Issue 327 | 3 May 2022 - Turner & Townsend alinea

Economic Week In Review | Issue 327 | 3 May 2022

Materials, commodities and currencies

Prices | The latest poll by the Federation of Master Builders reported that 83% of respondents had increased prices in Q1 2022 and the same percentage expect to raise prices in Q2. 60% of respondents had increased wages while 98% had experienced material price inflation.
Gas prices fell in Europe as buyers found sanction workarounds. Russia warned that it would stop gas supply to companies who do not pay in Rubles. However, companies in the EU that open Ruble accounts would violate sanctions.
Shipping | Continued lockdown measures in China have seen congestion at Chinese ports increase by 30-40% according to S&P Global Market Intelligence. Capacity at ports to load or unload cargo has fallen 11% between Q1 2021 and Q1 2022.

UK construction and property news

Building safety | The Building Safety Bill gained Royal Assent and passed into law. A survey by Construction Management magazine found that only 23% of respondents were prepared for it, with 43% saying they were unsure how to prepare.
HS2 pay | Hundreds of workers at HS2 have suffered from incorrect wages over the last few months due to administrative issues in data capture on the ‘Time and Attendance’ system.
Regulations | A survey by the Federation of Master Builders has shown that 52% of builders are neither prepared for nor aware of impending changes to building regulations affecting ventilation, power, overheating, and charging electric vehicles which will come into force on 15th June 2022.Data space | Demand for data centre space is expected to increase tenfold between 2018 and 2025 according to AECOM. JLL reported that the global construction pipeline for data centres reached a new high in 2021.
Productivity | Several contractors are helping to develop a new construction productivity playbook. The Construction Productivity Taskforce has been convened by charity Be the Business which was established in 2017 by former John Lewis chairman Sir Charlie Mayfield.

UK economy

Solvency II | Treasury plans will boost investment in UK infrastructure by “tens of billions of pounds”. The plan includes changes to the Solvency II legislation that governs how risk is managed across the EU, and these changes will give insurance companies more freedom to invest in long-term assets.
Free ports | Construction has started at the first of eight new freeports in the UK. Freeport East includes Felixstowe, Harwich and four customs sites.
Financial distress | According to Begbies Traynor, nearly 1,900 UK companies were in financial distress at the end of March, a 19% increase compared to the same period in 2021. The number of County Court Judgements (seen as a leading indicator of future distress) reached a five-year high of 22,552, an annual increase of 157%.

Global economy

GDP growth in France, Spain, and Italy missed forecasts, showing weakening economies, with the main drag in growth being a fall in household spending as stagflation takes hold. Inflation in the Euro-area rose to 7.5%.
Latin America would benefit from the world’s efforts to reorganise supply chains in the wake of the war in Ukraine according to the IMF. Shortages of food, metal and energy could be alleviated if the region embraces reforms to improve productivity, increase competition, and tackle tax and inequalities.
Environment | Global Energy Monitor has warned that there are too many new coal-fired power plants under development around the world to stay within temperature targets. Coal use was in decline before the Covid-19 pandemic but has increased since, particularly in China.

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	7,544.55	0.30	8.25
FTSE 250	20,708.71	-0.83	-7.95
Nikkei	26,808.53	-1.09	-6.96
CSI 300	4,016.24	0.07	-21.61
S&P 500	4,131.93	-3.27	-1.18
Nasdaq	12,334.64	-3.93	-11.66
CAC 40	6,533.77	-0.72	4.22
Dax	14,097.88	-0.31	-6.86
$ per £	1.2567	-2.18	-9.18
€ per £	1.1920	0.10	3.67
Gold £/oz	1,508.61	0.26	17.79
Brent Oil $/barrel	109.34	2.62	64.03

Weekly Summary

Despite rising prices, changing regulations,and a marked rise in companies in financial distress, the industry remains active (though we are keeping a watchful eye on signs of unease and reports of projects stalling). For the moment, there is demand for the right product and money looking to invest in real estate, as the industry displays an appetite to address its inherent productivity issues, and actively support teams find sustainable solutions, and an appetite to improve the industry’s long-running productivity issues.

Significant challenges of course remain: the survey from the Federation of Master Builders, together with further delays to shipping show that we are yet to see the end of material price pressures and supply disruptions, making it all the more important to develop a more granular understanding of supply chains, to help assess options in terms of sourcing and choosing materials, among other things.