City analysts say stock market uncertainty will be outweighed by healthy order books.
MARKET Analysts are saying the UK construction sector's prospects remain positive, despite fears that the terrorist attacks in the USA will push the global economy into a downturn.

Stock markets around the world are erratic as investor uncertainty grows. The London and New York stock exchanges had a torrid start to the week and analysts are reducing earnings for many firms, but experts insist that construction companies are well placed to ride out the problems.

"The fundamentals for construction and housebuilding companies are strong in the long term," said John Carnegie, of stockbroker Schroder Salomon Smith Barney. "My guess is that this will be a short-term issue."

Other analysts agreed and pointed to firms' strong order books and the government's commitment to increasing investment in British infrastructure and public spending.

But Peel Hunt analyst Stephen Rawlinson warned there might be a fall in new construction projects, with clients nervous about the economic outlook. He also suggested a decline in consumer confidence might hit house sales.

He said: "Consumer confidence is the key. People won't want another mortgage if they are uncertain about the future."

Consumer confidence is the key. People won’t want mortgages if they are uncertain

Stephen Rawlinson, analyst, Peel Hunt

Housebuilders' stocks fell on Tuesday after a lower-than-expected interest rate cut from the Bank of England. The rate was cut 0.25% to 4.75%. The market was hoping for cut of 0.5%.

On a more immediate level, some companies will benefit from involvement in the massive clean-up operation already under way, and the expected rebuilding in Manhattan and Washington, which will reportedly take up to 15 years.

Amec and Balfour Beatty shares improved after the firms secured work in the clean-up, and analysts said Amec was well placed to win work rebuilding the devastated areas.

Crédit Lyonnais analyst Alastair Stewart said the rebuilding work would take up any excess of supply caused by the US downturn.