Conflicting reports put construction industry activity into question

The latest Construction PMI from Markit / CIPS New reports charting the progress of the construction industry following the General Election have revealed conflicting views of activity in the sector.

According to the latest report from Markit and the Chartered Institute of Purchasing & Supply (CIPS), the UK construction industry has begun to recover from the loss of momentum seen in April ahead of the General Election. However, the Glenigan Index for June, which covers the value of projects starting on site during the previous three months has declined by 10%, as activity stalled in the run up to polling day.

The Markit / CIPS Construction Purchasing Managers’ Index PMI for May 2015 registered 55.9, up from 54.2 in April. Although this upturn in activity was less marked than seen through much of the previous two years, the latest survey suggested the first acceleration in output growth since February.

According to survey respondents, this upturn was prompted by clients’ willingness to spend following the outcome of the General Election. The resolution of May’s vote also reportedly increased greater business confidence across the construction sector, with the degree of positive sentiment the highest since February 2006.

David Noble, group chief executive officer at 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.”

However, the Glenigan report claims there have been falls in civil engineering and non-residential work, as well as further declines in the retail, office and industrial sectors.

Despite these findings, Allan Wil‚n, economics director at Glenigan, believes the industry will still recover in line with the findings of Markit and CIPS. He said: “Our data indicates that activity will bounce back quickly over the next couple of months.

“The value of contracts awarded has continued to grow during 2015 and developers will now be mobilising their project teams. We expect this to come to fruition with a surge in starts during the second half of the year.”

However, despite its findings suggesting growth within the construction industry, Markit and CIPS have expressed concerns that the industry will be unable to regain the levels of output experienced in the construction sector during the recent recovery period.

Tim Moore, senior economist at Markit and author of the Markit / CIPS Construction PMI, said: “It is far from certain whether the relief rally in construction confidence will usher in a lasting turnaround in output volumes on the ground.

“Despite a client spending rebound in May, all three key areas of construction activity have lost considerable momentum over the past 12 months. The scale of the construction slowdown since 2014 is such that it will not be fully reversed through the release of pent up demand after the election alone.”

Mr. Noble added: “The expectation is the sector is likely to trundle along rather than produce the same elevated progress of last year.”

Conflicting reports on the performance of the construction industry were also seen last month, when figures from the Office of National Statistics (ONS) suggested activity had dropped by 1.1% compared to the final quarter of 2014. However, evidence published at the same time by the Construction Products Association (CPA) suggested that during the same period, f