New year, new plans

Economic Week In Review | Issue 410 | 2 January 2024

UK construction and property

  • National Planning Policy Framework | After a year of development and almost 26,000 responses to the consultation, the Housing Secretary launched the new National Planning Policy Framework (NPPF) which focuses on delays to housing developments. If councils in England are delaying or blocking housing developments, they will be “named and shamed” under plans for a league table demonstrating the performance of councils approving housing developments. In extreme cases, councils could lose their planning powers.
  • Social housing decarbonisation | The government has allocated an additional £1.25bn to the Social Housing Decarbonisation Fund, which with planned matched funding, will see 140,000 homes insulated or retrofitted between 2025-2028. The Chair of the National Home Decarbonisation Group (which represents the social housing contractors) said that “excellent progress has been made, with nearly 50% of properties in England now having an Energy Performance Certificate (EPC) of C – up from just 14% in 2010.”
  • Canary Wharf | Barclays has agreed to extend its lease by five years. The news will see them remain at One Churchill Place until 2039.

Materials and commodities

  • Shipping | A number of shipping companies, including Maersk, have been intermittently suspending container ship passages through the Red Sea after attacks by Houthi militants. However, the disruption to the oil market has been relatively limited.
  • Gas |Gas storage across the EU reached maximum capacity in mid-October, after which the bloc turned to storage in Ukraine Storage of gas in Ukraine is a key part of Europe’s strategy to stockpile for winter, with Ukraine having more gas storage capacity than any EU country, due to its legacy role in the Russian gas pipeline.
  • 2023 rally | The world economy shook off concerns of a recession, with global stock markets seeing large growth. The S&P 500 neared an all-time high in 2023 and saw 24% growth in the year. However, shipping stocks outpaced it with shares in liquid petroleum gas transporters rising 184% and shares in tanker companies rising almost 100%.

UK economy

  • Government borrowing fell £0.9bn in November to £14.3bn when compared to a year earlier but was higher than the forecasts of £13bn and was the fourth highest since records began in 1993. Tax revenues have improved recently as fiscal drag has moved more people into higher tax bands.
  • Scottish Budget | The Scottish government announced tax changes that will see higher earners pay more tax, with a new 45% personal tax band introduced for those earning between £75,000 and £125,140. Those earning more than £125,000 will also pay more tax (48% rather than the current 47%), yet the threshold for the higher band – £43,663 – will be frozen.
  • Consumer Price Inflation slowed to 3.9% in November, well below the 4.4% expected by economists and fuelling expectations that the Bank of England will lower interest rates this year. 3.9% is the lowest level of inflation seen since September 2021 (however an indexed price is 16% higher today than in September 2021.)
  • Food inflation | According to the British Retail Consortium, food inflation slowed to 6.7% in December – from 7.7% in November – its lowest since June 2022. Discounts drove the fall as retailers competed to attract Christmas shoppers.
  • Attracting investment | The UK insurance industry has asked the government to adopt a light-touch regulatory regime to fulfil ambitions announced in the Autumn Statement to encourage the establishment and growth of captive insurance companies in the UK. Captives are in-house insurers which large companies typically set up for specific risks. According to brokers, interest in setting up these businesses is at its highest in decades following 24 consecutive quarters of rises in commercial insurance premiums.

Global economy

  • Factory output in Asia weakened in December, with the S&P Global index showing a decline in most Asian countries. Activity in South Korea fell into decline, and Taiwan’s contraction extended for a 19th consecutive month. China’s official data reported a third consecutive month of contraction, whilst the Caxin’s PMI showed growth.
  • Singapore | Q4 GDP increased by 2.8%, driven by construction and manufacturing improvements. The reading was faster than expected and marked a significant increase on the 1% recorded in Q3. Singapore’s GDP grew 1.2% in 2023, a decrease from the 3.6% seen in 2022.
  • Office owners | The Mortgage Bankers Association has warned that in the US there are $117bn of commercial mortgages tied to commercial offices which need to be either repaid or refinanced this year. Significant concerns exist around this as many of the loans were taken out when interest rates were low. Since then rates have increased substantially and commercial office values have underperformed. Unlike domestic mortgages, commercial property ones are often interest-only repayments, leaving the original amount payable at the end of the term.

Environment

  • Wind farm | Ørsted – a Danish renewable energy company – has made its final investment decision and thereby confirmed that it will build the world’s largest single offshore wind farm off the east coast of the UK. Hornsea 3 will see 231 turbines installed over 696km2 and is expected to generate 2.9GW.
  • Wooden turbines | Swedish factory Modvion has developed modular wooden wind turbines capable of generating 2MW, 150m to the top of the blade and made of 144 layers of laminated veneer lumber.

Friday to Friday

Price / Index Week %
change
Annual %
change
FTSE 100 7,733.24 0.46 3.78
FTSE 250 19,689.63 0.30 4.44
Nikkei 33,464.17 0.89 28.24
CSI 300 3,431.11 2.81 -11.38
S&P 500 4,769.83 0.32 24.23
Nasdaq 15,011.35 0.12 43.42
CAC 40 7,543.18 -0.34 16.52
Dax 16,751.64 0.27 20.31
$ per £ 1.2739 0.16 5.48
€ per £ 1.1518 -0.31 1.99
Gold £/oz 1,620.38 0.21 7.46
Brent Oil $/barrel 77.04 -2.57 -10.32

Weekly Summary

We enter the new year with higher wages, but higher costs of living, and a stagnant UK economy, even if world stock markets, betting on a brighter outlook, have displayed encouraging upturns. This year also brings the prospect of a UK General Election, which is rumoured for May but can be called any time up to 17th December 2024.) After a period of extended volatility, it may just be that a new government, of whichever stripe, brings some stability and encouragement in the form of new policies and spending plans. It is also worth remembering that the world continues to “shrink”, with international events increasingly impacting domestic politics and economies.

Author contact

Rachel Coleman
Rachel Coleman,
Associate Research Analyst