Issue 283 | 7 June 2021 - Turner & Townsend alinea

Economic Week In Review | Issue 283 | 7 June 2021

Materials and commodities

Timber | The Timber Trade Federation has warned that the supply / demand imbalance may worsen in Q3 as stock levels in Sweden are at the lowest in more than 20 years despite record production. Sawmills usually close in July for maintenance.
Petrol prices have reached a two-year high, and the RAC has suggested that this may be due to retailers charging more to make up for losses during the pandemic. The price of a litre of unleaded is 22p higher than a year ago, the largest annual increase seen in 11 years.

Property and construction news

Flexible office rents | Workplace Group has said that vacancies stabilised in Q4 2020 and leasings and enquiries have returned to pre-covid levels, but rents are still subdued.
Construction PMI rose at its fastest rate since 2014 and new orders grew at the fastest rate since the survey began in 1997. However, cost inflation also reached a record high and leadtimes lengthened.
Labour | 166,600 construction workers were still furloughed at the end of April.
Retail | 70 shopping centres in the UK could close. According to an analysis by Local Data Company at least 30 are half empty, with some being 80% empty.

UK news

Hiring activity | UK companies employed permanent staff at the fastest pace in 23 years and vacancy adverts reached a three-year high. The highest increase in adverts was in the transport, logistics and warehouse sector, which saw an increase of 295% since February 2020. Adverts in the construction industry increased by 185%.
Labour shortage | Restaurant owners have reported sharp wage increases as they struggle to recruit staff following the pandemic and Brexit. Some owners have reopened on a reduced service due to staff shortages.
Retail | Footfall increased 7% last week and is currently 73% of the comparable period in 2019, according to Springboard.
Foreign investors have bought UK government debt at a record rate over the past year as Brexit concerns reduce and other investments offer low or negative yields. Foreign investors bought £11.3bn of gilts in April, taking the twelve-month total to £89.8bn.
Eviction ban | The CBI has asked the government to extend support for companies as the eviction ban ends. It is estimated that £6bn is currently owed in missed rent and the British Independent Retailers Association says that almost a third of its members have some form of rent debt.
Trade | The UK government has announced trade deals with Norway, Iceland, and Liechtenstein, and began the long process of joining the 11-member Asia-Pacific trade bloc.
Transport | TfL received its third emergency support package which is intended to replace lost ticket revenue. The funding comes with conditions such as fare increases.

Global news

Unemployment in the USA fell to 5.8% as 559,000 jobs were added in May. Businesses have voiced concerns that they are struggling to rehire workers in pace with demand.
G7 GDP loss | The G7 group of countries could lose $5tn a year by 2050 if the world experiences 2.6°C warming according to Oxfam and Swiss Re Institute research. The impact is expected to be twice as severe as that from Covid-19.
Global tax | G7 nations agreed a minimum tax rate of at least 15% to battle tax avoidance by making large multinational companies pay tax in the countries in which they operate. Agreement must now be sought at G20 and at OECD talks.
Growth | The OECD has forecast the world economy to grow 5.8% this year, a marked increase from its previous forecast. GDP per person has already recovered in some countries.

Tender Price Index

Published every six months, our Tender Price Index is an analysis of inflation price deviation in construction prices. Click on the link above to view our most recent Index.

Friday to Friday

	Price / Index	Week % change	Annual % change
FTSE 100	7,069.04	0.66	9.02
FTSE 250	22,832.73	0.66	25.25
Nikkei	28,941.52	-0.71	25.44
CSI 300	5,257.34	-1.20	31.39
S&P 500	4,229.89	0.61	32.44
Nasdaq	13,814.49	0.56	40.76
CAC 40	6,515.66	0.49	25.35
Dax	15,692.90	1.11	22.15
$ per £	1.4174	-0.10	11.61
€ per £	1.1647	0.10	3.57
Gold £/oz	1,335.98	-0.41	0.38
Brent Oil $/barrel	71.89	3.25	69.95

Weekly Summary

Cost pressures are crystalising for a multitude of reasons, and demand is returning across different sectors. With the possible end of Covid restrictions in the UK, many have turned their thoughts to the prospect of inflation and increased base rates after years of easy credit.

The Bank of England has warned that if demand gets ahead of supply, there could be a generalised pick up in inflationary pressure and that CPI is expected to rise above the 2% target for a short period.

After a few years of flat or falling interest, and a market on hold whilst Brexit plays out, where does that leave construction and the property market?

With the magnitude and variety of pressures acting on the sector, averages can be troublesome. Behaviours and availability in one sector/area may not drive the same responses in others. Therefore, it is increasingly important to understand the factors affecting your project and plan accordingly.