Moving on?

Economic Week In Review | Issue 418 | 26 February 2024

UK construction and property

  • London construction | The City of London Corporation has updated its “heat map” which shows the volume of construction work taking place across the City. The latest version shows over 9 million sqft of work taking place and suggests that it is the same as 18 ‘Gherkins’. Planning applications have increased 25% since 2022, and work remains driven by ‘cut and carve’ retrofits as building owners push Grade B spaces to Grade A.
  • Road unblocking | Three major road improvement schemes on the A47 can now proceed after judges upheld the original schemes. Legal action has caused a 20-month delay, which in turn has increased the cost to taxpayers by tens of millions of pounds. A legal challenge against the Stonehenge tunnel (A303) also failed.
  • Strikes | 150 road maintenance workers on the M25 are being balloted for strike action after dismissing a 3.4% pay rise on the grounds that it is below the rate of inflation.
  • Building safety skills | The Local Authority Building Control – a body representing local building authorities – has warned that “vast numbers of experts” have yet to register with the Building Safety Regulator. Many are becoming increasingly concerned that the Health and Safety Executive has not yet published a list of registered inspectors.
  • Fire safety | The Government has given councils £8m to bolster enforcement teams that can encourage building owners to carry out vital safety improvements. Some building owners have recently been prosecuted for delays in removing dangerous cladding.
  • Hospital building | The Scottish Government has paused all new hospital projects for up to two years and warned that no more money is available. Funding will still be available for maintenance.
  • Icons | The BT tower has been sold for £275 million to MCR Hotels. The hotel company has said that it will take “a number of years” for BT to move out due to the complex equipment in the building but, eventually, it will be turned into a hotel.
  • Confidence | The RIBA Future Trends Survey has seen its longest-ever run of pessimistic results since it began in 2009. The monitor has been negative for the last seven months.
  • Wages | The latest Hays / BCIS Wage Cost Index Indices report that average site wages fell 0.7% in Q4 2023 compared to Q3, growing a total of 3.1% in 2023 as a whole.

Materials and commodities

  • European gas prices have fallen to prices last seen in 2021, before the winter energy crisis of the same year. The impact of Russian imports has been reduced thanks to the import of liquified natural gas from further afield, warmer weather, and a fall in demand.
  • Nickel | The expansion of Western sanctions against Russia pushed nickel prices to their biggest weekly gain in seven months. Russia is a key producer of refined nickel and aluminium.

UK economy

  • Consumer confidence | The latest survey by GfK shows consumer confidence fell by two points to -21 in February from a two-year high of -19. It is worth noting that the index is usually negative.
  • Business activity | The S&P Global flash UK PMI rose to 53.3 in February, up from 52.9. It is the highest reading since May 2023.
  • Mortgages | Some lenders have announced mortgage rate increases as fewer people expect the Bank of England to announce a cut to the base rate. However, an early announcement revealed that the Chancellor is preparing a 99% loan to mortgage scheme ahead of the Budget.
  • Prime homes | London prime residential prices have fallen by more than 7% in January compared to a year earlier. Sales of homes worth more than £5m have fallen 17%.
  • Budget surplus | The Government recorded a budget surplus last month, double the size of the one recorded in January. It was the result of higher tax receipts and lower spending, especially as energy support for households came to an end.
  • Population slowdown | The birth rate in England and Wales fell to its lowest level ever in 2022, with just 1.49 children per woman, from 1.55 in 2021. The rate has been falling since 2010. The trend adds to the economic pressure of an ageing population.

Global economy

  • European wage data | Data from the euro-area showed that in Q4 2023, wages grew 4.5%. President of the European Central Bank, Christine Lagarde called the figure “encouraging” but said that officials want more confidence that disinflation is sustainable.
  • China | Analysts expect China to take a gradual approach when stimulating its ailing markets, with policy makers expected to be focussed on ensuring that the economy doesn’t get worse. It recently announced a large reduction to the benchmark mortgage rate.
  • Defaults | The US and China collaborating on new measures aimed at preventing a wave of emerging market sovereign defaults, and easing the annual debt service burden which is in excess of $400bn, as higher interest rates affect the affordability of repayments.

Friday to Friday

Price / Index Week %
change
Annual %
change
FTSE 100 7,706.28 -0.07 -2.19
FTSE 250 19,179.56 -0.06 -2.62
Nikkei 39,098.68 1.59 42.42
CSI 300 3,489.74 2.52 -14.07
S&P 500 5,088.80 1.66 28.18
Nasdaq 15,996.82 1.40 40.39
CAC 40 7,966.68 2.56 10.84
Dax 17,419.33 1.76 14.53
$ per £ 1.2676 0.71 6.11
€ per £ 1.1707 0.15 3.35
Gold £/oz 1,606.29 0.52 5.93
Brent Oil $/barrel 83.03 -0.53 0.25

Weekly Summary

The data from the City of London  Corporation will no doubt encourage confidence in the City and support construction companies as they emerge from a particularly volatile time. However, the challenge of London’s rising office vacancy rate will need to be addressed, as will ensuring that the city is one that people want to visit or work and leisure to ensure the long-term sustainability of its buildings.

Author contact

Rachel Coleman
Rachel Coleman,
Associate Research Analyst