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Optimism returns to construction sector following general election

Article By: ,  Financial Analyst
June 2, 2015 6:36 PM

The construction sector is expected to see a period of improved growth and stability following last month's decisive general election result, according to the latest analysis from Markit.

UK construction companies recorded a slight rebound in output growth during May 2015, as revealed by the newest purchasing managers' index report from Markit and the Chartered Institute of Procurement & Supply (CIPS).

The headline index number for the month was 55.9, up from 54.2 in April and well above the 50.0 neutral mark that separates growth from contraction, even though the latest reading was the second-lowest since June 2013.

UK business performance was generally affected negatively in the build-up to the May 7th election, which had been widely expected to deliver a hung parliament, followed by a period of political uncertainty.

However, with the vote having in fact resulted in a clear majority for David Cameron's Conservative Party, construction firms can now look forward to greater stability in the coming months.

Growing optimism
Anecdotal evidence cited by the Markit report suggested that weaker new business gains during March and April acted as a drag on overall output growth in May, a trend that is not expected to persist.

Indeed, confidence regarding the year-ahead outlook has risen to its highest level in over nine years, with 58 per cent of firms now anticipating a rise in output levels in the next 12 months, compared to only four per cent forecasting a reduction. 

Meanwhile, the rate of job creation in the construction sector has also reached a five-month high.

David Noble, group chief executive officer at the CIPS, said: "The brakes are now off for the construction sector as it makes up some of the losses over the last few months with a steady and comfortable improvement.

"Though nothing like the highs of 2014, the quietly confident approach after the restraint displayed before the general election shows business confidence at its highest since February 2006."

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