Issue 288 | 12 July 2021 - Turner & Townsend alinea

Economic Week In Review | Issue 288 | 12 July 2021

Materials and machines

US lumber prices have fallen for the ninth consecutive week, falling 60% from the peak in May as demand softened and supply constraints eased.
Haulage | The CLC and the Road Haulage Association have called for HGV drivers to be added to the shortage occupation list to lower the requirements for foreign workers to be able to work in the UK.
Aluminium | Producers in the EU are seeking exclusion from carbon border taxes, claiming it will put them at a competitive disadvantage to foreign competitors.

Property and construction news

Construction output fell 0.8% after the fourth wettest May on record. Total output is 0.3% above pre-pandemic levels, but new work remains lower, with commercial output nearly 19% lower.
Output forecast | Glenigan forecasts UK construction output to pass 2019 pre-Covid levels. It expects construction starts in 2022 to be 3% higher than 2019.
PMI | The IHS Markit/CIPS index grew to 66.3 in June, up from 64.2 in May, the strongest rate of growth in 24 years. New orders recorded a strong increase, and firms warned of cost pressures and labour concerns.
Piling | Analysis by The Construction Index shows that among the top 20 piling companies overall revenues have fallen 3% and pre-tax profits have fallen nearly 60%, and for the first time in the tracker’s six-year history the 20 leading companies made a collective loss.
Cost inflation clauses | The Construction Employers Federation State of Trade Survey in Northern Ireland has reported that firms are calling for contractual clauses to be introduced into public contracts to account for inflationary pressures. 30% of respondents said that unsustainable cost increases are a risk to their survival, with 71% reporting lower profit margins than 2019/20. The CLC has written an open letter to the UK construction industry on managing inflationary risks. The letter can be read here.
Contracts league | Chinese contractor BCEGI led Construction Enquirer’s awards league in June having been awarded the Royal Mint building conversion for £202.5m.

UK news

Labour shortage | The Food and Drink Federation has warned that there is a “war for workers” and increasing wages is the only way to attract workers, including HGV and logistics drivers, which could increase food prices by 5% in the second half of 2021.
UK GDP grew 0.8% in May as easing restrictions allowed pubs and restaurants to serve indoors. However, this was slower growth than the 2% seen in April and the economy remains 3.1% smaller than pre-pandemic.
Business optimism | Deloitte’s latest survey shows that 70% of CFOs expect to boost capital expenditure and hiring in the next year, the highest level in nearly seven years.
US Investment | More than half of large US businesses with operations in the UK are planning to increase investment over the next few years. A survey carried out by trade association BritishAmerican Business with consultants Bain found “very high” confidence in the UK as a place to do business.
Public finances | The Office for Budget Responsibility, in its Fiscal Risks report said that government debt now stands at £2.2bn (99.2% of GDP). It questioned plans to pay for Covid spending and warned that the economy remains vulnerable to shocks.

Global news

European growth | Economists have voiced concerns over rising Covid infections in Europe that could derail an economic rebound, not as a result of lockdowns but voluntary restraint.

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	7,121.88	-0.02	16.84
FTSE 250	22,909.32	0.71	33.35
Nikkei	27,940.42	-2.93	23.21
CSI 300	5,069.44	-0.23	6.65
S&P 500	4,369.55	0.40	37.19
Nasdaq	14,701.92	0.43	38.47
CAC 40	6,529.42	-0.36	31.36
Dax	15,687.93	0.24	24.18
$ per £	1.3840	0.33	9.39
€ per £	1.1670	0.25	4.38
Gold £/oz	1,300.55	0.63	-8.73
Brent Oil $/barrel	75.55	-0.81	74.72

Weekly Summary

It is clear that the market is still settling after a year of lockdown and focused spending in certain sectors which has created pockets of pressure on top of logistical issues. As economies open up demand should become less focused on the repair and maintenance market (as has been seen in the US), and evidence suggests that businesses will look to resume investment activity. This general recovery should help demand become less volatile.

However, the construction industry continues to show some characteristics that we should be mindful of as the economy recovers and commercial workload returns. Several contractors have looked to the infrastructure sector to fill order books, which could create capacity constraints when paused projects return to the market. Company profit levels should also be closely watched in the coming period, particularly as we continue to see price pressures.