News

UK construction sector bounces back after the election

New data has shown that UK construction rebounded in May after a two year low in April, after uncertainty over the general election led developers to be more cautious with their spending decisions.

According to the Telegraph, house building led the rebound as companies resumed projects that had been put off in the run up to the May election, causing them to spend again.

The Markit/Chartered Institute of Procurement & Supply purchasing managers’ index (PMI) improved to 55.9 in May, beating forecasts and remaining well above the 50 threshold which indicates growth. Economists had been expecting a smaller increase to 55.

Markit’s Tim Moore said that the result meant “a period of uncertainty was no longer in the horizon.”

“Additionally, 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.” He added.

However, he also warned that there is still a lot of uncertainty as to whether “this new construction confidence will usher in a lasting turn around in output volumes on the ground.”

Chris Williamson, Markit’s chief economist, welcomed renewed optimism in the construction sector, but he too warned not to read too much into the figures[1].

“Despite the brighter signs for the coming months, the strength of the rebound remains uncertain. Civil engineering activity, for example, has been showing signs of weakness since late last year, and ongoing austerity is likely to limit government-funded infrastructure spending.”

Nevertheless, business confidence across the construction sector rose to its highest level since February 2006. Respondents said employment levels were supporting a post-election bounce in clients’ willingness to spend[2].

[1] Szu Ping Chan, The Telegraph Online
[2] Jessica Morris, http://www.cityam.com/