Economic Week In Review | Issue 451 | 14 October 2024

UK construction and property

• Infrastructure costs | Systemic weaknesses in how the UK delivers infrastructure projects drive up costs by as much as 25%, according to the National Infrastructure Commission (NIC). In a report published by the NIC, researchers identified four key factors: a lack of clear strategic direction; challenges with project clients and sponsors; inefficient consenting and compliance; and a constrained supply chain. Construction outturn costs in the UK have risen by around 30% more than GDP per capita since 2007. 
• Output | The latest data from the ONS shows that construction output in the last year grew 0.3%, but grew 1.0% in the three months to August 2024. New work grew by 1.7% in the quarter, whilst repair and maintenance was flat.
• Buried pipes | The Ordnance Survey has been named the future operator of the National Underground Asset Register (NUAR). The NUAR aims to make it easier for contractors to get information about assets in the ground and reduce the need to contact several organisations to ensure safe digging and excavation.
• Social impact investing | New research by Better Society Capital (BSC) has found that more than half of the UK’s social impact investing goes into social housing. The overall amount has increased to £10bn at the end of 2023, with pension funds being a significant investor.
• Roof gardens | A judge has ruled that roof gardens count as an additional storey when deciding whether a building falls into the high-risk category under the Building Safety Act.
• Apprentices | Nearly one-third of affected ISG apprentices and graduate trainees now have jobs at other contractors including Mace, Sir Robert McAlpine, Sisk, Wates, and Bowmer & Kirkland, according to Build UK. 

Global economy

• Deflation | Consumer price pressure cooled in China. Whilst retail sales are slowing, the services sector (especially food service and air passenger travel) is growing.
• Europe | The European Central Bank is expected to lower interest rates this week, despite seeming to rule them out a month ago.

UK economy

• According to Halifax, house prices have risen for the third straight month in September. Market conditions have improved over the summer thanks to strong wage growth and falling interest rates with boosted confidence amongst potential buyers, with the number of mortgages agreed up more than 40% compared to last year, and now at their highest level since July 2022. House prices rose 0.3% compared to the previous month, 1.2% on the quarter and 4.7% on the year, the highest annual rate since November 2022.
• Growth | The economy grew by less than expected over Spring, expanding 0.5% between April and June, down from an initial reading of 0.6%, after output fell more than first thought in the construction and manufacturing sector.
• Budget rumours | Jonathan Reynolds, the business secretary, refused to rule out whether employers’ national insurance contributions (NICs) could increase in the Budget later this month. The lead economist at the Confederation of British Industry has said that some firms are beginning to delay hiring and investment decisions until the Budget show the economic policy of the new government.
• Investment summit | The government will hold its inaugural International Investment Summit, promising to “remove needless regulation”. It is expected to bring billions worth of major investment deals in AI, life sciences, and infrastructure. Despite a heated exchange of words over the last few days, DP World has confirmed a £1bn expansion of London Gateway Port which will turn it into Britain’s “largest container port within five years”.
• Workers rights | The government has overhauled employment rights in what it calls the “biggest upgrade to rights at work for a generation”. Changes include making unfair dismissal a day one right (currently a two-year qualifying period) and flexible working being the “default” position unless an employer can prove it is “unreasonable”.

Materials and commodities

• Oil retreated on Friday with Brent Crude falling by 1.2% to $78.46 a barrel and WTI crude falling 1.1% to $74.99 per barrel. Still, prices remained set for a second weekly gain as investors weigh the impact of hurricane Milton’s damage on U.S oil demands against any broader supply disruptions if Israel attacks Iranian oil sites. On the supply side, Libya’s NOC said on Thursday that it has restored production close to levels before the country’s central bank crisis reaching 1.22 million barrels per day.
• Copper | Britons have been urged to go “urban mining” to counter a looming shortage of copper. Research by Recycle Your Electrics found that there are approximately 823 million unused or broken pieces of tech which contain almost 39,500 tonnes of copper, enough to provide 30% of the copper needed for the UK’s planned transition to decarbonise the grid by 2030. Copper demand is outstripping production driven in part by sustainable projects and the EV Copper prices have rebounded from losses seen earlier last week, as analysts bet on more economic stimulus measures from China, the world’s biggest importer of copper, with copper on the LME rising 1% to $9,772.50 a ton.

Environment

• Carbon Markets | The UN’s new carbon market will have a compulsory mechanism to prevent developers of carbon credit projects from breaching human rights or causing environmental damage with their activities, both of which dogged the previous UN carbon market—for example, forced relocations due to infrastructure like a hydropower dam in Panama. The new rules will require questionnaires designed to assess the risk their activity could pose which are then reviewed by an external auditor. These rules apply to new projects as well as thousands of others that are seeking to transfer into the new market.
• Climate Change Committee | Emma Pinchbeck, CEO of Energy UK will oversee the publication of the seventh carbon budget advice in early 2025 and the fourth climate change risk assessment independent assessment in 2026. It will detail the carbon emission limit for the period of 2038-2042 and how the UK should respond to national climate risks.

Industrial strategy

The government will launch its industrial strategy today, but construction is not one of the eight industrial sectors. The plan will focus on:

• “Advanced” manufacturing
• “Clean” energy industries
• Creative industries
• Defence
• Digital strategies
• Financial services
• Life sciences
• Professional and business services

Clare Barclay, the Chief Executive of Microsoft UK, will oversee the new British Industrial Strategy, chairing the Industrial Strategy Advisory Council. Businesses are being asked to respond to the Industrial Strategy Green Paper, ahead of final publication in the first half of next year.