After the rain

Economic Week In Review | Issue 421 | 18 March 2024

UK construction and property

  • Building Safety Professionals | A three-month extension to the deadline for all building control professionals to be registered has been announced by the HSE-run Building Safety Regulator. The deadline of 6th April was deemed unachievable after too few people registered in time.
  • Building Safety Levy | Housebuilders have warned that the new Building Safety Levy on new homes will add £5,000 to the cost of houses. The tax is intended to raise £3bn to pay for the remediation of buildings over 11 meters tall. Housebuilders have also argued that the tax is unnecessary because £5bn has already been raised through the Building Safety Fund and less than half of this funding has been committed to remediation projects.
  • Planning problems | Greenwich Council admitted that it can no longer police planning applications as it lacked funding for inspectors.
  • A new low | The number of planning permissions for new housing has reached a new low. The Housing Planning Report from the Home Builders Federation revealed that the number of permissions granted fell 20% in 2023. The Home Builders Federation’s executive chairman said, “This report should send alarm bells ringing across government and the country.”
  • Output | Total construction output returned to growth in the three months to January but was reliant on repair & maintenance, which grew 4.0%. New work fell by 4.5%. New infrastructure work saw the largest fall (9.3%) but remains far above its pre-pandemic level.
  • Second staircase | According to London Assembly Labour, 38,000 potential new homes are being blocked by the ongoing delay to the definition of the second staircase policy.
  • Sizewell funding | Legislation that was recently introduced to prevent UK media from being bought by international organisations has led to questions over the funding of physical infrastructure. Hinkley Point C has been developed in collaboration with China, and the government has been encouraging the UAE’s involvement in Sizewell C.
  • Heat pumps | The National Audit Office has pointed to the high cost of equipment and uncertain policy as a reason for the slow take-up of heat pumps in Britain. Meanwhile, the government will delay fines for boiler manufacturers who do not hit heat pump sales targets, from April this year until next year.

Materials and commodities

  • Oil refineries | Demand for refineries in Europe has increased after geopolitical tensions tightened capacity, and elevated margins for refined products.
  • Oil market | The latest report from the Energy Information Administration (EIA) shows that OPEC+ is fighting non-OPEC members for position. Non-OPEC+ members such as the United States, Brazil, Canada and Guyana account for more than 80% of the global supply growth.
  • Iron ore prices have stabilised around $100 after a volatile week. Data from China showed a mixed picture for steel demand with factory output increasing, but port holdings of iron ore increased to the highest level in a year, and steel production was only marginally higher in the first two months of the year. The country continues to see a prolonged slump in the property sector.
  • Shipping cost | The Drewry World Container Index fell 4% last week, the latest in weekly falls since 25th January 2024. Prices are 77% higher than the same week last year, and 123% more than 2019 levels.
  • Shipping routes | Droughts have meant that the Panama Canal Authority has had to impose strict limits on vessel traffic throughout the last year. Local conservation efforts mean that in the first quarter of this year, water levels have fallen just over one foot, compared to three during the same period last year. However, side effects of the process lead to increasingly saltier water infiltrating Panama’s largest source of potable water.

UK economy

  • Levelling Up | The Public Accounts Committee (PAC) has said that councils had spent just 10% of funds dedicated to “levelling up” projects and the majority of “shovel-ready” schemes have had to extend their deadlines. The funds must be spent between 2020/21 and 2025/26.
  • Asking prices | Data from Rightmove shows that housing asking prices have increased at their fastest pace in 10 months. At the same time, Nationwide’s house price index showed an annual growth in prices for the first time in more than a year in February.
  • Inflation data will be released on Wednesday, ahead of the Bank of England’s rate decision later this week. Many expect it to have fallen sharply to 3.5% from 4% in January, driven by lower food prices and energy bills.
  • Apprenticeships | The Prime Minister will announce a new initiative this week to fully fund apprenticeships in small businesses for people under 21 years old.
  • Tourism | The Association of Leading Visitor Attractions – a tourism trade body – has encouraged the government to reinstate tax-free shopping for overseas visitors after new data showed the number of visitors at the UK’s attractions remains 11% below 2019 levels.
  • Recession | Data on GDP from the ONS showed that the UK economy fell into recession during the final quarter of 2023, shrinking 0.3%, after a 0.1% fall in the previous quarter.

Global economy

  • China | Industrial output in China increased by 7% between January and February, fixed-asset investment rose by 4.2%, and retail sales increased by 5.5%. This positive news means that few expect policymakers to increase support for the economy after a large stimulus package was announced late last year.
  • Saudi Arabia | The Kingdom’s non-oil revenues reached 50% of GDP in 2023 after prolonged OPEC+ cuts to oil output and a focus on diversification under the Saudi Vision 2030 which was announced three years ago.

Environment

  • Rain | The last 18 months were England’s wettest since records began in 1836. The Met Office commented that while winters are getting warmer, they are also getting wetter as the atmosphere has an increased capacity to hold moisture.

Friday to Friday

Price / Index Week %
change
Annual %
change
FTSE 100 7,727.42 0.88 5.34
FTSE 250 19,512.91 -0.45 5.64
Nikkei 38,707.64 -2.47 41.61
CSI 300 3,569.99 0.71 -9.82
S&P 500 5,117.09 -0.13 30.65
Nasdaq 16,973.17 5.52 45.94
CAC 40 8,164.35 1.70 17.89
Dax 17,936.65 0.69 21.45
$ per £ 1.2740 -0.85 4.93
€ per £ 1.1701 -0.38 2.60
Gold £/oz 1,693.30 -0.07 3.73
Brent Oil $/barrel 85.34 3.97 16.95

Weekly Summary

Construction momentum has some significant hurdles to overcome; unsupportive policies with changeable dates, falling demand yet increasing costs, shipping challenges, and unpredictable commodity prices.

News that the UK fell into a slight recession at the end of 2023 will perhaps come as a surprise to few, with many looking to the positive news of an improving macroeconomic position in the quarters ahead and the belief that the bottom of the market has passed leading to increased confidence for real estate deals and projects.

Author contact

Rachel Coleman
Rachel Coleman,
Associate Research Analyst