Context behind the trackers

Economic Week In Review | Issue 377 | 2 May 2023

UK construction and property

  • Bounce back loans | A freedom of information request by Construction News has revealed that 46,323 companies have defaulted on repayments of their Covid loans. The combined total of defaults and arrears amounts to 25% of loans issued. Critics of the scheme suggest that it prolonged the life of unviable firms.
  • Contract terms | Build UK has issued a list of six types of clauses that it recommends are eradicated from contracts in order to give better visibility and allocation of risk. The suggestion is supported by the Construction Leadership Council. It includes fit-for-purpose design, unquantifiable risks, specified-peril-clause, blanket indemnity for breach of contract, and uncapped subcontractor liabilities. The full document can be found here.
  • HS2 spend | Data from HS2 shows that the North West has received only 4% of subcontractor spend. Greater London has received almost 23%.
  • Housebuilding rates | Persimmon has confirmed that its rate of building is 30% lower in the first quarter of this year because of a slump in demand and construction inflation outstripping growth in sales prices.
  • Lending to commercial property in the UK held up at the end of 2022 despite interest rate increases according to Bayes UK Commercial Real Estate Lending Report. Commentators added that many sought to refinance existing loans to negotiate the best deals as rates crept higher. The report also reveals that £7.3bn of loans were in some form of financial distress.
  • Headquarter size | Due to new hybrid ways of working, The John Lewis Partnership has announced plans to more than halve the size of its headquarters in its search for a new office.
  • Output | The Construction Products Association has downgraded its expectations for construction output growth. It now predicts that output will fall 6.4% this year, and see 1.1% growth next year. It had previously expected a fall of 4.7% this year. It expects falls in private new housing and repair and maintenance to be the main drivers. (For comparison, when this publication tracks construction output, it normally only references new work, not repair and maintenance). Before the mini-Budget in 2022, it forecast a growth rate of -0.4% in 2023 in all new work.
  • Build-to-rent | The British Property Federation and Savills have reported that the rate of growth in the sector has slowed, showing 9% growth in the first quarter of 2023, compared to the long-term average of 28%.

Materials and commodities

  • Asbestos rules cease to have any force if the Retained EU Law (Revocation and Reform) Bill 2022 strips away EU law at the end of 2023 and creates a “sunset date” by which it has to be repealed or assimilated. However, late on Friday it was suggested that the Government will abandon its complete removal of EU law by the end of 2023, with most transferred into UK law, and 800 removed.
  • Merchants sales volumes fell in the 12 months to February but rose between January and February, according to the latest data from the Builders’ Merchants Federation. Prices fell 4.6% in February.
  • State of Trade | The latest survey by the Construction Products Association reported a third quarter of falling sales for heavy-side producers (bricks, concrete, aggregate etc), whilst light-side materials saw an 11th consecutive quarter of growth. Both categories expect sales to increase over the next year, with activity focused on infrastructure, energy-efficient retrofits, and commercial refurbishment.

UK economy

  • UK borrowing | The government is expected to borrow £13bn less than forecast despite ongoing support for household energy bills. The difference was largely due to lower-than-anticipated public spending. However, borrowing is still at a historic high.
  • Recession fears are receding according to the Institute of Directors’ index which rose to -5 in April, from -13 in March, and -64 in November. Other commentators such as Lloyds Bank and PwC also suggested that business confidence increased.

Global economy

  • Commercial real estate deal-making in Europe has fallen to an 11-year low in the first quarter of the year, according to MSCI. Deals worth €36.5bn were made, 62% lower than last year.
  • Stamp Duty in Singapore has been doubled to 60% for foreign buyers in an effort to cool the housing market which has been powered by buyers from mainland China, who accounted for 25% of purchases of condos in 2022.
  • Population growth | India overtook China as the world’s most populous country, with the UN expecting India’s population to reach 1,425,775,850 by the end of April. China’s birth rate has fallen recently and its population shrunk last year for the first time since 1961.
  • Eurozone | The bloc narrowly avoided a recession, according to data from Eurostat. Growth stood at 0.01% in Q1 2023.
  • China’s manufacturing sector saw a surprise fall in April. Its PMI fell to 49.2 from 51.9 in March, raising concerns that it is struggling to sustain growth post-Covid.

Friday to Friday

Price / Index Week %
change		 Annual %
change
FTSE 100 7,870.57 -0.55 4.32
FTSE 250 19,425.14 0.81 -6.20
Nikkei 28,856.44 1.02 7.64
CSI 300 4,029.09 -0.09 0.32
S&P 500 4,169.48 0.87 0.91
Nasdaq 12,226.58 1.28 -0.88
CAC 40 7,491.50 3.87 20.46
Dax 15,922.38 0.26 12.94
$ per £ 1.2580 1.30 0.10
€ per £ 1.1394 0.67 -4.42
Gold £/oz 1,583.29 -0.64 4.95
Brent Oil $/barrel 79.54 -2.60 -27.25

Weekly Summary

Market indicators seem to be something of a see-saw at the moment, so it is encouraging to see several commentators reporting that business confidence is increasing. However, the number of indicators tracked by businesses over three years have expanded as various pressures were exerted on the economy. The challenge now is to put context to these indicators (for both time and relevance) and ensure that decisions are made for the correct reasons.

Author contact

Rachel Coleman
Rachel Coleman,
Associate Research Analyst

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