Sign of things to come?

Economic Week In Review | Issue 442 | 12 August 2024

UK construction and property

  • Cabling capacity | HS2 is to sell spare fibreoptic capacity in rural areas to reduce the cost of increasing connections in less densely populated areas. Whilst the line is expected to be open between 2029 and 2033, telecom companies could have access to the masts and cabling two years before then.
  • Infrastructure | Anglian Water has announced plans to build two major reservoirs for £5bn. The schemes are expected to go to tender in January 2027. Still, the water company is beginning to engage with the market to inform the main works contract procurement and packaging strategy.
  • Artificial Intelligence | Construction companies developing AI systems to improve safety on site and reduce time spent repairing railways are some of the companies to receive a share of a £32m government fund.
  • Activity | The latest S&P Global PMI survey for construction saw activity grow at its fastest pace for two years. The headline figure has increased from 52.2 in June to 55.3 in July. Commercial activity grew, but the strongest growth was seen in civil engineering which grew at the fastest rate in nearly two-and-a-half years. New orders saw their strongest growth since April 2022, seeing a sixth consecutive month of growth. Paused projects were returned to the market and confidence improved.
  • Output prospects | The Federation of Master Builders (FMB) reported that output amongst small building firms has increased with workloads up 7% between Q1 and Q2, whilst enquiries have risen 3%. The FMB’s Chief Executive said the figures showed “clear improvement” but “there is still substantial room for improvement.”
  • Labour growth | Labour specialist VCG Group Ltd has seen its turnover grow by 20% due to HS2. It says that part of its strategy is to provide local labour rather than busing in labour, and therefore has set up a series of regional offices.
  • Building control | More than 4,000 building inspectors have registered with the Building Safety Regulator. A 13-week extension period was granted after concerns of low registration.

Global economy

  • Foreign investment | China has seen record amounts of money from foreign investors withdrawn in recent months, with $15bn pulled in Q2. Chinese firms have invested a record $71bn overseas at the same time.
  • Trade challenge | China has filed a complaint with the World Trade Organisation claiming that the EU’s tariffs on Chinese electric vehicles, claiming that they undermine global cooperation on climate change. The tariffs were brought in following an investigation that found the Chinese government unfairly subsidised its car industry.
  • Six-day week | In contrast to most reports of increased work-life balance and flexible working, a new law in Greece could see several sectors return to a six-day week. Greece has an acute labour shortage that has already increased the number of hours worked to above the EU average.

UK economy

  • Start-up support | Small businesses which received start-up loans under Rishi Sunak’s £1.14bn Future Fund programme are at risk of being wound up as the terms of funding required firms to raise funding equivalent to the company valuation within three years or repay the loan in full and a 100% premium and any interest accrued. So far 27 of the 1,190 businesses have faced a winding-up petition.
  • Interest rate pressure | The Bank of England is facing pressure on its rate decision as wage, price and GDP data are expected to highlight upward inflation pressure, with economists expecting Wednesday’s CPI release to show an increase to 2.4%.

Materials and commodities

  • Material growth | Marshals will announce a new five-year strategy in November to take advantage of the growth in concrete bricks, solar panels, and civils and drainage products. The shift has been encouraged by the government’s focus on housebuilding.
  • Recovery signs | The Construction Products Association’s latest state of trade survey shows signs of recovery in the second quarter of 2024 as sales of heavy side construction products increased, the first quarterly growth since Q2 2022.
  • Non-certified boards | The Thermal Insulation Contractors Association (TICA) has raised concerns about the ongoing use of non-certified PIR boards on external ductwork. The TICA’s Technical Director warned that “manufacturers need to be clear and unambiguous about where their product can and can’t be used.”
  • Manufactured stone worktops are facing calls for tighter restrictions after the increased discovery of silicosis amongst installers. Australia has already introduced a ban on the material. The Health & Safety Executive says that adequate legislation is already in place.
  • Commodities | The Bloomberg Commodity index has fallen 5% in 2024 and is 27% lower than its June 2022 highs. Copper has fallen 20% since its peak in May.

Environment

  • Extreme weather plan | The City of London Corporation is rolling out £68m of environmental measures such as upgrades to riverside walls and changing planted flowers to drought resistant varieties. It warns that this is only a fraction of the amount that needs to be invested to prepare for a future of more extreme measures. The Thames Estuary 2100 project alone, will cost £16.2bn.
  • Weather-related claims have pushed average UK home insurance policies up to nearly £400, according to the Association of British Insurers. It represents a 6% increase from the previous quarter, and 19% higher than a year ago.
  • Peak energy | Population growth has compounded the impact of climate change on coffee to guarantee higher prices due to greater demand and a reduction in suitable land.

Friday to Friday

Price / Index Week %
change		 Annual %
change
FTSE 100 8,168.10 -0.08 8.56
FTSE 250 20,625.18 -0.97 9.71
Nikkei 35,025.00 -2.46 7.86
CSI 300 3,331.63 -1.56 -14.23
S&P 500 5,344.16 -0.04 19.72
Nasdaq 16,745.30 -0.18 22.72
CAC 40 7,269.71 0.25 -0.96
Dax 17,722.88 0.35 11.94
$ per £ 1.2764 -0.27 0.56
€ per £ 1.1684 -0.36 0.85
Gold £/oz 1,905.57 -0.13 26.40
Brent Oil $/barrel 79.66 3.71 -8.24

Weekly Summary

It is clear that we need to modify our built and living environments to prepare for future climate change. These modifications could include replanting, rebuilding, and reinforcing.

Surveys of sentiment consistently indicate growing confidence in the construction market. However, the actual utilization of this confidence and its translation into workload depends on continued economic stability, which is something we are closely monitoring

Author contact

Rachel Coleman
Rachel Coleman,
Associate Research Analyst

Related reviews

Website &AGENCY