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Construction sees post-election bounce

UK construction companies recorded a slight rebound in output growth during May 2015, according to the latest survey of purchasing managers, as reported in Construction Index on 2 June. But this only partially reversed the loss of momentum witnessed in April, ahead of the general election.

Business confidence across the construction sector picked up sharply in May, with the Conservative election victory contributing to the highest degree of positive sentiment since February 2006.  Signs of optimisim feeding through to the construction industry include:

  • The headline seasonally adjusted Markit/CIPS UK Construction Purchasing Managers’ Index (PMI) registered 55.9 in May.  This compared to 54.2 in April and was well above the neutral 50.0 threshold. However, it remains the second-lowest since June 2013.
  • The latest survey marked the first acceleration in output growth since February. The modest rebound was driven by a sharp and accelerated increase in residential building activity, alongside a return to growth in civil engineering. Commercial building work also expanded, but at its slowest pace since August 2013.
  • Growth of incoming new work picked up for the first time in three months during May. Survey respondents commented on improved underlying client confidence and an associated post-election bounce in new order volumes.
  • Survey panel optimism for future:  Looking ahead to the next 12 months, 58% of the survey panel anticipate a rise in output, while only 4% forecast a reduction. Anecdotal evidence cited ongoing investment plans, new project wins and reduced uncertainty towards the business outlook.
  • Construction firms experienced an upturn in new business growth from April’s near two-year low and job creation was the fastest recorded so far in 2015.

Lasting turnaround still in doubt

Despite the positive signs above, experts quoted in the article cast notes of caution including:

  • Looking at the last 12 months – all three key areas of construction activity have lost considerable momentum.
  • The scale of the construction slowdown since 2014 is such that the election boost alone will not be enough to fully reverse it
  • Continued high operating costs, as a result of substantial supply chain pressures and acute sub-contractor shortages, have hampered productivity gains at construction firms

Enfield-based construction equipment hire company, Mr Plant Hire, which offers scaffold towers hirepowered access hirelifting equipment hire in the London area backs up the survey findings:

“After the election, the construction side of our business definitely picked up and the rest of the business has remained pretty steady,” commented Mr Plant Hire MD David Elsdon.

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