Shares in Jarvis and Balfour Beatty both went up in the expectation that Railtrack would let more rail maintenance contracts in the wake of last month's train derailment in Hatfield, Hertfordshire. Amec's shares neared their year high at 291.5p.
The City's bullish mood was heightened by the announcement that that Highways Agency would spend 拢10bn on new roads over the next 10 years.
City analysts were, however, divided over the long-term effect of the recent boost, which saw Jarvis' shares jump a further 22.5p this week to 188.5p on top of a 10% increase in the immediate aftermath of the Hatfield tragedy.
Seymour Pierce analyst Leslie Kent, who was bullish about the sector, said investors had started to shift their attention from internet and IT stocks to older industries, such as construction.
Kent said: "A lot of investors have been enquiring about the construction industry in the past couple of weeks. It is an encouraging sign." Kent said the upturn in interest was also a by-product of the fact that contractors were more ruthless about obtaining higher margin contracts.
He said: "Contractors are now running their businesses much better, which means they can be more selective in the work they choose." One analyst said: "There are rumours that the infrastructure contracts could be worth anything up to 拢180bn, which has sparked a lot of City interest in the construction sector." If this turned out to be true it would be more than twice the 拢70bn figure pencilled in by the government in its 10-year transport programme.
But Granville Baird analyst Mike Foster was less sanguine about the sector's long-term performance. He pointed out the rising concern about the potential dangers of rail work.
Foster said: "I don't think it [the increase in rail work] will change profit and loss accounts that much. And there is still the risk of significant penalties for contractors, which is another reason for not getting too enthusiastic about the sector." In August 好色先生TV suggested that the Comprehensive Spending Review would help construction grow 1% more than GDP in two years' time.
