Waiting for the Budget

Economic Week In Review | Issue 452 | 21 October 2024

UK construction and property

  • HS2 review | A new independent review of HS2 has been announced after the cost of the line has increased further. The new chief executive of the projects – Mark Wild, who was previously head of the Elizabeth Line – is expected to find that costs have increased due to inflation, alterations to the scheme and delays.
  • Infrastructure task force | The Chancellor met with finance leaders to discuss how to enable funding and speed up the delivery of major projects across the UK. The task force will focus on working with the private sector to build business confidence in UK infrastructure investment. The 14-member task force includes Charlie Nunn, chief executive of Lloyds Banking Group, and Anne Richards, vice chair of investment firm Fidelity International. No construction firms have been included in the task force.
  • Planning approvals fell 47% in the third quarter of 2024, according to Glenigan.
  • Insolvencies | Construction remains the worst-affected industry for insolvencies, with 4,310 firms becoming insolvent in the 12 months to 31st August 2024, 17% of the total number of insolvencies.
  • First 100 days | A survey by Pick Everard with planning and consultancy Lichfields, has found that the construction industry’s appetite to invest has not increased after the General Election. 34% of people surveyed cited uncertainty as the biggest barrier to entry with 24% warning that the constraints on local authority capital budgets were also holding firms back from committing resources.
  • Technology | Greater use of technology could boost the UK’s economy by £417bn within two and a half decades, according to a survey by Costain. Extensive use of connected and autonomous plant (CAP) in the industry could bring £356bn worth of benefits by 2050, creating 50,000 high-skilled industry jobs by 2050, as well as boosting safety and net zero standards.
  • Apprenticeships | A report by the University Awards Council with Sheffield Hallam University has warned that the government’s new plans to restrict levy funding of level 7 apprenticeships will widen the skills gap.
  • Labour rates | Construction vacancies have increased by 15% in the year and are now 44% higher than pre-pandemic levels. Average wages in the industry also grew by 4.2%.

Global economy

  • Interest rates | The European Central Bank (ECB) cut interest rates to 3.25% after inflation in the Eurozone fell below its 2% target to 1.7% in September down from 2.2% the previous month. This is the third cut the ECB has made this year, putting it two ahead of the Bank of England.
  • China | Banks have cut their benchmark lending rates in China. The one-year loan prime rate has fallen from 3.35% to 3.10% and the five-year version from 3.85% to 3.60%. The move comes after the People’s Bank of China set out steps to encourage households and businesses to borrow money. Consumer price inflation in the country fell to 0.4% in the year to September, adding to deflation concerns.

UK economy

  • Workplace health support | A study by the Royal Society for Public Health found that almost half of the UK workforce lacks access to health support, such as winter flu vaccinations and NHS cardiovascular checks. The study advised that encouraging better support could reduce the economic cost of ill health by £100bn a year.
  • Sick pay | A consultation on statutory sick pay (SSP) is being launched alongside the second reading of the employment rights bill.
  • Private landlords | Rightmove has said that 18% of homes listed for sale in September had previously been rented out, blaming the increase on fears that capital gains taxes will be increased in the Budget later this month.
  • 2024 Investment Summit secured a record-breaking £63bn of investments (more than double the £29.5 billion committed at last year’s Global Investment Summit) and nearly 38,000 jobs for the UK. At the summit the government re-stated its focus on planning reforms, removing the “bureaucracy that blocks investment”, AI and Data Centres expansion, and net zero through renewable energy.
  • National Wealth Fund (NWF) | The new national wealth fund unveiled a £1bn deal with Barclays and Lloyds Banking Group to provide partial guarantees on loans to housing associations for the retrofit of thousands of homes for better energy efficiency. A separate £150m deal is expected to be announced this week with the Housing Finance Corporation as well as plans for the NWF to absorb the UK Infrastructure Bank, announced this week by Rachel Reeves. The treasury intends to inject £5.8bn into the NWF.

Currencies and commodities

  • Exchange rate and inflation | The pound’s valuation has dropped to the lowest level in almost two months after UK inflation fell below the Bank of England’s 2% target for the first time in three years to 1.7%. The downturn in inflation was largely driven by airfares and fuel with the average cost of petrol in the UK falling to its lowest rate since 2021. A sudden fall in inflation rates suggests a cut in interest rates is likely to come from the Bank of England.
  • Copper prices climbed after China unveiled new measures to boost liquidity in its stock market, fuelling hopes of further stimulus.
  • Oil prices stabilised at a two-week low on Wednesday following a 7% fall over the prior three days after forecasts for lower oil demand and easing concerns that Middle East conflict will disrupt supply. On the demand side, OPEC and the International Energy Agency cut their 2024 global oil demand forecasts, with China accounting for the bulk of the downgrades with fiscal stimulus announced in China failing to give oil prices much support. Britain has imposed sanctions on 18 further Russian oil tankers and four LNG vessels, the largest batch to date against the country’s so-called “shadow fleet,” which Britain says uses illicit practices to avoid Western restrictions on Russian Oil.

Environment

  • Nature envoy | The UK has appointed Ruth Davis as its first special representative for nature, a move which is intended to “put climate and nature at the heart of our foreign policy”. She will be charged with developing global agreements on halting the decline in species.
  • Solar panels | In a groundbreaking new trial, solar panels will be placed onto railway tracks between the sleepers in Switzerland next spring as part of a three-year pilot. The panels will be removable to allow for welding and general maintenance of the line and will be installed (or removed) by a specially designed machine that can install 1,000 sqm of panels daily.

Friday to Friday

Price / Index Week %
change		 Annual %
change
FTSE 100 8,358.25 1.27 12.92
FTSE 250 21,149.58 1.85 24.17
Nikkei 38,981.75 -1.58 24.70
CSI 300 3,925.23 0.98 11.81
S&P 500 5,864.67 0.85 38.84
Nasdaq 18,489.55 0.80 42.40
CAC 40 7,613.95 0.48 11.70
Dax 19,657.37 1.46 32.83
$ per £ 1.3021 -0.38 7.16
€ per £ 1.1997 0.43 4.57
Gold £/oz 2,085.25 2.56 28.01
Brent Oil $/barrel 73.06 -7.38 -20.72

Weekly Summary

Next week’s Budget is the focus of much of the current news, and it will hopefully confirm tax changes, outline public spending and borrowing, and hopefully return confidence to the market after another reason to pause and review. However, there was positive news from the investment summit and agreements for the National Wealth Fund.

Author contact

Rachel Coleman
Rachel Coleman,
Associate Research Analyst
Kishan Patel
Kishan Patel,
Research Analyst

Related reviews

Website &AGENCY