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Post-Election Construction Growth Bounces Back

Construction growth appears to be bouncing back following an uncertain period in March and April 2015, most likely the result of pre-election jitters. The after effects of May 2015’s General Election have seen construction getting back on track, with confidence high amongst construction buyers.

Despite low figures compared to February 2015, which saw the Markit/CIPS UK Construction PMI index at 60.1, May’s 55.9 figure is a clear improvement on April’s low of 54.2. Insiders in the industry appear confident that now is the time for the construction sector to start making up for the pre-election lull, with many predicting a measured but steady improvement over the coming months.

Regaining confidence

While 2014 saw impressive spikes in growth, this perceived “return to form” is seen by many as a very positive sign for an industry which has yo-yo’d and struggled to stay on track since the financial crisis. In fact David Noble, group chief executive officer at the Chartered Institute of Procurement & Supply, believes that the current steady yet confident growthshows business confidence at its highest since February 2006.

Suppliers & subcontractors

Although post-election confidence is one factor in construction’s incremental improvements, there are a number of other elements in play which are helping to get the sector back on top…

  • Raw materials shortages are dwindling
    The crisis amongst suppliers is now easing as raw materials like oil become more readily available and more affordable as a result. Although there is still pressure on suppliers’ stocks, the problem is now dissipating.
  • Fewer companies are subcontracting labour
    Many companies are now choosing to train in-house, instead of hiring subcontracted labour which was in short supply, putting a costly premium on their services.

Cautious optimism

But it may not be time to start popping Champagne corks just yet. The release of “on pause” demand frozen by the election is unlikely to be enough to get the sector back to the heights of 2014. Operating costs are still relatively high and productivity gains certainly still have the brakes on. While optimism is healthy, taking May’s post-election figures as a sign of being over the hump could yet prove foolhardy…

Have you seen an up-tick in construction work this month? Do you think this is a temporary spike or the beginning of longer term growth? Share your thoughts with other tradespeople in the comments section below.