The labour issue

Economic Week In Review | Issue 416 | 12 February 2024

UK construction and property

  • Output | The construction Purchasing Managers’ Index from S&P Global reported that optimism in the sector has reached a two-year high, despite subdued order books. The total activity index remained below the crucial 50.0 marker, at 48.8. Respondents to the survey hoped that looser financial conditions and improving economic prospects could encourage client activity.
  • Flexible office space | IWG has announced plans to open 2000 new locations across the UK over the next five years. It expects that companies will reduce their head office space and individuals will look to work closer to home.
  • Planning biodiversity | The British Property Federation (BPF) claims that planning departments are not ready for biodiversity net gain rules which come into force this week for major developments. In its election manifesto, the BPF argues that the planning system should be reformed, and higher fees should be paid by applicants to fund training and capacity in council planning departments.
  • HS2 Euston tunnel | The Public Accounts Committee has told the government to urgently make a decision on the start date for the final tunnel drive to Euston Station. With much of the funding for the station and the tunnel drive to Old Oak Common now reliant upon private funding, it recommended that the government sets out plans for a range of private investment scenarios.
  • RAAC survey | The Department for Education has now completed its survey of buildings affected by reinforced autoclaved aerated concrete and the number of schools affected has increased to 234. Of those, 119 are currently listed to have new buildings through the school rebuilding programme, and 110 will receive grants to renovate.

Materials and commodities

  • Mineral Products | The Mineral Products Association’s sales data shows a consecutive annual drop in sales volumes, caused by a slow down in major construction markets such as commercial high-rise and highway projects. The total volume of asphalt sales is at a decade low.
  • Timber | Trade body Timber Development UK has reported that timber imports rallied during the second half of last year, with the full year of imports only slightly behind 2022 levels. The second half of the year was driven by imports of softwood, hardwood ply, OSB, and MDF.
  • Material sales | The Construction Products Association’s latest state of trade survey reported that material sales slowed for the sixth consecutive quarter for heavy side manufacturers in Q4 2023. Manufacturers expect sales to slow further throughout the next 12 months. However, costs were shown to have improved as inflation slowed.

UK economy

  • Inflation expectations | The government expects that inflation data for January (which will be published on Wednesday) will show a slight increase.
  • Business environment | The director general of the Confederation of British Industry – Rain Newton-Smith – has urged politicians to avoid “large-scale” tax cuts and focus on public spending, explaining that businesses do not want to see tax reductions driven by short-termism. Her speech at a conference stated that business investment is set to fall by 5% this year, driven by high interest rates.
  • Mortgage market | A report by UK Finance shows that the number of mortgages in arrears increased by 7% at the end of 2023. The percentage of buy-to-let mortgages in arrears increased by 18%. However, repossessions remain comparatively low.
  • Housing market | The latest survey by RICS shows that buyer demand, agreed sales, and new instructions all turned positive in January. Respondents to the survey expect the market to remain relatively subdued against the long run average, but report a consistently modest improvement.
  • Evictions | Michael Gove has promised to push through a ban on “no-fault” evictions ahead of the next general election. Data released last week showed that “no-fault” evictions rose 49% last year, from 6,339 to 9,457.
  • Post-Brexit exports | Analysis from the Centre for European Reform (CER) claims that export growth in the UK has been sluggish when compared to other advanced economies, with £23bn missed growth in the quarterly export of goods and services.
  • Jobs data | The deputy head of the Office for Statistics Regulation has warned that there is “a way to go” before it would re-endorse official jobs data from the Office for National Statistics (ONS). Labour data at the ONS has undergone a refresh after concerns were raised over its quality due to low rates of engagement with its survey.
  • Wages | The Chartered Institute of Personnel and Development has said that the forecast rate of pay rises in the private sector has fallen from 5% to 4%. It is the first time that the forecast has fallen since early 2020.
  • Visas | Immigration lawyers have reported that some companies are withdrawing job offers because of the impact of new immigration rules which would require them to pay higher salaries, whilst others have tried to fast track applications ahead of the April deadline. In December, the main salary threshold for skilled worker visas increased from £26,200 to £38,700 from April 2024.

Global economy

  • China’s deflation | Prices have fallen at their steepest rate since 2009. Consumer prices are 0.8% lower than a year ago. Consumer attitudes are being affected by a slump in the property market. Analysts at ING suggest that this could be the lowest point in China’s current cycle and that it is not trapped in a “deflationary spiral”.
  • German housing market | Property prices have fallen sharply, according to the German Real Estate Index from the Kiel Institute for the World Economy. The price of a single-family home has fallen by 11.3%. It is the sharpest drop in the price of property since recording began in the 1960s.

Energy

  • New record | An experiment by UK-based JET laboratory has produced more energy than ever before for nuclear fusion. Whilst just 69 megajoules of energy was produced over five seconds, it is widely celebrated as a step forwards.
  • Wylfa | The British government is in talks to take control of a key site in Wales which has been set aside for a nuclear power plant. Great British Nuclear is in early discussions with Hitachi – who currently own the land – with a view to find a new private partner as Hitachi abandoned plans in 2019 after failing to reach a financial agreement with the British government.

Friday to Friday

Price / Index Week %
change
Annual %
change
FTSE 100 7,572.58 -0.56 -3.93
FTSE 250 19,062.32 -0.58 -4.83
Nikkei 36,897.42 2.04 33.34
CSI 300 3,364.93 5.83 -18.05
S&P 500 5,026.61 1.37 22.89
Nasdaq 15,990.66 2.31 36.46
CAC 40 7,647.52 0.73 7.26
Dax 16,926.50 0.05 10.57
$ per £ 1.2626 0.01 4.67
€ per £ 1.1711 0.05 3.60
Gold £/oz 1,602.87 0.73 3.61
Brent Oil $/barrel 81.19 6.28 -4.86

Weekly Summary

The absence of reliable labour force data is a worrying fact for policymakers who will be looking to make decisions on interest rates but for those with more of a micro view, it affects decisions they take in combatting the enduring skills crisis and planning growth. Labour and wages are key drivers of construction pricing, and this additional uncertainty will no doubt create more nervousness.

Author contact

Rachel Coleman
Rachel Coleman,
Associate Research Analyst