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Construction Surges in UK Post Election

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Published on : Jun 02, 2015

British construction firms hit optimism after a nine yearlong low period, after the unexpected decisive election victory of Prime Minister David Cameron. The sector is slated for growth, as revealed by a survey.

The CIPS UK Construction Purchasing Managers’ Index (PMI) got an uplift in May to 55.9 from the April value 54.2 which it stood at for 22 months. The index above 50 denotes growth, which beat the Reuters poll projection of 55.0.

After Cameron’s Conservative Party won majority on the May 7 polls, the share prices of the biggest house builders in Britain have gone up almost 20% since then.

Since then, businesses have gained confidence and policy uncertainty is longer in the horizon, as commented by Tim Moore, senior economist at a survey compiled by Markit.

The PMI also suggests construction firms resumed hiring at the fastest rate in May compared to the last five months.

Although the CIPS survey suggests solid growth in the construction sector that has happened since mid-2013, it is at odds with much lower official data.

As per economic growth statistics released last week, construction output dropped 1.1% in the first three months in 2015, which was already contracted 2.2% towards the end of previous year.

However, Markit commented it was not sure how the increased confidence would turn into higher output volumes, highlighting the fact that all parts of the construction sector to have lost momentum in the last twelve months, also taking into consideration PMI bounce quited for May.

A similar survey carried recently revealed British manufacturing activity to have surged in May, which rebounded after hitting seven moth drop in April.