Some sudden squalls

The sunny spell enjoyed by the quoted construction sector over the past two months came to an end last week. Shares in the construction sector dropped almost 1% to 3511, which, though not a major downpour, was in contrast with the balmy weather of recent weeks.

Housebuilders were worst hit – not helped by the fact that the market is gearing up for the next set of results and housebuilders are warning that times have not been as good in the first six months of this year as they were in the last six months of 2004.

But fluctuations in the share prices of housebuilders can also be linked to the ups and downs of merger and acquisition speculation. Taylor Woodrow has been at the centre of takeover speculation in recent weeks but last week shares fell less than 1% to 319.25p Commentators will also be watching keenly as fresh players attempt to enter the housing market. Building revealed last week that Australian developer Lend Lease was poised to buy Midlands housebuilder Crosby Homes for about £270m. It is the latest in a series of companies eyeing the sector.

Earlier this year, Laing O’Rourke announced that it had moved into the housing market, although things have been quiet since. Regeneration specialist Crest Nicholson is not yet free from Gerald Ronson’s Heron International, Crest’s biggest shareholder, and British Land was close to buying Raven Mount, the alternative investment market-listed housebuilder run by Anton Bilton.

Housebuilders will feel safe in the knowledge that experience goes a long way, but acquisitions by large companies that have the money to survive the cash-consuming business of housing are an increasing threat.

Among the losers last week were Persimmon, Redrow, Wilson Bowden and George Wimpey, which all dropped about 3%.

Quoted contractors fared much better, and shares in Alfred McAlpine rose almost 6% to 383p, and Carillion and Costain both increased 5%. Among the support services companies, Amec was up 3.5% to 352.5p and John Laing 4% to 264p.

Shares overall outperformed the construction sector, rising almost 1% to 2520.

Angela Monaghan is business editor

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