Optimism returns to construction sector following general election

<p>Output levels and business confidence in the construction sector have seen an upturn following the recent general election, according to new Markit data.</p>

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."

Join our live webinars for the latest analysis and trading ideas. Register now

GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.