Clarity and consistency

Economic Week In Review | Issue 403 | 30 October 2023

UK construction and property

  • Second staircase | Michael Gove announced a 30-month grace period after the rules for a second staircase are published in Approved Document B. For schemes that have already been approved, developers will be given 18 months to start, to stop developers from stockpiling schemes. If this 18-month deadline is missed, the schemes will have to re-submit their schemes under the new guidelines.
  • Fire safety | The RIBA has opened the application process for construction’s first register of principal designers. Under the new Building Regulations, every building project needs to have a designated principal designer. RIBA members will show their competence through a three-stage assessment process and pay a subscription to be on the register and will need to reapply every five years.
  • Infrastructure | The Building Cost Information Service (BCIS from the RICS) has added to calls for “clarity and consistency of policy and regulation” in the government’s approach to major infrastructure projects. It also raised concerns that “Network North” prolongs uncertainty for companies working in the sector, as well as the need to increase supply-side capacity to deliver projects.
  • Engineers | Work permits issued to foreign engineers increased by 71% between 2021 and 2022, according to analysis of Home Office data by Integro Accounting. Over the same period, work permits issued to civil engineers rose by 95% (albeit from a lower base).
  • Workload expectations | The latest RIBA Future Trends survey showed that whilst sentiment is still fairly pessimistic, negativity has reduced considerably when compared to July and August. The index improved from -11 to -1 in September, driven by optimism amongst smaller practices and the housing sector.
  • HS2 land | The construction and property industry has added its voice to those calling for the sale of HS2 land to be delayed. The government plans to sell 2,900 acres of land “within weeks”, raising £100m, compared to the £200m paid for it. The High Speed Rail Group warns that the sale of land would also create a permanent and irrevocable bottleneck at Colwich junction, limiting the flow of services over the West Coast Main Line.
  • Circular Construction | A report from Mace claims that adopting circular economy principles across Greater London could save 13.8m tonnes of construction waste, worth £1.25bn over 10 years. Currently, only 10% of construction waste is recycled.
  • Planning | Knight Frank has recommended that urgent action be taken to promote increased development and remove barriers to delivery within the life sciences golden triangle between Oxford, Cambridge, and London as more than half of the area’s development pipeline is stuck in the pre-planning phase.
  • Central London take-up of offices reached its highest point this year. Savills reported that more occupiers are looking to increase their space requirements, but leasing activity remains well below the long-term average.

Materials and commodities

  • Building products inflation | According to the Builders’ Merchants Federation (BMF), sales volumes fell 10.5% in the year, and prices were up 8.0%, leaving the overall value of sales down 3.3% between August 2022 and August 2023. Some departments saw growth; renewables and water-saving sales values increased by 37.6%. MRA Research, who produced the report for the BMF, explained that sales throughout August were partly lower due to contractor and client holidays, but also due to a wetter-than-average summer which encouraged more people to go abroad for a holiday, and deferred normal summer building projects.

UK economy

  • Utilities | Ofwat has warned on the financial health of four water suppliers, suggesting that Thames Water, Southern Water, South East Water, and SES Water require close monitoring and that more debt and equity would be needed. To fund necessary investment, water companies have asked Ofwat to approve increases to customer bills of around 60% between 2025 and 2030.
  • Retail sales | The Confederation of British Industry (CBI) reported that retail sales fell in October, but more concerningly, the rate of increase has grown. Sales fell 14% in the year to September, and by 36% in October. Retailers expect sales to fall by 13% in November.
  • Business activity | The latest S&P Global business activity tracker for the UK fell for the third consecutive month. The survey suggests a modest impact on GDP (-0.1% of the quarterly rate) but businesses have warned that the uncertain economic climate could cause further decline.
  • Short-termism | The Institute for Government has warned that public services are worse than when the Conservatives were elected in 2010, and are stuck in a “doom loop” of recurring crises as a result of short-term thinking from ministers, and will decline further if current spending plans are adhered to.
  • Household wealth | The Resolution Foundation and Abrdn lower household wealth due to falling house prices and pension pots. Together, those assets account for £4 in every £5 of total wealth. Total household wealth was worth 840% of GDP in 2021 but had fallen to 630% in 2023. It suggests that if interest rates stay higher for longer, it could continue to erode Britain’s household wealth.
  • House prices | House prices fell in 80% of the UK’s markets, according to Zoopla. House prices grew 9.2% last year, but have fallen 1.1% this year.
  • High street | Wilko’s new owner, CDS Superstores, has announced that the collapsed retailer will return some standalone stores to some high streets before the end of the year. Five new concept stores will open before Christmas, with others opening throughout 2024. Previous Wilko employees will be prioritised in the recruitment drive.

Global economy

  • European rates | The European Central Bank (ECB) held interest rates at 4%, ending its record-setting run of 10 consecutive increases. Christine Lagarde – President of the ECB – said that talk of cuts was “premature.”
  • Eurozone growth | S&P Global’s latest survey of purchasing managers revealed a large drop in new orders and the first fall in employment in over two years. However, it also showed a reduction in price pressures. The overall PMI reading was 46.5, lower than the 47.4 expected by economists.
  • Germany | GDP fell by 0.1% in Q3 2023, less than the 0.2% drop economists had expected. Growth since Q1 2022 has been negligible.

Environment

  • Water standards | The UK is to move away from the EU’s standards for monitoring water quality – the Water Framework Directive (WFD). The WFD was originally passed into UK law after Brexit, but now differences are emerging such as chemicals and pesticides which are banned in the EU, are not banned in the UK.

Friday to Friday

Price / Index Week %
change
Annual %
change
FTSE 100 7,291.28 -1.50 3.46
FTSE 250 13,688.23 -0.98 -5.86
Nikkei 30,911.69 -0.86 14.34
CSI 300 3,562.39 1.48 0.59
S&P 500 4,117.37 -2.53 5.54
Nasdaq 12,643.01 -2.62 13.88
CAC 40 6,795.38 -0.31 8.33
Dax 14,687.41 -0.75 10.90
$ per £ 1.2148 -0.02 4.98
€ per £ 1.1470 -0.02 -1.54
Gold £/oz 1,655.30 1.62 16.89
Brent Oil $/barrel 89.20 -3.21 -4.87

Weekly Summary

Claims that something needs to change in policy planning and spending are timely given the forthcoming Autumn Statement and General Election, however, this should be considered alongside warnings on short-termism in political thinking. Negligible growth, alongside high interest rates and inflation show the need for considered policies that can build confidence for long-term decisions.

Author contact

Rachel Coleman
Rachel Coleman,
Associate Research Analyst