The energy issue

Economic Week In Review | Issue 398 | 25 September 2023

UK construction and property

  • MEES | In a speech on the UK’s updated Net Zero pathway, the Prime Minister removed requirements for residential landlords to meet minimum energy efficiency standards (MEES), The speech made no mention of the specific requirements for commercial landlords.
  • Payment disputes | The Construction Leadership Council warned this week that commercial behaviour is likely to tighten as a result of the availability and cost of finance. This would put pressure on lower tiers of the industry and SMEs, affecting cash flow. Research by Construction Enquirer has found that collaboration over differences in valuations has gone “back to the bad old days”.
  • Building Safety | Almost 2,000 high-rise buildings are yet to register their details with the new Building Safety Regulator ahead of the 1st October deadline. Overall, 12,500 buildings need to be registered. Not registering buildings is a criminal offense.
  • Insolvencies | The number of construction insolvencies fell from 386 in June to 275 in July.
  • European first | The first battery electric loader to be supplied in Europe has been bought by Aggregate Industries. It delivers a 10–11-hour shift on a full charge.
  • Infrastructure | Following last week’s confirmation of a £1.2bn deal to save Tata Steel’s Port Talbot plant and to facilitate its decarbonisation plan, the Welsh Secretary has said that without support the steel manufacturer would have left the UK.

Materials and commodities

  • Prestressed concrete | The Mineral Products Association has updated its guide to the safe production of prestressed concrete after the first edition was produced in 2014. The update considers reviews of processes, systems, risk assessment, and safety systems for maintenance and training. HSE has endorsed the guide.
  • Material prices | The latest update from the Construction Leadership Council’s Product Availability Group says that the supply of most materials has returned to pre-Covid levels, and price inflation has stabilised at around 1% to 2%. It blames a stagnation in demand causing discounts in the market.
  • GGBS | A report by the Institution of Structural Engineers has labelled ground granulated blast furnace slag (GGBS) as “a limited and constrained global resource” and that it is time to start looking for alternatives.
  • Oil prices have reached their highest in ten months, raising concerns for the future of fuel prices.

UK economy

  • Finances | The latest data from the Insolvency Service shows an increase in the number of winding-up petitions across England and Wales. There were 225 compulsory liquidations in August 2023, a 45% increase in the number seen in August 2023. This adds further concern to the insolvency data in the construction sector.
  • Future of Work | According to the ONS, there are a record number of over-50s in part-time work in the UK. It continues a recent trend of workers gradually slowing down at work, rather than working full-time until retirement.
  • The Great British Slowdown | The Resolution Foundation thinktank has issued a new report showing how the slowdown in economic slowdown over the last 15 years has left the country poorer. It summarises that the average household has lost £1,400 per year. It also argues that the UK lacks “economic dynamism” in which successful firms grow and struggling ones shrink.
  • Economic outlook | KPMG has forecast growth to slow to 0.4% this year and to 0.3% next year, falling from 4.1% in 2022. It expects inflation to slow from 9.1% last year to 7.5% in 2023 and 2.7% in 2024 as bottlenecks ease.
  • Cost of borrowing | Responding to the unexpected fall in inflation, The Bank of England maintained the current base rate at 5.25% rather than increasing it.
  • Banking reforms | The Bank of England will delay the implementation of some of the Basel III reforms. A new deadline of July 2025 is expected.
  • Inflation | Despite the unexpected fall in the level of consumer price inflation, the Organisation for Economic Co-operation and Development (OECD) expects the UK to see the highest level of inflation amongst G7 countries this year.

Global economy

  • EU/China | A senior official for Brussels has warned that relations between the EU and China are “at a crossroads” and could “drift apart” due to China’s support for Russia and its “discriminatory” trade deals.
  • Bank rates | Central banks in the US, Japan, and Switzerland all decided to keep rates on hold, as inflation rates have fallen in most Western countries. Capital Economics suggests that for the first time since 2020, the majority of the world’s 30 largest central banks are expected to lower rates in the next quarter, rather than increase them.

Environment

  • Whole life | The RICS has launched the second edition of its Whole-Life Carbon Assessment tool. The methodology for the tool will be incorporated into the Net Zero Carbon Building Standard which is currently being developed.
  • Green action | The UK is one of 32 countries facing European court action over climate policies. A group of Portuguese young people are claiming that nations’ policies to tackle global heating are inadequate and in breach of human rights obligations.
  • Net Zero Square Mile | The City of London Corporation has approved plans to deliver a Net Zero Square Mile by 2040. Commercial buildings are responsible for around 65% of the carbon footprint of the Square Mile. The Local Area Energy Plan (LAEP) sees seven priority intervention areas:
    • Maximising the energy-efficiency of buildings;
    • Maximising rooftop PV;
    • Decarbonising transport;
    • Decarbonising heat;
    • Implementing waste capture and exchange;
    • Reinforcing the electricity distribution network; and
    • Rolling out energy system flexibility.

Friday to Friday

Price / Index Week %
change
Annual %
change
FTSE 100 7,683.91 -0.36 9.48
FTSE 250 18,606.84 -0.97 3.53
Nikkei 32,402.41 -3.37 19.33
CSI 300 3,738.93 0.81 -3.04
S&P 500 4,320.06 -2.93 16.97
Nasdaq 13,211.81 -3.62 21.57
CAC 40 7,184.82 -2.63 24.23
Dax 15,557.29 -2.12 26.64
$ per £ 1.2256 -1.08 12.22
€ per £ 1.1497 -0.96 2.33
Gold £/oz 1,572.86 1.23 3.76
Brent Oil $/barrel 93.27 -0.70 8.26

Weekly Summary

The rollback of energy efficiency and carbon policies is no doubt frustrating for owners of, and investors in property who have made long-term plans to align with the UK’s commitments. Understanding how much of current construction and repair and maintenance work is related to these net zero commitments is vital to understanding the impact that the changes will have. However, there is a growing body of evidence to suggest that tenants of commercial buildings value more sustainable buildings.

Author contact

Rachel Coleman
Rachel Coleman,
Associate Research Analyst