Economic Week In Review | Issue 348 | 26 September 2022

Materials, commodities and currencies

• Energy Price Cap | The Government outlined support for businesses which comes into effect in October and will last until April 2023.
• Aggregate | A report from the Mineral Products Association has warned that four billion tonnes of crushed rock, sand and gravel is needed over the next 15 years to meet demand. The MPA suggests that future supply needs to be planned and managed and that imports or recycled materials cannot meet demand.
• Oil prices fell to below $85/barrel for the first time since January as concerns increase over a global slowdown. The dollar’s strength has made oil more expensive for international buyers.
• Sterling | The announcement of the UK Growth Plan and its associated borrowing levels unsettled the market, sending the pound to its lowest level against the dollar since 1971, touching $1.035 and reaching a low of €1.0787 against the Euro.

UK construction and property

• Output | Construction output according to Glenigan showed that office starts fell by 51% in the three months to the end of August, leaving it 48% lower than the same period last year.
• Carbon | The RICS Sustainability Report 2022 revealed that construction professionals are beginning to embrace digital tools and technologies to complete sustainability related analysis but are unlikely to use these tools to reduce embodied carbon or measure the impact on biodiversity.
• Skills | The Engineering Construction Industry Training Board has launched a new strategy with £87m to support training and tackle the skills shortage over the next three years. The Board recognised that an increase in infrastructure projects intensifies the war for talent.

UK economy

• IR35 reforms were scrapped in the UK Growth Plan but the changes will not come into effect until April 2023.
• Business | A survey by Bibby Financial Services found that 82% of businesses consider the current economic landscape is worse than it was pre-pandemic and only 11% were prepared to absorb any more cost increases.
• Tax-free shopping for tourists will be re-introduced after it was removed at the end of 2020, in line with the new Brexit trade deal. The new scheme is expected to cost nearly £1.3bn.
• Interest rates | Traders are expecting UK interest rates to increase to 5.75%, and for the Bank of England to make an emergency move to try and counter the sterling’s fall.

Global economy

• EU energy plan | The European Commission will publish its plan on 28th September which will detail how the bloc plans to ease the crisis. It is expected to require members to reduce peak hour usage by 5% which will represent at least 10% of all consumption.

UK Growth Plan

The new Chancellor unveiled his UK Growth Plan, a mini-Budget in all but name without any new economic forecasts. It announced the largest package of tax cuts in 50 years. The Chancellor vowed to make further cuts.
Particularly of note for the construction industry were:
• Maintenance of the Super Deduction on Capital Allowances tax benefit
• Promise to “unlock” 138 infrastructure projects
• Changes to IR35 rules
• Stamp Duty Land Tax threshold increases.