The Markit/CIPS UK Construction Purchasing Managers' Index (PMI) showed that optimism in the industry is now at its strongest since February 2006, prior to the start of the economic downturn. The rate of job creation has also reached its highest level in five months.
The Index stood at 55.9 in May, beating the 55.0 forecast by industry analysts, showing a remarkable turnaround from the 54.2 of April, which was its lowest level in almost two years. The Index counts anything above 50 points as market growth.
May’s improvement is considered to be a reaction to the Conservatives’ General Election victory at the start of the month. Estate agents and construction firms working at the more expensive end of the residential property market had previously expressed concern that a Labour victory could lead to the imposition of a ‘mansion tax’, which they feared would subdue the market. In the infrastructure construction sector, companies were also believed to be holding off from giving large projects the green light until the outcome of the election was known.
Markit senior economist Tim Moore said: “May’s survey provides the first sign of a post-election bounce in the UK construction sector. With a sustained period of policy uncertainty no longer on the horizon, business confidence surged back to its highest level since early 2006.
“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.”
But he cautioned that there were no guarantees the sector would see a lasting turnaround in output volumes, because the industry as a whole had lost “considerable momentum” since 2014. Supply chain pressures and sub-contractor shortages, especially in the house building sector, also remain issues.