Issue 245 | 7 September 2020 - Turner & Townsend alinea

Economic Week In Review | Issue 245 | 7 September 2020

Brexit

Brexit borders | A leaked memo from the Cabinet Office’s Border and Protocol Delivery Group has raised concerns over the readiness of the UK’s border infrastructure post-Brexit. The memo highlighted 13 key risks including a lack of contingency planning if things go wrong and inadequate time to prepare before UK haulage firms and freight forwarders have to navigate 10 new systems. Mass testing of new IT systems is not expected to happen until October of November.
Trade talks | The next round of talks between the EU and the UK start this week, but Michel Barnier voiced concerns last week over the lack of concessions from the UK and reiterated that the end of October was a “strict deadline” to finalise an agreement.

UK news

Tax | The Chancellor is under pressure from the Conservative 1922 committee to avoid economic measures which would “stifle” the recovery.
Redistribution | Pret a Manger made the headlines again as it announced a change of business plan to provide more suburban branches as well as a delivery service.

Global news

US jobs | Employers in America added 1.4 million jobs in August, but the pace of rehiring of workers who had been let go during the pandemic slowed. The unemployment rate currently stands at 8.4%

Currencies and stocks

Tech stocks have been fuelling a steep rise in US stock markets recently but saw reversing fortunes this week pushing the Nasdaq Composite down by nearly 5%. Apple shares lost 8% ($150bn in value). Recently the five largest UK companies – Apple, Amazon, Microsoft, Alphabet and Facebook had been trading at an average of 44 times their average earnings.
Sterling is set for its biggest weekly fall against the dollar since mid-June as Brexit uncertainty weighs on the pound. In Reuter’s poll of twelve month forecasts, the range was wide, from $1.20 to $1.47. Volatility between the Euro and the pound also increased this week.

Construction and property news

Hong Kong | Agents have reported a significant increase in the number of Hong Kong nationals showing interest in residential properties in London. The increase is driven by favourable exchange rates and easing of immigration rules for residents.
High end residential | Demand for £1m+ properties outside of London rose in August with 228% more sales agreed than a year earlier. The number of new buyers registering with Savills in the 11 weeks to mid-August was 120% higher than the pre-pandemic average.
HS2 | Construction work on HS2 moved on from enabling work to full construction. Phase one (London-Birmingham) is expected to employ 22,000 people and has an estimated cost range of £35bn and £45bn. The first phase is due to open between 2029 and 2033.
Construction PMI fell from its five-year high in August to 54.6. Whilst this could represent a slowing of the recovery, it is still above the 50.0 marker for no change. Civil engineering slumped to below 50.0 whilst growth in the commercial and housebuilding sectors slowed.

Friday to Friday

	Price / Index	Week % change	Annual % change
FTSE 100	5,798.08	-2.76	-20.37
FTSE 250	17,354.28	-2.44	-11.93
Nikkei	23,170.00	1.26	9.29
CSI 300	4,770.22	-1.53	20.81
S&P 500	3,426.96	-2.31	15.05
Nasdaq	11,313.13	-3.27	39.63
CAC 40	4,965.07	-0.76	-11.40
Dax	12,842.66	-1.46	5.34
$ per £	1.3230	-0.87	7.55
€ per £	1.1196	-0.13	0.52
Gold £/oz	1,456.62	-1.06	18.78
Brent Oil $/barrel	42.66	-7.16	-30.68

Weekly Summary

A key headline this week was the shareprices of tech giants who, until now, have been boosting stockmarkets in an otherwise tumultuous year. Globally, stockmarkets fell as investors started to doubt recent rallies.

The ongoing commitment to HS2, along with the 22,000 jobs that it will create will be welcomed by the industry, especially in light of the PMI survey which saw respondents suggest that future construction growth will rely upon “a boost from major infrastructure projects and resilient public sector construction spending”.

This week all eyes are on the trade talks with the EU for any sign of a post-Brexit trade deal as the UK’s departure from the trade bloc draws near.