What lies ahead

Economic Week In Review | Issue 405 | 13 November 2023

UK construction and property

  • Project Speed | The development consent order for the £1.3bn A66 Northern Trans-Pennine project, which was designated by the Government as a “Project Speed pathfinder” project, has been delayed by four months. Several contractors have already built work compounds to begin the work.
  • Infrastructure | The National Institute for Economic and Social Research (NIESR) has called for Jeremy Hunt to use this month’s Autumn Statement to announce a £30bn-a-year investment in infrastructure. It advises the Chancellor to boost growth through improvements to transport, digital networks, skills, and housing, warning that failure to increase investment would mean that the UK “UK is set for a decade in the doldrums and poor prospects for regional regeneration.”
  • Housing | The latest RICS Residential Property Monitor showed a fall in both enquiries for and sales of housing, however, the falls were less severe than in the summer. It said, “the pace of decline seems to be levelling off.”
  • Construction output | Monthly output increased slightly (+0.4%) in volume terms in September, led by a 2.1% increase in Repair and Maintenance, according to the ONS. Anecdotal evidence suggests the increase was driven by warmer weather. Construction price growth slowed to 3.9% in the twelve months to September, a significant slowing from the record rate of 10.4% set in May 2022.
  • Administrations | The latest data from the Insolvency Service shows that the number of administrations in the construction industry has doubled between October 2022 and October 2023, from 19 to 37. However, 11 of those were Inland Homes PLC and its associated companies. 10 of the companies employed two or fewer staff members.
  • Insurance | The Construction Leadership Council has warned that access to insurance is a growing concern for the supply chain. It also found that hardening payment practices are adding to pressures, particularly for smaller firms.

UK Steel

  • The UK’s steel production is largely from blast furnaces which create virgin steel, but at a huge environmental cost. Electric arc furnaces usually melt down existing steel, and have the benefit of being easy to start and stop depending on demand loads. The plants at Port Talbot and Scunthorpe are responsible are the first and third largest emitters of carbon.
  • British Steel confirmed plans to close its blast furnaces in Scunthorpe, putting 2,000 jobs at risk. The furnaces will be replaced with electric-arc furnaces but would require state support.
  • Tata Steel received £500m of support from the government earlier this year to build two electric arc furnaces, with the expected loss of up to 3,000 jobs.

UK economy

  • UK consumer health | The number of mortgages in arrears has increased in the UK, partly driven by buy-to-let landlords. UK Finance data showed that there were 87,930 homeowner mortgages in arrears of at least 2.5% of their outstanding balance, in the third quarter of this year, an increase of 7% compared to Apr-June 2023.
  • Employment | The number of online job adverts has fallen 2% in the week to 3rd November, according to the ONS.
  • Data gaps | The ONS aims to offer cash rewards for filling out questionnaires to fill in gaps in its data sets, particularly in labour data. It has found that £20 payments lead to a higher response rate. ONS data has been under scrutiny recently, following significant revisions.
  • GDP | Growth was flat between July and September and forecasters expect the economy to be stagnant for several months more. This follows the Bank of England’s forecast which set out zero growth until 2025.

Global economy

  • Chinese growth | The IMF has encouraged bankers to “ride the dragon” and raised its forecasts for growth in China, pointing to stronger support from policy in Beijing. It now thinks that the economy will grow 5.4% in 2023 and 4.6% in 2024 – an upgrade from its previous view of 5% and 4,2%. However, the fund warned that weakness will persist in the property sector. GDP growth is expected to fall later in its projection due to an ageing population, and weak productivity.
  • Chinese inflation | Consumer prices fell by 0.2% in the year to October, putting the economy into deflationary territory. The tumbling cost of pork is slightly to blame. It is the most widely consumed meat in China and has an outsized weighting in the inflation calculation.

Environment

  • Temperatures | The EU’s climate change service is now “virtually certain” that 2023 will be the hottest year on record, following “exceptional” temperatures in October. Extreme temperatures are forecast to continue into 2024.

Friday to Friday

Price / Index Week %
change
Annual %
change
FTSE 100 7,360.55 -0.77 0.58
FTSE 250 17,853.09 -0.73 -8.99
Nikkei 32,568.11 1.93 15.23
CSI 300 3,586.49 0.07 -5.33
S&P 500 4,415.24 1.31 10.58
Nasdaq 13,798.11 2.37 21.86
CAC 40 7,045.04 -0.03 7.10
Dax 15,234.39 0.30 7.10
$ per £ 1.2203 -1.37 3.43
€ per £ 1.1438 -0.78 0.20
Gold £/oz 1,585.64 -1.46 5.96
Brent Oil $/barrel 81.43 -4.08 -15.17

Weekly Summary

The week’s news has been dominated by discussions of company finances and speculation on financial health. Years of “once-in-a-lifetime events” have elongated programmes, increased costs, and taken their toll on company coffers, leaving them vulnerable to further shocks.

Author contact

Rachel Coleman
Rachel Coleman,
Associate Research Analyst