Upside down

Economic Week In Review | Issue 407 | 27 November 2023

UK construction and property

  • Wages | The latest data from Hudson Contract shows that average pay for self-employed construction workers increased 2% between September and October. It also found that whilst the number of payments to brickworkers fell 11% when compared to a year earlier, pay increased; suggesting that the workforce has shrunk but experienced and higher-paid workers are being retained.
  • Procurement Act | The new Act, which intends to modernise and streamline procurement rules, gained Royal Assent and is expected to come into force in October 2024. It is part of the government’s post-Brexit strategy to remove EU-based legislation.
  • Safety | AXA UK is to provide body cameras to contractors so that they can record safety work on buildings with flammable or combustible materials. The insurer said that the process will provide detailed evidence and information on working practices and site management.
  • CIS | Changes announced in the Autumn Statement to the CIS industry tax scheme have been heavily criticised. The changes mean subcontractors will now have their VAT records checked as part of compliance. Critics warn that although the checks are intended to tackle VAT fraud, they will instead just create more red tape and problems for the middle of the supply chain.
  • Dogs | National Highways has begun using dogs trained to detect the scent of Japanese Knotweed. The more acute detection method means that the invasive plant can be found before it can be seen.
  • Planning reforms | The Autumn Statement announced plans to allow applicants to pay for guaranteed planning timelines under a “premium planning service”.
  • Net zero | A report by Lloyds Banking Group has found that  more than 40% of private landlords have cancelled plans to decarbonise their rental properties after the government removed the energy efficiency targets for homes.

Materials and commodities

  • Iron ore | After a week of gains, prices fell as Beijing announced increased market supervision and warned against hyping up iron ore prices. The National Development and Reform Commission said that companies should not fabricate and spread information about rising prices and that hoarding, excessive speculation and manipulation of the futures market are not allowed. Iron ore prices have increased recently despite lower domestic demand.
  • Uranium prices per lb will hit triple figures for the first time since 2007 as economies push away from oil and coal into nuclear power and supply struggles to keep up with demand.
  • Base metals those commonly used in manufacturing or industry, not precious metals – are showing signs of surplus at the London Metal Exchange. Low economic growth has allowed surpluses to be rebuilt after the events of recent years had pushed supplies down to historically low levels.

UK economy

  • Manufacturing | Nissan announced that it will commit to building two of its electric car models in Sunderland. The move will protect 6,000 jobs and will cost £1bn, supported by a government contribution from the Automotive Transformation Fund (a fund which received a £2bn top-up in the Autumn Statement).
  • RAAC | The Department for Education has been criticised in a report from the Public Accounts Committee for “unacceptable numbers of pupils” attending classes in ”poorly maintained or potentially unsafe buildings”. It reported that 700,000 students are in educational settings which need major rebuilding or refurbishing.
  • Retail | Early Black Friday promotions didn’t drive retail sales as much as expected in the first half of November, according to IMRG. It is perhaps unsurprising as analysis from Which? revealed that just 2% of offers are at their cheapest price during the event.
  • Business rates | Colliers has warned that unless business rates are completely overhauled, more retailers will fail.
  • Wages | In the Autumn Statement, the Chancellor increased the National Living Wage to £11.44 per hour (from £10.42), and lowered the threshold age down from 23 to 21. The National Living Wage was introduced in 2016 and is calculated on the cost of living. It replaced the Minimum Wage which was calculated on the amount that businesses could pay. The difference has caused businesses to be nervous about the impact on their finances. The general secretary of the Trades Union Congress (TUC) has called for the National Living Wage to reach £15 “as soon as possible” to make up for the drop in real wages caused by inflation.
  • Council budgets | A cross-party group London Councils has warned that the funding shortage of £400m in 2023-24, rising to £500m in 2024-25 that it calculated in October needs to be revised upwards by £200m. The increase is due to a collective overspend on local services, especially support for homelessness. The group warned in summer that nearly 170,000 Londoners – one in fifty – are currently homeless and living in temporary accommodation.
  • Global Investment Summit | The meeting of more than 200 executives is being held in the UK. This morning it was announced that those attending have collectively pledged £29.5bn of investment into the UK, creating 12,000 jobs. However, a closer look at the announcement shows that some of it had been committed before.
  • Reform | A report from the House of Lords has called for reform at the Bank of England after it found that its forecasting models are “inadequate”, and it lacks intellectual diversity within its most senior ranks. It claims that this is the reason why inflation has remained stuck at high levels.

Global economy

  • US supply chains | The White House has announced new measures to strengthen supply chains. A new White House Council on Supply Chain Resilience will be inaugurated this week and will conduct a review similar to those carried out on national defence and homeland security, reporting back at the end of 2024. It comes after the Federal Bank Reserve of San Francisco concluded that supply chain pressures in 2022 were responsible for 60% of the surge in inflation. The measures are expected to include attempts to reduce reliance on international markets for the pharmaceutical supply chain.

Environment

  • Renewables | The European Commission is to set out its €584bn plan to upgrade the electricity grid to integrate renewable sources.

Friday to Friday

Price / Index Week %
change
Annual %
change
FTSE 100 7,488.20 -0.21 0.02
FTSE 250 18,458.10 -0.59 -5.56
Nikkei 33,625.53 0.12 18.89
CSI 300 3,538.01 -0.84 -6.30
S&P 500 4,559.34 1.00 13.24
Nasdaq 14,250.85 0.89 26.94
CAC 40 7,292.80 0.81 8.65
Dax 16,004.18 0.53 10.06
$ per £ 1.2560 1.39 4.12
€ per £ 1.1524 0.87 -0.94
Gold £/oz 1,587.07 -0.16 9.35
Brent Oil $/barrel 80.48 -0.16 -3.86

Weekly Summary

It’s clear that cost pressures – in both construction and the general economy – still exist despite an easing in demand. The question now is how much longer this can continue and how can businesses can mitigate the impact.

Author contact

Rachel Coleman
Rachel Coleman,
Associate Research Analyst