I’m searching the FTSE 100 and FTSE 250 for the best UK shares to buy for these tough economic times. Here are two I’ll be looking to add to my portfolio when I have extra cash to invest.
B&M European Value Retail
Inflation is tipped to remain sky-high in the UK throughout most of 2023. It’s a scenario that, while threatening most UK-focused retail shares, should benefit value retailers like B&M (LSE:BME) as shoppers try to stretch their budgets.
The OECD reckons British inflation will average 6.9% this year. It also predicted today that the domestic economy will grow just 0.3% and 1% in 2023 and 2024 respectively.
Such a recipe should continue to drive significant footfall into B&M and its Heron Foods grocery stores. Revenues growth has already been impressive here and like-for-like sales in its flagship stores rose an impressive 8.3% in the first nine weeks of the new financial year beginning April.
Value retail has become massively popular of late. But in truth it’s growing strongly over the past decade. This FTSE 100 business remains committed to strongly expanding its store estate to capitalise on this long-term trend too.
It plans to have “at least” 950 B&M shops running eventually, up from just over 700 at present. It also has scope to grow its Heron Foods footprint and its network of bargain stores in France. I’d buy its shares even though lack of an e-commerce channel could cost it sales.
Grainger
Purchasing property stocks could be another good idea in this era of high inflation. Businesses like these can effectively protect profits by raising rents to cover increased costs.
Residential landlord Grainger (LSE:GRI) is one such UK share on my radar today. In fact this FTSE 250 firm offers an extra layer of safety for investors. Accommodation-related expenses are one of the last things people cut back on when times get tough.
This all explains why Grainger still grew like-for-like rents by a robust 6.8% during the six months to March. This was almost double the 3.5% it recorded a year earlier.
Rents in the private housing sector are soaring due to a worsening supply situation. According to HomeLet, the average monthly rent for new tenancies hit £1,213 in May. This was up a staggering 10% year on year, the property services firm says.
Like B&M, this is a company I expect to deliver strong returns for years to come. Development pipelines for new properties remain weak, meaning supply should lag continue lagging strong tenant demand in the coming years.
Construction activity on new homes actually slumped to its lowest level since 2009 (excluding the pandemic) in May. Strict planning rules and cooler buyer interest could keep homebuilding on the back foot too.
Higher-than-usual build costs could continue eating into Grainger’s profits. But as rents rise I still expect the firm to record impressive growth.
