Economic Week In Review | Issue 345 | 5 September 2022

UK Leadership Campaign

Liz Truss has been announced as the new leader of the Conservative party and therefore, the UK’s new Prime Minister. As well as addressing the major issues such as the cost of living crisis, and the high cost of manufacturing, we hope that the new Prime Minister will continue to unlock the UK’s public works programme, and support the industry in tackling the growing skills crisis. Helping both businesses and households navigate the impact of high energy costs, and unlocking necessary decisions on HS2 and NHS schemes should be high on the agenda for the new Prime Minister.

Materials and currencies

• Fuel | Two of the world’s largest data centres are stockpiling generator fuel to protect against potential blackouts over winter.
• Gas | Having closed the pipeline earlier this year for maintenance, Russia’s Gazprom will not resume gas flows through Nord Stream One citing economic sanctions on Russian gas which have hindered Gazprom’s maintenance of the pipeline.
• Sterling has recorded its steepest monthly decline against the US dollar since the Brexit referendum, falling 4.5% in August, and 3% against the Euro. Analysts have suggested that the fall underlines concerns that if Liz Truss is named as Prime Minister, the Government’s policies could diverge from the aims of the Bank of England.
• Euro fell below $0.99 for the first time since 2002 on the news that Russia will not restart gas flows through Nord Stream One which increases the recessionary risks in the area.
• Construction material producers | The Mineral Products Association has sought Government support, suggesting four steps that the Treasury could take to reduce the impact of increasing energy costs: allow temporary deferral of VAT payments; reinstate or replace the red diesel rebate; extend the freeze on Aggregates Levy indexation beyond April 2023; take measures to tackle costs for energy-intensive industries such as cement and lime.
• Port strikes | The Construction Products Association has warned that continued strikes at UK ports could create scarcity and price pressures. In addition to the recent strike at Felixstowe, workers at the Port of Liverpool voted to strike.
• Bitumen is being rationed by local highway authorities. Around 60% of the material in the European market was previously sourced from Russia.
• Steel | ArcelorMittal has closed two blast furnaces in Europe over high energy prices.

UK construction and property

• Sizewell C | Whilst the decision on £700 million of public funding will be finalised by the new Prime Minister, Boris Johnson has said that he is “absolutely confident” that the funding will be confirmed in the next few weeks. The overall cost of the scheme is between £20bn and £30bn and construction is expected to start before 2024.
• Training | The first cohort of students have completed their T-levels, with 93.7% achieving a “pass” or above and 94.2% completed a placement which is at least 315 hours of on-the-job training.
• Construction starts | Glenigan has reported that construction starts have fallen in the three months to July. All work commencing on site was 31% lower than a year ago, and 18% lower than the previous quarter.
• PII fire safety | A new model insurance clause has been written by the International Underwriting Association and the Government for use in work completed under the Building Safety Fund. It aims to speed up the removal of unsafe cladding and encourage greater safety and confidence in risk management, according to Levelling up Secretary, Greg Clark.
• Infrastructure funding| TfL has secured £3.6bn of funding from the Government to ensure the delivery of key capital renewals and investments over the next 18 months. It will ensure the purchase of new tube trains, increased bus priority lanes and upgrades across the tube network.
• Road repair | The cost of fixing portholes and laying new roads has raised more than 20%, while the cost of repairing and running street lighting has increased 38%. The analysis by the Local Government Association and the Association for Directors of Environment, Economy, Planning, and Transport reports that unless dedicated funding is released by central Government, new work will be delayed. Latest estimates suggest that £12bn of funding is needed to bring local roads up to standard and could take ten years to complete.

UK economy

• A matter of indexing | Trustees of pension schemes at BT, Ford, and Marks and Spencer have won a legal challenge arguing that the UK Statistics Authority’s plans to move to the new CPHI measure would leave pensioners worse off. Currently, 10.5 million people in the UK have private sector final salary pensions linked to RPI.
• Labour | Data from ONS shows 42% of Ukrainians who entered the UK under the Homes for Ukraine and family schemes are in work, up from 9% in April.
• Fuel poverty will affect 12 million homes unless the next Prime Minister takes immediate action. Last year 10.7 million people in 4.6 million homes were affected.
• Christmas hiring has driven job vacancies in the UK to a new high. The Recruitment and Employment Confederation said that 2.08 million new jobs were advertised in the last week of August.

Global economy

• Labour | Australia has raised its permanent migration cap by 35,000 to 195,000 in order to ease labour shortages. The new places will be focused on nursing, engineering, and technology roles as well as the rural workforce.
• Lockdowns in China | Megacities in China are extending Covid lockdowns ahead of the Mid Autumn Festival. Over 30 cities are in partial or full lockdown and citizens are being urged to stay at home for the holiday.