Economic Week In Review | Issue 259 | 14 December 2020

The Construction Playbook

As promised a few weeks ago, the government issued a Construction Playbook, which aims to show how the government will work with industry to make sure public works are delivered faster, better, and more sustainably.

Specific measures include clarity around the public pipeline which will enable suppliers to invest in new technologies and modern methods of construction. This will be supported by a commitment to standardisation across projects.

The document also reinforces the importance of teamwork, properly understanding a project, and fair bidding practices.

Property and construction news

• Self employment wages have returned to pre-Covid levels according to Hudson Contract, construction’s largest payer of subcontractors. Wages saw the fastest monthly increase in the North East (+8.4%), London (+6.8%) and the Southwest (+5.3%). In London annual pay is still -0.1% annually.
• Leadership | Construction has another new minister. Kwasi Kwarteng has taken over from Nadhim Zahawi who has been given the job of overseeing the Covid-19 vaccine roll out.
• Output | Infrastructure is the only sector to have recovered to its pre-Covid level. The sector grew 1% in October but remains 7.5% smaller than a year ago.

Investments

• Global bonds | $1 trillion of bonds saw their yields become negative this week. Bloomberg now estimates that 27% of the world’s investment-grade debt now has a negative yield.

Materials, stocks, and currencies

• Pound reacts | As Brexit talks soured, the pound fell 3% from its monthly high. As talks were extended, it recovered slightly.
• Timber | The Timber Trade Federation has said that the strain on the supply chain will continue into at least Q2 2021 and could be further complicated by Brexit. Recent deliveries have been disrupted due to rising cases in Sweden, the UK’s largest source.

UK news

• GDP | The UK economy grew 0.4% in October, just before the new national lockdown came into force, the lowest rate since May. Production and construction increased 1.3% and 1.0% respectively whilst services (which accounts for 80% of GDP) grew by just 0.2%. The services industry has struggled to improve output whilst maintaining social distancing rules.
• Border issues | Honda had to halt production for two days at its Swindon plant because of a shortage of parts as delays at Felixstowe have impacted other major ports such as Southampton and London Gateway. Stockpiling has also caused problems, with French hauliers reporting cross border traffic is 30% higher than usual.
• Bank of England warnings | Most of the risks to financial stability from a no deal scenario in 2021 have been mitigated, but “some disruption to financial services could arise”, warning that “the real economy is going to struggle”.
• Retail prices | The British Retail Consortium has warned that “Currently, four-fifths of UK food imports come from the EU and without a tariff-free deal, supermarkets and their customers face over £3 billion in tariffs from 2021”. Tesco added that consumers should expect price increases of 3% to 5%.
• Inflation | The Office for Budget Responsibility warned that if inflation surges during the pandemic recovery, the impact to government debt could be dramatic.