Plans and targets

Economic Week In Review | Issue 399 | 2 October 2023

UK construction and property

  • Major issues | The Construction Industry Training Board has criticised the Government’s lack of decision-making on major issues such as the UKCA mark (which was removed for construction machinery, but not products), net zero pathways, and HS2.
  • Work expectations | The RIBA’s Future Trends survey has found a growing gap in confidence between smaller and larger firms, with larger practices generally more optimistic about workload and workforce growth. The stalling housing market is weighing on smaller companies. Overall, 18% of practices expect workloads to increase over the next three months, and 29% expect them to fall.
  • Brickwork | The Association of Brickwork Contractors has launched a new qualification for brickwork technicians. Currently, bricklayers operate under a labourer’s card, but contractors felt that the complexity and importance of their role (particularly for fire barriers and masonry support systems) necessitates a career path and professional qualification.
  • Immigration | A specialist employment lawyer is reported (by The Construction Index) to have criticised the expansion of the Shortage Occupation List to include roofers, bricklayers, and carpenters. Angela Barnes at After-Athena commented that increases in visa fees and a “myriad” of other hurdles and fees discourage UK businesses from recruiting from overseas.
  • Pay | Building engineering services workers have agreed to a 7% pay rise as part of a two-year deal which will see a further increase of 3% in October 2024.
  • Water pollution | Severn Trent plans to raise £1 billion through an issue of new shares to support plans for new infrastructure to reduce leaks and pollution. The group plans to spend £12.9bn across the next five years and create 7,000 jobs. The main water and sewerage companies will submit their spending plans to Ofwat for 2025-2030 today.
  • HS2 | Speculation increased around the future of some phases of HS2 as senior Conservative members refused to comment on possible cuts. Recent Prime Ministers Boris Johnson and Theresa May publicly warned against cancelling the northern leg of the line.
  • Housebuilding | Work started on 76,600 new homes in Q2 2023, a 34% increase when compared to the same period last year, and the highest quarterly total since records began in 1978. The rally is thought to be caused by pressure to start before new carbon emission rules come into force. Capital Economics expects new starts to drop to 15,000 in Q3.

Materials and commodities

  • Materials | The latest Builders Merchant Building index shows that sales were 0.4% lower by value in July 2023 than a year earlier, despite prices being 8.1% higher. Sales volumes were 7.9% lower.
  • Timber imports have become less volatile, according to Timber Development UK. After reaching record highs post-pandemic, imports have fallen back to 2019 levels, and figures are much less volatile. It reported that “barring another major market shock, we are unlikely to see these dramatic peaks and troughs return anytime soon.”
  • US dollar | The dollar is on track for its best quarter in a year against a basket of currencies. Its recent improvements have been supported by increasing US consumer spending and moderating inflation in the US.

UK economy

  • Workforce | The Chartered Institute of Personnel and Development (CIPD) has found that staff have taken an average of 7.8 sick days in the last year, up from an average of 5.8 before the pandemic. The data comes from analysis of over 900 organisations, managing 6.5 million employees
  • Consumer confidence | Having fallen in July after six months of increases, GfK’s Consumer Confidence Index increased in August to -25.
  • Living wage | The Chancellor, Jeremy Hunt, announced that the national living wage will rise to at least £11/hour.
  • Oil prices neared $100/barrel, driven by supply cuts and an increase in demand.

Global economy

  • China | The World Bank has lowered its forecast for China’s growth in 2024, warning that east Asia’s developing economies will grow at their lowest rates in five decades due to protectionism in the US and debt levels. In April, the World Bank expected China to grow at a rate of 4.8%, but this has been lowered to 4.4%.
  • US shutdown | US Congress made a last-minute deal which avoided a federal shutdown. The bill ensured funding until 17th November.
  • European inflation | The Consumer Price Index in Germany fell to a 2-year low, with prices rising by 4.3%. Across the wider 20-country bloc, inflation slowed from 5.2% to 4.3% in September.
  • Global trade | The latest World Trade Monitor, published by the Netherlands Bureau for Economic Policy Analysis shows that world trade volumes fell at their fastest annual pace for almost three years. It suggests that global demand for goods is falling as interest rates increase and the post-pandemic rally is ending.

Environment

  • UK oil | Regulators have approved a new offshore development 80 miles off the coast of Shetland. It is the UK’s largest untapped oil field, and is estimated to contain 300 million barrels of oil. The move has been criticised on sustainability/climate change grounds, but its supporters say that it is vital for the UK’s energy security.
  • Carbon market | The UK’s carbon market collapsed after the government weakened several green initiatives. Carbon prices have fallen to less than half the EU equivalent, having previously been near parity. In 2026 the EU will apply a tax on countries with substantially lower carbon costs, adding pressure on exporters to the bloc. Despite this being some way off into the future, exporters to the EU will need to start recording their embedded carbon emissions into their products, showing that they have an equivalent carbon price in place.
  • Mini-reactors | The design has been chosen for the next generation of Small Modular Reactors (SMR), after a design competition of six companies. The government’s intention is for up to a quarter of all UK electricity to come from nuclear by 2050.
  • Energy sources | Plans have been announced to bring solar and wind power to the UK via the world’s longest sub-sea cable from Morocco. The government is looking to streamline planning processes for the £20bn plan.

Friday to Friday

Price / Index Week %
change		 Annual %
change
FTSE 100 7,608.08 -0.99 10.36
FTSE 250 18,279.42 -1.76 6.47
Nikkei 31,857.62 -1.68 22.83
CSI 300 3,689.52 -1.32 -3.03
S&P 500 4,288.05 -0.74 19.59
Nasdaq 13,219.32 0.06 25.00
CAC 40 7,135.06 -0.69 23.82
Dax 15,386.58 -1.10 27.01
$ per £ 1.2213 -0.34 9.73
€ per £ 1.1539 0.37 1.48
Gold £/oz 1,528.09 -2.85 2.73
Brent Oil $/barrel 95.31 2.19 11.95

Weekly Summary

The need for a long-term view in both reviewing current trends and making new plans is apparent in the news this week. At first glance, the fall in global trade seems alarming, but trade is still almost 9% greater than at the beginning of 2020 (albeit with a recent flatlining). The construction of large infrastructure, the skills gap, and climate change all show the importance of commitment to a long-term plan to put investment and enabling activities in place, especially in times of volatility and uncertainty.

Author contact

Rachel Coleman
Rachel Coleman,
Associate Research Analyst

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