Where and when?

Economic Week In Review | Issue 382 | 5 June 2023

UK construction and property

  • ULEZ concerns | A vehicle scrappage scheme for businesses of fewer than 50 people has been extended. The Builders Merchants Federation chief recently warned that the additional charge will be a significant increase for small building companies which are already under pressure from price increases.
  • Labour rates | According to Hudson Contract, labour rates have increased by an average of 5% in the year to April 2023, despite a 4.4% fall in April. Average pay packets across the UK were £941. Average pay in London was £974 and wages grew 3.9% annually.
  • Building Safety Regulator | All high-rise residential buildings (at least 18 metres tall or have seven or more floors with at least two containing residential units) must be registered with the new Building Safety Regulator (BSR) under the Building Safety Act 2022. Currently, 750 applications have started. The deadline for completing the registration is 30th September 2023.
  • Design review | Michael Gove has called in two more schemes for review on design grounds. Recently the Secretary of State for Levelling Up, Housing and Communities called in a scheme for Berkeley Homes in Tunbridge Wells on the grounds that it was “generic”.
  • Skills college cancelled | The National College for Advanced Transport and Infrastructure (NCATI), which was launched by the Government in 2017 in order to meet the skills need to deliver major infrastructure projects will close next month after failing to become viable. Few students enrolled in the courses and it faced a funding shortfall.
  • Transport planning acceleration unit | The division tasked with improving planning for infrastructure projects, and dealing with “blockages and barriers” has been cancelled after cuts made in the Autumn Statement made near-term delivery of infrastructure projects less of a priority.
  • High-rise changes | The latest Tall Buildings Survey by New London Architecture reveals a shift in the use of tall buildings. Whilst residential towers have stalled, office schemes “could not be busier”.

Materials and commodities

  • Metal mining company BHP has found that it underpaid workers for 13 years, creating a US$280m bill (plus taxes) for the company. The company is already expecting a financially tougher year as a result of changes to Australian regulations.
  • Iron ore prices reached a two-week high on the prospect of more stimulus in China. Prices had previously weakened due to uncertainty over whether the US would increase its debt ceiling, and it remains much lower than its recent peak in March. In 2021 it reached a high of nearly $230/t and is currently $104/t (December 2019 prices were near $65/t).
  • Nickel | The metal had a very bumpy 2022 but is expected to be in surplus until at least 2027 according to analysts at Macquarie. Output from Indonesia is quickly ramping up
  • Builders’ Merchant sale | The Independent Builders Merchant Group (IBMG), the UK’s largest privately owned builders’ merchant is expected to be sold for between £500-£600m. Jewson was also recently sold to Stark, a Danish construction and building materials group which CVC Capital Partners, a private equity firm, owns.
  • Oil prices rose after Saudi Arabia pledged to cut supply by one million barrels a day.

UK economy

  • Housing stress | House prices have fallen at their fastest pace in almost 14 years, according to Nationwide’s tracker. Prices fell 3.4% in the year to May, whilst the number of mortgage approvals fell to 48,700 from 51,500 in March. In contract, Halifax’s index had a less negative sentiment, showing a 0.1% increase in April.
  • Goods trade | The EU has advised the UK to join a pan-Euro-Mediterranean trading pact in order to limit damage to the car industry when new rules of origin come into effect as part of the post-Brexit agreement. The UK wants to delay the implementation of the new rules until 2027.
  • Nuclear race | A nuclear developer from the US has joined the UK Government’s race to build small modular nuclear reactors. The Government is currently running a competition for providers and aims to settle on a design by autumn.

Global economy

  • US debt ceiling | The Bill to suspend the US debt ceiling passed through Congress, avoiding a default on its $31.4tn debt. The deal means the ceiling is suspended until 1st January 2025 and non-defence spending is capped.
  • US jobs growth | 339,000 jobs were added in May, beating forecasts and reducing the unemployment rate to 3.7%. Only 190,000 jobs were expected to be added.
  • US property debt | Lenders in the US are preparing to sell off property loans at a discount in order to reduce exposure to the market as concerns grow over the health of the sector
  • World food prices fell 2.6% in May according to the Food and Agriculture Organisation of the United Nations. The index reached its lowest level since April 2021. Food costs are currently a significant driver of global inflation.
  • Offices in Hong Kong are amongst the world’s most expensive but are also increasingly empty with rents and sale prices falling. Dealmaking by western banks has fallen and Chinese companies are taking less space due to economic struggles in China. A record 13 million sqft is currently empty, with a vacancy rate of almost 15% (three times higher than in 2019 and the current rate in Singapore of 4.6%). Unlike most cities, Hong Kong is not struggling with returning to the office with subway use surpassing 2019 levels,

Friday to Friday

Price / Index Week %
change		 Annual %
change
FTSE 100 7,607.28 -0.26 0.99
FTSE 250 19,149.31 1.89 -5.54
Nikkei 31,524.22 1.97 13.55
CSI 300 3,861.83 0.28 -5.57
S&P 500 4,282.37 1.83 4.23
Nasdaq 13,240.77 2.04 10.22
CAC 40 7,270.69 -0.66 12.11
Dax 16,051.23 0.42 11.00
$ per £ 1.2467 1.03 -0.23
€ per £ 1.1626 0.94 -0.32
Gold £/oz 1,564.33 -0.77 5.54
Brent Oil $/barrel 76.13 -1.07 -36.41

Weekly Summary

Confidence or willingness to invest in property seems to be waning around the world; whether the cause is hybrid working causing a reduction in space requirements, new regulations giving a moment for pause, or extended Covid-slumps limiting appetite, particularly amongst international investors.

Office values are falling in several key cities, which as future confidence returns could present an opportunity for investors to return to the market. The key questions are which city and when?

Author contact

Rachel Coleman
Rachel Coleman,
Associate Research Analyst

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