Economic Week In Review | Issue 309 | 6 December 2021

UK construction and property news

• Shopping centre values | The sale of the 1.1m sqft Silverburn shopping centre near Glasgow, and the ongoing share sale of Bluewater will be watched by many in order to gauge the market’s value.
• Construction PMI rose at its fastest rate in four months to 55.5 and the survey also revealed an easing of supply issues as 47% of firms reported longer delivery times, down from 77% in June.
• Retentions | Draft legislation to outlaw use of retentions in construction contracts is back before the House of Lords. It is estimated that the practice removes £4.5bn annually from the economy and £1m per working day is wholly lost to smaller construction companies who have withheld funds due to them.

Materials, commodities and currencies

• Oil | Opec+ agreed to increase output in January by 400,000 barrels after pressure from the White House which called for increased output to reduce prices.
• Iron ore prices increased slightly, buoyed by concerns over supply from China, but the price remains much lower than we saw over summer (53% lower). Some border cities in China’s Inner Mongolia region and Heilongjiang province have paused non-container imports by rail for some commodities (coal, iron ore, copper ore, and zinc) to reduce Covid-19 risks amid a recent increase in cases.
• Net Zero | In its latest Global Research Metals 2022, the Bank of America has warned that metal producers will need to double capital expenditure in order to become net zero by 2050. It also expects metal demand to hold up better than in previous business cycles because of current commitments to invest in renewables, energy storage, and the energy transition.
• Shipping | Problems with shipping and fractured supply chains have led retailers to create their own off-site container storage areas to increase processing speeds. Some, such as Asda in the UK, and Costco and Walmart in the US have chartered their own container ships to ensure Christmas stock arrives.
• Steel tariffs | US tariffs on British steel have been maintained, despite those on EU steel being removed. Under the Trump administration tariffs of 25% on steel products and 10% on aluminium were imposed on EU products, when the UK was still part of the bloc.

UK economy

• House prices returned to double-digit growth, as Nationwide announced prices increased 10% in November.
• Energy crisis | Zog energy became the 25th energy supplier to cease trading in the last three months. Ofgem has had to find new suppliers for 2 million households since the beginning of September (in addition to the 1.7m Bulb customers who are yet to be handled by an administrator).
• Green Homes Scheme | According to the public accounts committee (PAC), the Green Homes Scheme was poorly organised and a failure. It cost £50m and only delivered on a handful of objectives, upgrading just 47,500 homes out of the 600,000 originally planned.
• HGVs | There are signs that the road freight market will improve, according to the trade association Logistics UK. The number of people leaving the market has slowed and more trainees are undergoing the testing process.

Global economy

• Irish imports direct from the EU increased 50% as exporters avoided the UK and Brexit’s red tape.
• Global Gateway | The European Commission, along with the High Representative for Foreign Affairs and Security Policy announced a European Strategy to boost digital, energy, transport, health, and education infrastructure by mobilising up to €300 billion in investments between 2021 and 2027. It will also boost ties between Europe and its trading partners.
• Eurozone construction figures showed the fastest increase in activity since February 2018.

G7 forecast

The OECD has forecast the UK will see the best growth amongst the G7 in 2021 but it will struggle next year due to a lack of workers and issues moving goods across borders, although it will still be ahead of other G7 countries.