The 400th edition!

Economic Week In Review | Issue 400 | 9 October 2023

UK construction and property

  • Output | The latest S&P Global/CIPS UK Construction PMI showed a reduction in business in all construction sectors, pushing the index down to 45.0 in September, from 50.8 in August. Residential work was the most affected, falling to 38.1, whilst commercial saw a more modest decline to 47.7.
  • Housing demand | The number of people requesting to view a rental property in Britain has increased from 20 to 25 in the last five months, according to Rightmove. In 2019, it was just five.
  • HS2 | The Prime Minister’s HS2 announcement has led to questions about the development of Euston Station, which will be scaled down to six platforms. Its funding is under scrutiny as a report by the Department for Transport says that it will require a substantial amount of private funding.
  • Infrastructure | Billions of pounds worth of road, rail, and bus link projects were announced throughout the week, in place of HS2’s northern leg to Manchester.
  • Training | The London School of Architecture (LSA) has launched “Part 4” of its modular learning programme. Part 4 aims to address the changes in the nature of work for architects and professionals in the built environment and the demand for lifelong learning that cuts across professional silos. Three courses will be offered initially – design for life, working with heritage, and inclusion in practice, later it will add courses for social value, ethical practice, climate literacy, and housing design
  • Building Safety | The Building Safety Act came into force at the beginning of October, and all buildings 18 metres in height (or at least seven storeys, and contain at least two residential units) must have registered with the Building Safety Regulator or face prosecution. New legislation also added to the existing duties of Responsible Persons, and to ensure that occupiers receive proper fire safety guidance for their buildings.
  • Insolvencies in the construction sector have been increasing recently and attention has turned towards the level of debt left behind. Buckingham’s administrator has said that nearly 20 firms are due more than £1m each, with two companies owed more than £4m each.
  • Retentions | Following industry consultations, the Government has agreed to include new requirements to report retention records in six monthly returns in the forthcoming Prompt Payment and Cash Flow Review.

Materials and commodities

  • Copper | A supply shortfall is expected to worsen from 2027, fuelled by a lack of new mines and an increase in demand from electric cars and upgrades to the electricity grid. According to Anglo American, the living standards of the average person living in the West requires 200-250kg of copper per person, compared to 60kg globally.
  • Oil | Concerns over possible US sanctions on Iran pushed oil prices up over the weekend, however, they remain lower than prices seen in recent weeks.

UK economy

  • Electric car sales to private buyers have fallen 14% in the last year, but overall sales were up 19% as fleet owners buy electric cars. Overall car registrations have increased 21%.
  • Trade rules | The EU will relax “Made in Europe” rules in 2024, giving UK car makers more time to move battery sourcing from Asia to Europe. The post-Brexit Trade and Cooperation Agreement dictates tariffs of 10% on electric vehicles sold in Europe if their batteries are substantially made outside of Europe or the UK.
  • Food price inflation fell for the first time in two years with the average basket price 0.1% lower due to strong competition between supermarkets.
  • National debt | The interest on national debt has reached a 20-year high as 30-year bonds have reached 5.05%. The total amount of national debt in the UK stands at £2.50tn.
  • Banking | MetroBank announced plans to raise new funds and refinance some of its debts. It announced late on Sunday evening that it had managed to secure £325m of new funding and refinanced £600m of debt. The bank insists that it is strong and continues to meet all regulatory requirements.
  • Tax and regulation | UK businesses have called for a “major MOT” of the business tax and regulation system in the Autumn Statement next month. A survey by Make UK and tax advisory firm RSM found that 44% of UK businesses believe the current system is unfavourable. Companies stated that frequent changes to business incentives and R&I credits had hindered investment plans, encouraging Make UK to suggest that the Chancellor makes fiscal decisions only once a year.

Global economy

  • US jobs | The latest figures released by the US Labor Department shows that employers added 336,000 jobs last month, higher than the 170,000 expected. Unemployment was stable at 3.8%. The figures add to expectations that the Federal Reserve will increase interest rates.
  • Trade growth forecasts | The World Trade Organisation has cut its forecast for growth in the global trade of goods by more than 50% (from 1.7% to 0.8%). It claims that rising interest rates have reduced consumer demand in the US, Asia, and Europe. The slowdown has a broad cause but is particularly caused by softening demand for; iron and steel, office and telecoms equipment, textiles, and clothing.
  • Global growth | The World Bank predicts the worst economic outlook for half a century due to a sluggish post-pandemic recovery.
  • Borrowing costs | The cost of government debt is increasing around the world as bond yields increased last week. Yields on 30-year US bonds rose to 5% for the first time since 2007 and 10-year bonds in Germany rose to a 12-year high of 3% as investors looked for safe-haven investments.

Environment

  • Sustainability guide | The Chartered Institute of Building (CIOB) has published a sustainability guide for built environment professionals which offers practical tools and strategies for sustainability development goals, green financing, embodied and operational carbon, biodiversity, and social value.
  • Temperatures | The Copernicus Climate Change Service confirmed that September was the hottest on record, by an “extraordinary” margin. It means that the world is on course for its hottest year ever, at 1.4˚C over pre-industrial levels.

General Election 2024

Both the Conservative and Labour Party Conferences took place over the last couple of weeks with each party beginning to set their stalls out for the next General Election which will be held at a currently unannounced point next year. Labour has announced plans for an Energy Independence Act, remove barriers to clean energy infrastructure, and the “biggest boost to affordable housing for a generation”. Large announcements were sparser at the Conservative Conference (which is only a few weeks ahead of the Autumn Statement) but they announced plans to reduce the number of civil servants by 66,000 (back to pre-pandemic levels), and the curtailment of HS2, a mix of new and previously announced infrastructure projects.

Friday to Friday

Price / Index Week %
change
Annual %
change
FTSE 100 7,494.58 -1.49 7.20
FTSE 250 17,732.32 -2.99 2.18
Nikkei 30,994.67 -2.71 14.30
CSI 300 3,684.73 -0.13 -2.28
S&P 500 4,308.50 0.48 18.38
Nasdaq 13,431.34 1.60 26.09
CAC 40 7,060.15 -1.05 20.34
Dax 15,229.77 -1.02 24.09
$ per £ 1.2254 0.34 10.11
€ per £ 1.1566 0.23 1.80
Gold £/oz 1,497.89 -1.98 -1.99
Brent Oil $/barrel 84.58 -11.26 -13.62

Weekly Summary

Insolvencies are clearly, and rightfully, an issue in the industry, with concerns around not just the financial health of companies, but also the residual financial impacts for projects and the wider supply chain.

Political party conferences showed that the race for Number 10 is starting, with housing, energy and infrastructure seemingly at the heart of the debate. As the Election campaigns begin in earnest, we will ensure we cover them and their impacts for the industry.

Geopolitical events have clearly shaken the markets this week, but have been omitted from this commentary to keep it focussed on current events impacting the construction and property markets. We will report on the impacts of the events as and when this happens.

Author contact

Rachel Coleman
Rachel Coleman,
Associate Research Analyst