The other skills crisis

Economic Week In Review | Issue 392 | 14 August 2023

UK construction and property

  • EPC targets | The British Property Federation (BPF) has urged the government to clarify EPC targets for commercial buildings. It found that the lack of regulatory certainty was one of the key barriers to reaching a net-zero property sector. The BPF argued that the delay in publishing a response to a 2021 consultation has made the target of EPC C by 2027 “unrealistic”.
  • Mortgage rates | Four of the UK’s largest lenders have reduced mortgage rates following lower rates of general inflation. The move means that a five-year fixed deal, which is currently marketed at 6.10% will be 5.39%.
  • Skills | The City of London Corporation has written a report which recommends reforms to the Apprenticeship Levy and s106 policies to match the demand for skilled workers. It warns that addressing skills gaps and workforce shortages are crucial to central London’s transition to a more sustainable economy. The full report is available here.
  • Contract awards | Barbour ABI’s latest analysis shows that the value of contracts awarded reached a year-high, with £7.6bn awarded in July. The industrial work increased 184% in the month, and the sector also saw its highest level of planning approvals in over a year. Residential awards remained low, 15% lower than in 2022.
  • Buy-to-let | Analysis of capital gains tax receipts by Savills suggests that interest rate hikes and tougher laws on landlords have encouraged landlords to dispose of properties. There were 151,000 home disposals in 2022/23 financial year, the second highest on record after 2021/22.
  • Construction output and inflation | The latest data from the ONS shows that total output has increased by 1.6% in the last month, with increases in new work (2%) and repair and maintenance (1.1%). Six of the nine sectors showed growth, with infrastructure new work and non-housing repair and maintenance being the main contributors (4.7% and 3.4% respectively). The ONS also reported that the average rate of construction output price growth was 4.6% between June 2022 and June 2023, showing a slowing from the record level set in May 2022 of 10.4%.

Materials

  • Oil | The International Energy Agency said that global oil demand has reached record levels and may increase further in August as efforts to reduce reliance and target carbon emissions are yet to have a significant impact.
  • Iron ore | China’s iron ore imports have increased by 6.9% in the first seven months of 2023. Its imports of low-grade iron ores have also increased as steel makers face low margins

UK economy

  • GPD grew by 0.2% in Q2 2023, helped by improving weather and a bounce-back from May’s bank holidays in June. Quarterly growth has been weak for some time (between +0.2% and -0.1% since Q2 2022.
  • Spending power is expected to increase in London, Wales, and Northern Ireland but fall in other regions, according to the National Institute for Economic and Social Research (NIESR). The largest falls will be seen in the East of England and the South East Spending power is not expected to surpass 2019 levels before late next year. It warned that Brexit, Covid, and the war in Ukraine will cause five years of “lost” growth in the UK.
  • Pawnbroking has reached “record levels” according to H&T Group, the UK’s largest operator. Its pledge book has risen by 35% in the last year. It blamed a lack of alternatives for small-sum credit
  • Pay | The Chartered Institute of Personnel and Development found that businesses expect to make 5% pay rises over the coming year – the highest level since 2012. The survey of HR personnel found that the labour market remains tight leading 40% of employers to make a counter-offer to try and retain employees.

Global economy

  • Deflation in China | The Consumer Price Index in China fell 0.3% last month when compared to a year earlier. Combined with weak import and export data, high youth unemployment, and high levels of local government debt, it has caused many to question the health of China’s post-pandemic recovery.
  • French inflation reached 5.0% in July, down from 5.3% in June. Lower energy, food and manufacturing prices were the key drivers.

Environment

  • Disaster averted | A container ship off the coast of Yemen has finally had all of its oil transferred to a replacement tanker. The floating storage vessel contained as much oil as was spiled in the Exxon Valdez disaster and has been poorly maintained throughout the war in Yemen. The UN led the initiative with a wealth of international donors and is thought to have averted $20bn worth of damage.

Friday to Friday

Price / Index Week %
change		 Annual %
change
FTSE 100 7,524.16 -0.53 0.31
FTSE 250 18,799.70 -0.71 -7.71
Nikkei 32,473.65 0.87 13.76
CSI 300 3,884.25 -3.39 -7.32
S&P 500 4,464.05 -0.31 4.30
Nasdaq 13,644.85 -1.90 4.58
CAC 40 7,340.19 0.34 12.00
Dax 15,832.17 -0.75 14.76
$ per £ 1.2693 -0.64 4.60
€ per £ 1.1585 0.08 -2.06
Gold £/oz 1,507.62 -1.07 1.52
Brent Oil $/barrel 86.81 0.66 -11.55

Weekly Summary

The City of London Corporation’s admission that the industry needs to focus on “green” skills is important and should be a focus of the construction sector as it seeks to reduce its carbon burden, especially amongst existing stock.

GDP and construction output news were positive this week, but we remain mindful of the decline in new orders, especially when viewed alongside continuing price pressures.

Author contact

Rachel Coleman
Rachel Coleman,
Associate Research Analyst

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