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Economic Week In Review | Issue 427 | 29 April 2024

UK construction and property

  • Sizewell C | A nearby Pontins holiday park is set to be transformed into accommodation for 500 construction workers as preparation work for the £20bn project begins. The project will have a workforce of 7,900, at its peak, with a third coming from the local area. An accommodation campus on-site will house 2,400 workers. A dozen contractors and unions Unite and GMB have signed labour agreements with developer EDF.
  • Subcontractor payments | Berkeley Group is moving to a new finance system and causing concern that the transition could disrupt payments for six weeks. It expects to be unable to raise or make any payments between mid-June and the end of July. The Group says that it is proactively engaging with its supply chain to manage cashflow.
  • Financial worries | Analysis from Begbies Traynor shows that at the end of Q1 2024, 83,559 construction companies faced ‘significant’ financial distress, and an additional 6,141 were ‘critical’. The number of companies in the ‘significant’ category was almost 39% higher than the same period in 2023.
  • Output Forecasts | The Construction Products Association’s spring forecast suggests a narrowly larger fall this year than it previously thought due to heavy rain at the beginning of the year. Total output is now expected to fall by 2.2% this year, marginally worse than the 2.1% fall previously forecast in January. It has also modestly improved its view for 2025 by 0.1%. However, each sector will experience different degrees of recovery in the coming years, with the commercial sector being dependent upon large office towers and leisure/entertainment projects which paused due to high construction and financing costs.
  • Skills shortage | Industry recruitment agent Randstad UK has warned that an imminent skills shortage will “make 2007’s war for talent look like a water fight” as several large or mega construction projects are already underway and many more are set to begin.
  • Planning costs | A Freedom of Information request by Bloomberg revealed the taxpayer is paying a record amount to cover costs of developers who have successfully appealed planning permissions that had been denied by local authorities. 30% of rejected applications were overturned last year, the highest level in at least 10 years.

Materials and commodities

  • Market consolidation | Anglo American has rejected a £31.1bn takeover by BHP, saying it is “highly unattractive” and “opportunistic”. The merger would have created the world’s largest copper producer.
  • UN Global Plastics Treaty | Negotiations have begun to curb plastic pollution, however, many expect it to have no impact due to companies arguing against it, and changes would make food more expensive. The EU approved new rules on plastic aimed at reducing single-use plastic, and one rule was a ban on single-use plastic packaging on fresh fruit and vegetables.
  • Iron ore | Brazil could export more than double its normal level of iron ore this year if rivers stay high and there is enough water in the rivers. Recent years have been affected by drought which forced barges to operate at a reduced capacity. Iron ore prices have risen for the last three weeks as demand from China improved.

UK economy

  • Retail prices | Analysis by the Energy and Climate Intelligence Unit (ECIU) suggests a 17.5% reduction in the amount of wheat, barley, oats, and oilseed rape grown in the UK due to unprecedented wet weather. The report suggests that sales prices of bread, beer and biscuits will have to rise. In 2022-23 England saw its wettest October to March period since records began in 1836.
  • House prices rose for a seventh consecutive month in April according to Zoopla. The number of sales rose by 12% in the four weeks to 21st April, marking an uninterrupted increase since October 2023. Buyers have been encouraged by lower mortgage rates and growing consumer confidence.
  • Cost of living | A survey of almost 3,200 consumers by Deloitte shows that people have reduced the amount of money spent in pubs or bars than at any time since the end of lockdown. Desire to eat out has fallen to levels seen at the end of 2022 and interest in pubs and bars has fallen to the lowest since their reopening after the pandemic as prices remain high.

Global economy

  • Saudi Arabia | Riyadh is expected to lower its expectations for population growth. It previously had a target to double its population by 2030 to support the Crown Prince’s agenda to diversify the kingdom’s economy. The city’s population is expected to grow by 1.8% this year to 7.8 million, and reach 8.5 million by 2030, but wants to target 10 or 15 million.
  • Bull market | Hong Kong’s Hang Seng Index has increased 20% from its January lows, driven by property shares. It is a broadening of the recent stock market rally that has been seen throughout the region.
  • European ports are facing congestion due to a surge in electric vehicle imports, mostly from China. The car-handling terminal at the port of Bremerhaven, Germany used to have an 80% export, 20% import ratio, but recently this has changed to 50:50. The port says that the problem is not the number of cars arriving, but the speed at which they are transported onwards. Sales of cars have slowed and there is a shortage of truck drivers at a time when China is proactively pushing sales.
  • Bank rates | Investors expect central banks to delay rate cuts as several price pressures continue to drive inflation.

Environment

  • Economic destruction | The Green Finance Institute has warned that continued loss of natural habitats over the next decade could cause an economic slump in Britain worse than that caused by the 2008 financial crisis or the Covid pandemic. It estimates that 12% could be wiped off GDP by the 2030s.
  • Conservation efforts | International researchers from dozens of research institutes have spent 10 years looking at conservation measures, and the study – which was the first of its kind – found that conservation actions are effective at reducing global biodiversity loss. A review of measures, some from 1890, found that they had a positive effect in two-thirds of cases.
  • Climate Change | The Climate Change Committee has criticised current policy saying that it did not prioritise climate change and that UK targets are not as ambitious as they once were.

Friday to Friday

Price / Index Week %
change
Annual %
change
FTSE 100 8,139.83 3.09 3.42
FTSE 250 19,824.16 2.23 2.05
Nikkei 37,934.76 2.34 31.46
CSI 300 3,584.27 1.20 -11.04
S&P 500 5,099.96 2.67 22.32
Nasdaq 15,927.90 4.23 30.27
CAC 40 8,088.24 0.82 7.97
Dax 18,161.10 2.39 14.06
$ per £ 1.2472 0.60 -0.86
€ per £ 1.1670 0.30 2.43
Gold £/oz 1,871.42 -3.23 18.20
Brent Oil $/barrel 89.50 2.53 12.52

Weekly Summary

The forecast from the Construction Products Association is positive. Whilst poor weather has dampened expectations, the revision is minimal. A key concern, however, is that whilst the report talks of schemes waiting to restart after being paused, the supply chain seems increasingly precarious according to the latest figures from Begbies Traynor.

Author contact

Rachel Coleman
Rachel Coleman,
Associate Research Analyst