Expert View: UK plc is battered but not broken

By Oliver Ralph, March 19, 2009

March is a hectic time in the City. Analysts, fund managers, PR advisers and journalists try to cope with “reporting season”. An array of listed companies, having spent a couple of months adding up the numbers from 2008, have been telling us how they did last year and, more importantly, how they expect to do in 2009.

The news from the front line of British business has not been good. We’ve heard a lot about faltering sales performances, debt worries, efforts to reduce costs and dividend cuts. We’ve also heard a lot of uncertainty about future prospects. Some companies don’t know where the next contract is coming from, while those that do are unwilling to appear overconfident. Nevertheless, the news has not been unremittingly bleak. Some sectors are doing nicely. In aerospace and defence, there have been decent results from Cobham and Ultra Electronics. Dividends from the two companies rose by 10 per cent and 23 per cent respectively.

Companies that offer outsourcing services such as Capita have also been doing well. Their clients are looking for ways to save money, so demand should remain strong. And the oil services sector has put in a good performance. Although the oil price has been falling, oilfield owners are reluctant to cancel new developments. That bodes well for the likes of Petrofac and Wood Group.

Other sectors are suffering from a split personality. Housebuilders Taylor Wimpey, Barratt and Persimmon are having a tough time as the housing market remains frozen. And building materials suppliers such as Wolseley, CRH and Marshalls are under pressure. But large contractors such as Costain, Balfour Beatty and Carillion are finding life easier. Much of their work is related to long term government spending programmes, and their overseas diversification has given them some protection from the recession.

Media is also a tale of two halves. Newspaper groups and broadcasters are finding life tough as advertisers cut their spending. ITV is to cut jobs and sell non-core businesses to reduce debt, while Trinity Mirror is also struggling. However, groups such as WPP and Chime, which own advertising and PR agencies, are doing better thanks to their international businesses.

British business is suffering. But, to paraphrase Mark Twain, reports of its death are exaggerated.

Oliver Ralph is editor of the Financial Times’s Investors Chronicle magazine

Last updated: 10:55am, March 19 2009