technical and complex. UK contractors such as Mowlem shied away from the ambitious scheme, as it did not need to land a trophy project to get on in the UK market. The problem was predicted, and the reaction was therefore less alarming than it could have been.

Multiplex shares dropped more than 20% to AUS$2.56 (107p) when the news was announced last Tuesday, and had recovered by less than 5% at the end of the week. Meanwhile, construction shares as a whole in the UK rose 5% to 3536.

By contrast, when a UK contractor reveals an unexpected profits warning or loss, as Gleeson and Alfred McAlpine did earlier this year, the rest of the sector is tarred with the same brush and shares usually fall across the board.

Despite hard times of late, at Bath Spa and also within its M&E business, Mowlem was the best performer in the sector overall last week, up almost 9% to 193.75p.

The housebuilders also enjoyed a positive week, with about a 3% share price rise among several of the major players including Persimmon, Redrow, Taylor Woodrow and Westbury. Among the support services companies, shares in John Laing rose almost 4% to 254p on the back of the news that it planned to raise 拢100m from a rights issue in order to invest in more PPP and PFI projects. Shares overall rose slightly, 0.4% to 2503.

Angela Monaghan is business editor

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