More or less?

Economic Week In Review | Issue 328 | 9 May 2022

Materials, commodities and currencies

  • Russian oil | Members of the G7 have committed to banning the import of oil from Russia, although the commitment is to “phase out” dependency “in a timely and orderly fashion”.
  • Timber | Imports have returned to pre-Covid levels following a slowdown in house building and repair. Imports reached record highs in 2021.
  • Sterling fell to a two-year low against the US dollar on concerns raised by the Bank of England of possible stagnation in the UK economy.

UK construction

  • PMI | The S&P Global / CIPS UK PMI for construction recorded another month of growth at 58.2, but concerns over higher costs and the future of the economy pushed optimism over future workloads to the lowest level since September 2020.
  • Output forecast | The Construction Products Association revised its previous forecasts for output down from 4.3% to 2.8%, warning that global issues are beginning to affect the UK market. However, growth is not spread evenly across different sectors. Infrastructure is expected to grow 8.8% this year, whilst housebuilding will expand by 1%.
  • Sentiment | A survey of small builders by Travis Perkins found that  48% of builders expect workload to increase over the next two months, with 45% expecting it to fall. Domestic repairs and maintenance are expected to fuel workload, as there is increasing interest from domestic retrofit energy efficiency projects. Energy costs are an increasing concern with many changing they ways they work – switching to more efficient cars and holding more virtual meetings with clients.
  • Employment costs | Barratt has brought forward its annual pay increases to help its employees as the cost of living increases. It has also extended benefits across all of its employees.
  • Slave labour | A report by the independent anti-slavery commissioner has found that more than 30 construction companies have ties to an organised crime group that placed more than 500 people on major projects in London and the South East. The report highlights “worrying systemic weaknesses in vetting and security”.
  • Offsite | The Construction Innovation Hub has detailed seven “rules” explaining how building projects could make better use of offsite manufacturing. The Product Platform Rulebook is an open-access guide for clients, contractors, manufacturers, consultants, and suppliers.

UK economy

  • Inflation | The Bank of England moved the base rate to 1%, its fourth consecutive increase since December. It also warned that inflation could reach 10% this year, driving job losses and stagnation. HSBC’s global head of fixed-income research was quoted as saying “the second half of the year is going to be much weaker than the first half”.
  • Emergency Budget | The head of the British Chambers of Commerce (BCC) has urged the Chancellor to produce an emergency Budget to support companies as they struggle with increasing energy, labour, and material costs. The BCC has warned that some companies have reported a more than doubling of energy costs and that profit margins have been wiped out.
  • Brexit | The Prime Minister will announce plans to remove large swathes of EU rules from domestic law. Some environmental protections which obstruct infrastructure projects will be removed, and changes to Solvency II will allow for more investment into infrastructure projects from insurance companies. The plans will be included in the Queen’s Speech tomorrow. In the previous parliamentary session, one-third of the bills promised in the Queen’s Speech did not pass into law within the promised timescale.

Global economy

  • US | The American economy shrank by 1.4% on an annualised rate in the first three months of 2022, the first contraction since April 2020.
  • China | Exports growth in China fell to a two-year low as Covid restrictions in China saw factories close and disrupted supply chains.
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 7,387.94 -2.08 3.62
FTSE 250 19,819.67 -4.29 -12.98
Nikkei 27,003.56 0.73 -8.02
CSI 300 3,908.82 -2.67 -21.76
S&P 500 4,123.34 -0.21 -2.58
Nasdaq 12,144.66 -1.54 -11.69
CAC 40 6,258.36 -4.22 -1.99
Dax 13,674.29 -3.00 -11.20
$ per £ 1.2347 -1.75 -11.81
€ per £ 1.1678 -2.03 1.46
Gold £/oz 1,526.11 1.16 16.59
Brent Oil $/barrel 113.12 3.46 65.67

Weekly Summary

The market is a mix of optimism with significant and growing concerns. Whilst the headline of the CPA forecast is the downward revision to growth, we cannot overlook the point that it still forecasts growth, albeit with continued differences in the fortunes of each sector which could continue to reshape appetite throughout the contracting market.

The increasing cost of living crisis is encouraging employers to bring future pay rises forwards, and to look in more detail at their employment package, which will undoubtedly impact the already tight labour market in construction. This in turn, should encourage deeper commitment to modern methods of construction and other ways to increase productivity.

Author contact

Rachel Coleman
Rachel Coleman,
Associate Research Analyst

Related reviews

Website &AGENCY