Issue 443 | 19 August 2024 - Turner & Townsend alinea

UK construction and property

Retentions | Research led by the Construction Leadership Council has intended to create an alternative to retentions, by sharing data on defects and an industry quality score. However, the pilot has stopped as too few contractors were willing to share data on defects.
Activity | ONS data shows that construction output fell annually in Q2 despite two months of growth. New Work fell by 0.5% between April and June, whilst Repair and Maintenance increased by 0.4%. New orders grew by 16.5% in Q2, boosted by Private Commercial work and Infrastructure.
Construction starts | Glenigan’s construction review shows that construction starts have increased by 8% in the three months to July 2024 compared to a year earlier. Major project starts have increased significantly, by 42%. However, planning approvals were down, with the value of major projects falling by 54%, and on-site work being 10% smaller. Glenigan’s economic director said the situation was “cautiously optimistic.”
HS2 unions | Unite and GMB have agreed a site access deal on the tunnelled London portion of HS2 after a five-year campaign. The agreement allows union members to meet workers in site rest areas, and during inductions to discuss employment matters.

Start-up failures | The number of failed start-ups in the US has increased by 60% in the past year as the technology boom of 2021-2022 unwinds. Venture Capital investment into start-ups has fallen since the demise of Silicon Valley Bank last year. Instead, some large tech companies have been poaching staff from start-up companies.

Investment | The Chancellor is considering plans to consolidate local government pension schemes. The plan is similar to Canada’s pension system where pension funds are used to invest in infrastructure projects.
Budget hopes | Manufacturing trade bode Make UK has surveyed its members and found that more than half disagreed with the scrapping of the northern leg of HS2 and that the poor quality of the UK’s roads was increasing logistics costs. Most were hoping for an autumn Budget to address the decade of decline in national infrastructure.
Energy bills are expected to increase to an average of £1,714 this winter, a 9% increase, although lower than last winter’s £1,835 cap. This week Ofgem will set out the new cap for the period between October and December. The increase will be driven by higher gas prices. Changes have already been announced which will reduce the number of people who receive the £200 or £300 Winter Fuel Payment.
Minimum wage | HMRC has launched a nationwide crackdown on SMEs that are not paying the national minimum wage. Non-compliant firms will be offered a free HMRC “health check”. Failure to take up this offer will result in a formal enquiry.

Iron ore | Falling demand due to economic struggles in China has pushed iron ore prices down to levels last seen in November 2022. The fall has also removed approximately $100bn in market capitalisation from the “big four” producers – BHP, Rio Tinto, Vale and Fortescue. Crucially, prices have fallen below the $100/tonne mark at which high-cost production becomes uneconomic.
State of trade | The latest survey by the Construction Products Association (CPA) showed an increase in both light-side and heavy-side sales, but an ongoing concern about the near-term demand and labour availability. The CPA’s head of construction research, Rebecca Larkin, commented that they are now seeing “the green shoots of recovery.”
Fear index | Bloomberg’s VIX index, which is often known as the “fear index” as it is a measure of volatility, has reached its highest level since the pandemic. It suggests that stockmarkets may see continued volatility.
Lithium competition | Albemarle – the world’s largest lithium producer – has encouraged global governments to act to loosen the dominance of China’s industry. Albemarle is mothballing production lines in response to prices falling 80% in the last two years. China processes 65% of the world’s lithium and has cheaper construction costs and subsidies, as well as more technical skills.
Gold | The price of gold has reached a near-record level as investors expect the US Federal Reserve to cut interest rates.

Zig zags | A study by Qilong Cheng at Columbia University in New York suggests that incorporating zigzag patterns into building walls could help cool overheated buildings, reducing their surface temperature by up to 3C through radiative cooling.
Clean power | China added new clean energy output comparable to the UK’s total electricity output. Energy generation from coal and gas has fallen by 5% in the year to July.
Climate goals | Australia’s largest lender, the Commonwealth Bank, will stop financing fossil fuel companies which don’t meet the emissions pathway dictated by the Paris Climate Agreement.
Climate Justice | The International Court of Justice (ICJ) will hold public hearings in December in a case that can potentially become the reference point in defining a country’s legal obligation to tackle climate change. Whilst the ICJ’s advisory opinions are not legally binding under international law, they are likely to be used as citations in other lawsuits.