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Economic Week In Review | Issue 417 | 19 February 2024

UK construction and property

  • Output | Total output fell 1.3% in the last quarter of 2023. New work fell 5%, cancelling a 4% increase in repair and maintenance. The key drivers were falls of 6.4% and 1.1% in infrastructure new work and private housing repair and maintenance respectively. In the year, output increased by 2% logging the third consecutive year of growth. However, this growth is skewed toward repair and maintenance.
  • Infrastructure | In its annual results, EDF Energy logged a €12.9bn impairment on its Hinkley Point C development.
  • Brownfield development | Michael Gove has announced changes to planning which will force local councils to take a less restrictive approach to developments on brownfield sites. A review of the London Plan by the Housing Secretary claimed that the complexity of policies was a barrier to the delivery of homes on brownfield sites, and simplifying the process in favour of brownfield developments could increase capacity for the delivery of homes by 11% a year. The full consultation paper is available here.
  • Permitted development rights are to be relaxed to allow any size of commercial building to be developed into housing. A consultation on further relaxation of permitted development rights has also been launched which would allow property owners to build extensions or large loft conversions without planning permission.
  • Robot bricklayers | Startup – Monumental – has secured £20 million of funding, allowing it to increase the number of bricklaying robots it can deploy on sites. Monumental can be employed as a subcontractor to bring in its robots which have sensors, computer vision and small cranes.
  • Planning applications rose ahead of the 25% to 35% fee increase on 6th December 2024.
  • Building Control | Chiefs have warned that councils may not be able to conduct inspections when the new Building Safety Regulator competence regime comes into force. 4,500 registered inspectors who have proved their competency will be needed, but trade body LABC has warned that figure is unachievable and recommends a six-month delay is announced.

Materials and commodities

  • Nickel | The Australian government has intervened in the nickel market by adding it to a list of commodities eligible for a stimulus fund. It has recently been affected by a glut of low-cost supply from Indonesia which has seen prices fall by almost 45% in the last year.
  • Oil | Activist investor Bluebell Capital Partners is putting pressure on BP over its plan to cut oil and gas output by a quarter in 2030 compared to 2019. It deems the cut “unrealistic” and suggests that BP should cut “in line with society”, whilst looking to cut its emissions and invest in renewables, hydrogen, and bioenergy.

UK economy

  • Technical recession | The UK entered a technical recession as GDP fell 0.3% in Q4 2023, a second consecutive quarter of negative growth. GDP per head has fallen for six of the last seven quarters, only managing 0.1% growth in 2023.
  • Jobs | Unemployment levels remained stable at 3.8%, and whilst the employment rate remains below estimates a year ago, it has increased in the last quarter.
  • Economic inactivity in 16–64-year-olds increased to 21.9%, an increase of 1.4% when compared to pre-pandemic levels. 2.8 million people were inactive due to long term sickness at the end of last year. Across G7 economies, inactivity has only increased in the UK and the US.
  • Retail sales have increased, beating economists’ predictions. The volume of goods sold increased by 3.4% in January, the most since April 2021. Excluding the Pandemic unlocking, it was the largest increase since records began in 1996. However, sales fell 3.3% in December. Economists had expected a 1.5% increase.
  • Energy prices | Energy Consultant, Cornwall Insight, expects that a typical energy tariff will fall to £1,635 from the current cap of £1,928. The fall is expected due to a reduction in industrial demand, a mild winter which did not peak energy prices, and strong gas supplies. The move would have positive impacts for the Bank of England’s inflation target.
  • Mortgages | A new type of mortgage, based on a Dutch version will be launched in the UK. It will allow swaps to a lower loan-to-value rate at horizons other than remortgaging, allowing interest rates to fall as the mortgage is paid off.
  • Underemployed | Job cuts across the “Big Four” auditing firms are focussing on “underemployed” staff, with companies examining staff utilisation rates.

Global economy

  • Helicopter money | Singapore is to issue a special cost of living payment of up to S$400 ($297). Adults who do not own more than one property and have an income which does not exceed S$100,000 will be eligible for a payment of between S$200 and S$400. Inflation has surged recently, and economic growth has been low.
  • US offices | CBRE claims that the US office market is improving, and demand has increased in the last six months. It expects falling interest rates to lead to higher numbers of transactions later in the year.
  • Germany | Carsten Brzeski – an economist at ING – has said that Germany’s economy is caught in a “twilight zone between recession and stagnation” after it shrank 0.3% last year but managed to avoid a technical recession. It faces some structural challenges such as China’s car market.
  • Global reorganisation | Mexico has become the top exporter of goods to the US, replacing China. Exports by value from Mexico grew 5% last year, whilst the value from China fell by 20%.

Friday to Friday

Price / Index Week %
change
Annual %
change
FTSE 100 7,711.71 1.84 -3.66
FTSE 250 19,191.93 0.68 -4.47
Nikkei 38,487.24 4.31 39.89
CSI 300 3,403.81 1.16 -15.63
S&P 500 5,005.57 0.42 22.71
Nasdaq 15,775.65 -1.34 33.84
CAC 40 7,768.18 1.58 5.72
Dax 17,117.44 1.13 10.56
$ per £ 1.2588 0.31 4.77
€ per £ 1.1689 -0.19 3.90
Gold £/oz 1,597.96 -0.31 4.43
Brent Oil $/barrel 83.47 1.56 0.57

Weekly Summary

Market data shows that the UK’s economic state is not improving, although stability in the labour market will no doubt be welcomed. As we look at ways to reduce the impact of construction’s skills crisis and the labour shortage within the wider economy, many will be hoping for a remedy in next month’s Budget.

Author contact

Rachel Coleman
Rachel Coleman,
Associate Research Analyst