Up or down?

Economic Week In Review | Issue 381 | 30 May 2023

UK construction and property

  • Planning complaints | RIBA’s Future Trends survey reports on a significant number of projects being cancelled because of delays in planning. In the three months to April, 22% of practices saw cancellations because of the protracted process, up from 7% in the three months prior. 47% of practices also reported project delays of six months or more.
  • Solar panels | The Government’s new Solar Taskforce is considering plans to install solar panels on the roofs of commercial buildings, schools, warehouses, and car parks in an effort to meet its target of increasing solar capacity by almost fivefold to 70GW by 2035. In Francenew legislation means that all new and existing car parks of more than 80 spaces need to be covered by solar panels.
  • HS2 deliveries | An Amazon locker-style delivery system is in place at the Hertfordshire site. A 40ft-high modular shipping container will act as a vending machine, allowing 24/7 access to products which are paid for after collection. It will contain items such as bolts, washers, nails and sealants and it is expected to reduce carbon emissions from site deliveries by 70%.
  • Bricklaying academy | Keepmoat has launched a bricklaying teaching programme at HMP Moorland to help address skills shortages and the challenge of an ageing workforce.
  • Industrial | Jaguar Land Rover announced plans to build a gigafactory in Somerset for car batteries. The £1bn plans could receive up to £500m of public support.
  • Refurbishments are still driving the London office market as the Deloitte Crane Survey reported a record volume of refurbishment starts in the last six months.
  • Hospitals relaunch | The Government has relaunched its promise to spend £20bn building 40 new hospitals by 2030 using standardised materials and a modular approach to build Hospital 2.0 projects 25% faster.
  • Safety concerns | The Association for Project Safety warned of a dearth of candidates to fill job vacancies in construction design risk management and an ageing workforce means that vacancies are often being filled by people with less experience but at an increased cost.

Materials and commodities

  • Energy prices in the UK are unlikely to fall to pre-crisis levels for two years, according to Ofgem. Wholesale prices have fallen, but are 60% higher than at the end of 2021. The cap is also set to fall from £3,280 in April (£2,500 with Government support for households), to £2,074 in July.
  • Gas demand in the EU is expected to fall by more than the amount it imports from Russia thanks to measures (supported in law) to cut consumption, as well as a relatively mild winter. However, Germany’s plan to prohibit the installation of new gas boilers has been met with criticism.

UK economy

  • Retail sales by volume rose by more than expected in April after poor weather in March affected spending, and government benefits were increased in line with inflation. However, volumes were 3% lower than in April 2022, whilst total value rose 4.7%.
  • Inflation fell by less than expected, to 8.7%. The UK’s inflation rate is joint highest in the G7, alongside Italy. Core inflation (excluding food and fuel) rose 6.8%, a 31-year high. The British Retail Consortium reported that food inflation fell from 15.7% to 15.4% in May, suggesting that inflation may have peaked. The Government is discussing plans for supermarkets to introduce a price cap on basic food items.
  • Interest rates | The Chancellor announced support for increasing the base rate even if it pushes the UK into recession, stating the “only path to sustainable growth” is to bring down the high prices causing the cost of living crisis.
  • Immigration | Net figures showed that immigration reached an all-time high of 606,000 in 2022 (although some of this has been attributed to a backlog of asylum claims, necessary healthcare immigration, the relocation of people from Ukraine, and students with families).
  • Growth forecasts | The IMF has significantly upgraded its forecast for GDP growth in the UK and now expects 0.4% growth in 2023 (after forecasting -0.3% last month). encouraged by falling energy prices, fewer Brexit concerns and improved financial stability.

Global economy

  • Germany entered recession as Q1 output dropped by 0.3%, following a 0.5% fall at the end of 2022. Households are spending less and government spending has been reduced. Construction has been a bright spot, though, encouraged by unseasonably warm weather.
  • US debt ceiling | US President Joe Biden is “optimistic” that a deal to suspend the debt ceiling will pass through Congress. Unless suspended, the US may default on its debt by 5th June. The plans will suspend the debt ceiling rather than raise it and will cap non-defence spending until 2024.
  • Turkey | Recep Tayyip Erdogan secured another five years in power after run-off second round of voting. The news pushed the Turkish Lira to a record low against the US Dollar.

Friday to Friday

Price / Index Week %
change		 Annual %
change
FTSE 100 7,627.20 -1.67 0.55
FTSE 250 18,794.09 -2.57 -7.75
Nikkei 30,916.31 0.35 15.44
CSI 300 3,850.95 -2.37 -3.76
S&P 500 4,205.45 0.32 1.14
Nasdaq 12,975.69 2.51 6.00
CAC 40 7,319.18 -2.31 12.33
Dax 15,983.97 -1.79 10.52
$ per £ 1.2339 -0.98 -2.15
€ per £ 1.1518 0.00 -2.21
Gold £/oz 1,576.39 -0.81 7.34
Brent Oil $/barrel 76.95 1.81 -35.57

Weekly Summary

The IMF’s latest revision to its forecasts for growth in the UK shows how unpredictable the economic context is. Since October 2022, its forecast for 2023 has moved from +0.3% to -0.6% and back up to +0.4%. Systemic issues such as planning delays and the re-announcement of schemes have all affected confidence and therefore predictability of investment.

Author contact

Rachel Coleman
Rachel Coleman,
Associate Research Analyst

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