Market normality down the line?

Economic Week In Review | Issue 394 | 29 August 2023

UK construction and property

  • Infrastructure | Anglian Water is building a 205 mile £500m pipe from Humberside to south Essex and is planning two reservoirs. However, customers have been warned that new infrastructure will cause bills to rise.
  • Electricity breaches | The Building Safety Group has reported a 12% increase in the number of electricity breaches between 2021 and 2022. The main causes of infringement were damaged or trailing cables, as well as the temporary position of impermanent supplies.
  • Power link | Plans for a subsea power connection between Scotland and England has achieved full planning consent meaning that work can begin on the five-year project. Marine cable installation is expected to begin in 2026, with the scheme completing in 2029. It will carry enough power for 2 million homes.
  • Building safety | The government published a raft of secondary legislation giving more details of the Building Safety Act 2022. The changes are due to take effect from 1st October 2023 and the Construction Leadership Council has encouraged the industry to understand the changes and take action now. HSE has produced a summary document of the new process for Higher Risk Buildings which can be found here.
  • Self-employed labour | The number of workers paid under the Construction Industry Scheme which gives a way for self-employed workers to pay tax as they earn, and so could be seen as a proxy for self-employed workers, increased by 15% last year. The advantage for employers is that workers paid through CIS are not required to pay employers’ national insurance contributions of 13.8%.
  • Wage growth | The Hays/BCIS Site Wage Cost Indices show that wages for “unskilled” labourers and plant operators are increasing faster than for other roles, growing 8% between April and June (with some of the increase due to the 9.7% increase in the National Living Wage). Overall wages increased 4.7% in the year and 4.2% in the quarter. It also reported that job placements of skilled labour was down, but attributed this to a shortage of workers, not a shortage of work.
  • Housing shortage | Data from the Office for National Statistics reveals that one in 10 Londoners are living in overcrowded conditions. At a national level, the figure is lower at 4%. The worst affected boroughs are Newham and Barking and Dagenham, where more than a fifth of households are affected.
  • Second staircase impact | Property developer and builder London Square has proposed adding three additional storeys on two consented residential towers in response to the new rules for a second staircase.
  • Planning rules | Michael Gove is to announce changes to the rules on waterway pollution and “nutrient neutrality” for housing developments. It is rumoured that the changes will make neutrality a local decision and that property developers could instead pay into a “mitigation fund”.
  • Workload expectations | The latest Future Trends Survey by the RIBA found that architects are increasingly downbeat over future workloads, with the index dropping from +1 in June to -10. No regions had a positive outlook.
  • Land banking | The Competition & Markets Authority launched a study into the house building market earlier this year and has now set out the five areas on which it will focus: land banks, planning rules, competition between builders, barriers to entry and estate management charges. It is concerned that the market is not working as it should which in turn is limiting the supply of housing. It intends to publish its findings later this autumn.
  • Investment in repairs | Think tank Demos and the Centre for Ageing Better has suggested that spending £625m a year on improving safety, heating and accessibility of homes could remove potentially fatal hazards in 520,000 homes a year and could deliver £10bn in economic benefits annually.

Materials and commodities

  • Material costs | The latest Builders Merchants Building Index from the Builders Merchants Federation reported that prices fell 3.3% in the second quarter of 2023 when compared to the previous quarter. Total sales in Q2 were 7.6% higher with the increase due to stronger volumes rather than price inflation for the first time in a year. Compared to the same period last year Q2 sales were 4.1% lower and price growth 10.9% higher. The CEO of the Builders Merchants Federation commented “Hopefully, this is the first step towards market normality down the line.”

UK economy

  • Borrowing | Net borrowing by the Government was £4.3bn last month, lower than the £5bn that economists had forecast. The figure encouraged speculation that the Chancellor could cut taxes ahead of the General Election next year.
  • High pay | The median pay of a FTSE 100 boss has increased by nearly 16% in the last year and the typical earnings are 118 times higher than the average UK pay.
  • Energy price cap | Ofgem has lowered the energy price cap marginally to £1,923 from October.
  • Recession risks | The S&P Global / CIPS UK Purchasing Managers’ Index (PMI) reported that higher interest rates and weaker spending led to a sharp drop in the demand for goods and services in August. The index recorded a level of 47.9, its lowest in 2.5 years. The chief business economist at S&P Global Market Intelligence said that the survey showed that fighting high levels of inflation has heightened recession risks.
  • Trade | Talks between the UK and India are entering their “final but trickier” stages according to government sources. It is hoped that a deal could be “months” away, but there are a few hurdles to overcome. It was previously hoped that the deal could be announced in the autumn of 2022.

Global economy

  • Germany | Business confidence has fallen to a 10-month low. The Ifo Institute reported a fall of 1.7 points, whilst economists polled by Reuters had anticipated a smaller drop. GDP also stagnated, with weaker exports offsetting a positive contribution from investment, inventories, and public spending.
  • BRICS | The five-country alliance (Brazil, Russia, India, China, and South Africa) has agreed to expand its group to include Argentina, Ethiopia, Iran, Saudi Arabia, Egypt, and United Arab Emirates in an effort to provide balance to the dominance of Western alliances in global affairs. The six new countries will become formal members on 1st January 2024. The expansion brings together some of the world’s largest energy producers and largest consumers.


  • Fossil fuels | According to the International Monetary Fund, fossil fuels benefitted from record subsidies of £10.3m a minute in 2022. Its study found that total subsidies for oil, gas, and coal were £5.5tn, the equivalent to 7% of global GDP. Subsidies increased in 2022 to respond to the energy crisis caused by the war in Ukraine.

Friday to Friday

Price / Index Week %
Annual %
FTSE 100 7,338.58 1.05 -1.19
FTSE 250 18,131.02 0.19 -5.42
Nikkei 31,624.28 0.55 10.41
CSI 300 3,709.15 -1.98 -9.70
S&P 500 4,405.71 0.82 8.58
Nasdaq 13,590.65 2.26 11.93
CAC 40 7,229.60 0.91 15.23
Dax 15,631.82 0.37 20.51
$ per £ 1.2571 -1.32 6.67
€ per £ 1.1654 -0.52 -1.02
Gold £/oz 1,522.35 2.61 2.83
Brent Oil $/barrel 84.48 -0.38 -14.68

Weekly Summary

The quantity of news in the construction and property section shows how much change is currently in the market, and perhaps the most critical changes sit on the political side, rather than the cost of construction. Uncertainty caused by changes to planning or reviews has sometimes slowed output more than changes to confidence.

The falling cost of materials recorded by the Builders Merchants Building Index will be encouraging, especially as sales volumes remain high. The high price of materials, and the rate of change, have been a barrier to some over the last few months and this easing will no doubt be welcomed.

Author contact

Rachel Coleman
Rachel Coleman,
Associate Research Analyst