The FTSE 100 index, a key barometer of the UK's largest publicly traded companies, closed down by 0.83% on Thursday, reflecting investor reactions to recent corporate earnings and a disappointing construction PMI report. The data highlighted a significant downturn in the British construction sector, with business activity experiencing its most rapid decline since May 2020.
This drop can be attributed to a combination of weak demand, high borrowing costs, and a scarcity of new projects in the pipeline. The S&P Global UK Construction PMI recorded a value of 44.6 for February 2025, representing a decline from 48.1 in January and falling short of the consensus estimate of 49.5.
Despite these challenges, construction firms maintain a level of optimism regarding growth prospects over the next year, although this optimism is tempered by growing concerns about the overall UK economic environment, as noted by Tim Moore, the economics director at S&P Global Market Intelligence. In a notable political development, UK Prime Minister Keir Starmer and his Irish counterpart Micheál Martin convened at the UK-Ireland summit in Liverpool, aiming to forge a stronger partnership between the two nations.
Ireland has proposed a substantial investment of 185.5 million pounds sterling into the UK, which has the potential to generate over 2,500 new jobs, providing a much-needed boost to the labor market. Turning to the corporate sector, asset manager Schroders ($SDR) emerged as a standout performer, witnessing a remarkable increase of 12.62% in its share price.
For the fiscal year ending December 31, 2024, the company reported a profit attributable to equity holders of 417 million pounds, up from 388.2 million pounds, driven by robust revenue growth. Conversely, Melrose Industries ($MRO.GB) saw a significant decline of 18.18%, despite reporting a reduced attributable loss of 49 million pounds for 2024, compared to 1.02 billion pounds the previous year.
The aerospace firm, nonetheless, recommended a higher dividend in light of improved revenue. Peter Dilnot, the Chief Executive Officer of Melrose Industries, remained optimistic about the company’s future trajectory. “Melrose delivered a strong 2024 performance driven by robust industry demand, ongoing aftermarket growth, and the impact of extensive business improvement actions,” he stated.
He emphasized that this performance occurred amid widespread supply chain challenges in the industry, positioning Melrose for advantageous progress in 2025, coupled with expectations of significant free cash flow. In contrast, pest control company Rentokil Initial (RTO.L) faced a setback, losing 10.77% as its attributable profit for 2024 fell to 307 million pounds, down from 381 million pounds.
This decline was reflective of lower revenue figures, underscoring the difficulties faced by companies in this economic climate. In summary, the UK construction sector is navigating a turbulent landscape with economic pressures affecting corporate performances, while there are pockets of resilience in specific companies which continue to inspire optimism among investors and industry leaders alike..