Debt and taxes

Economic Week In Review | Issue 453 | 28 October 2024

UK construction and property

  • Contract forms | The Construction Leadership Council issued a statement condemning the practice of amending forms of contracts to introduce onerous and/or difficult to insure terms. The full statement can be found here: https://www.constructionleadershipcouncil.co.uk/news/standard-appointment-terms/
  • Infrastructure funding | This week’s Budget is expected to include changes to the government’s self-imposed debt rules to allow the government to fund infrastructure. The change is expected to release up to £50bn.
  • Office uptake | According to Savills, office uptake in Greater London and the South East has increased by 38% in 2024 so far. Grade A space accounts for 80% of take-up.
  • Developer contributions | Research by the Home Builders Federation found that more than 25% of developer contributions collected by local authorities are unused after five years. It suggests that more than £8bn of unspent funds have been collected in England and Wales.
  • Safety | Balfour Beatty and Laing O’Rourke Company Select Plant Hire have trialled a new attachment for concrete skips developed by Conquip Engineering Group. An extended flow gate handle removes the need for someone to stand below a suspended load.
  • Construction business confidence has reached its highest point in almost three years according to a survey by accountancy trade body the Institute of Chartered Accountants in England and Wales (ICAEW). Construction sector business confidence stood above the national average of 14.4 at 25.3 for Q3 2024, its highest reading since Q4 2021.
  • New work | Last month construction SMEs experienced the sharpest rise in new work in two and half years, according to the latest survey by NatWest. The bank’s SME Business Activity Index tracks the growth of smaller firms and recorded a reading of 55.1 for construction in September more than five points above the neutral mark of 50, showing signs that demand is rebounding.  
  • Council housing revolution | Deputy Prime Minister, Angela Rayner is planning to double council house building arguing that council housing is vital to hitting the target of building 1.5 million homes. She believes the homes will help avert a projected £9 billion rise in the benefits bill and cut the cost of temporary homeless accommodation which is currently impacting council finances. 

Global economy

  • Hydrogen network | German regulators have approved the construction of a nationwide hydrogen network as the country transitions away from fossil fuels. Some sections are expected to be completed before 2032, with the project cost forecasted at $21 billion, which the private sector will largely cover. According to the Association of Transmission System Operators, the network should be able to transport up to 278 terawatt hours of energy in the form of hydrogen every year, equivalent to a third of Germany’s current natural gas consumption. 
  • German factories | Volkswagen AG is to close at least three factories in Germany as part of a cost-cutting drive. It will also carry out universal pay cuts of 10%. Nearly a third of all major passenger-car factories run by Europe’s five largest manufacturers were underutilised last year, producing less than half their maximum capacity, according to Bloomberg News.

UK economy

  • Business confidence | According to the latest Lloyds Business Barometer, the net balance of optimism towards the economy has fallen to a four-month low ahead of the Budget. However, businesses are still largely confident, with 55% feeling confident (down from 57% last month).
  • Jobs data | Long-running problems with the Labour Market Survey (LMS) from the ONS are continuing and economists expect that it will make it difficult to assess how the Budget will affect jobs. The LMS has been under scrutiny recently following large discrepancies between it and other indicators such as tax records and business surveys, as well as low response rates to the survey. The Bank of England’s chief economist criticised recent attempts to fix the data saying that it has “not yet led to improvement”.
  • London job vacancies are expected to remain below pre-pandemic levels as hybrid working reduces the need for shop assistants and baristas due to lower footfall. Economists at recruitment site Indeed suggest that vacancies are 25% lower in the capital than before Covid. The rest of the UK has rebounded faster.
  • Council loans | The Deputy Prime Minister announced that struggling councils will no longer need to pay a “punitive” premium on financial payments.
  • Economic forecasts | EY Item Club’s latest economic forecast suggests the UK economy will grow slower than expected over the next two years. It now predicts growth of 0.9% this year, rather than 1.1% as it expected in July.
  • Public borrowing exceeded official forecasts in September, recording the third-highest figure for the month since records began in January 1993.

Commodities

  • Water | According to the Environmental Secretary, Steve Reed the UK’s lack of water infrastructure is now holding back economic growth by not allowing homes to be built. Water demand is expected to outstrip supply by the mid-2030s. In addition to new water infrastructure, nine new reservoirs are planned in England. Seven regions in south and east England could experience water scarcity by 2030 and 14 water companies covering most of central and southern England are already classified as being water-stressed, allowing them to impose meters on households.
  • Oil prices fell by 4% after Israel’s strikes on Iran were less severe than many thought and avoided oil and nuclear facilities.

Environment

  • Clean towns and cities | Six towns and cities are to develop the UK’s first heat network zones which will recycle excess heat from data centres or factories to heat nearby buildings. The schemes in Bristol, Leeds, London, Plymouth, Stockport, and Sheffield will share £6m of government funding with construction expected in 2026.
  • Climate data | An unexpected impact of the war in Ukraine; Nato has warned that Russia is withholding data which is necessary for modelling the impacts of climate change from the Arctic. Data is gathered from 95 field bases, but 21 are “on pause”.

Friday to Friday

Price / Index Week %
change		 Annual %
change
FTSE 100 8,248.84 -1.31 13.13
FTSE 250 20,819.91 -1.56 23.44
Nikkei 37,913.92 -2.74 22.34
CSI 300 3,956.42 0.79 11.06
S&P 500 5,808.12 -0.96 41.06
Nasdaq 18,518.61 0.16 46.47
CAC 40 7,497.54 -1.53 10.33
Dax 19,463.59 -0.99 32.52
$ per £ 1.2978 -0.33 6.83
€ per £ 1.2003 0.05 4.64
Gold £/oz 2,119.75 1.65 28.06
Brent Oil $/barrel 76.05 4.09 -14.74

Weekly Summary

Change is definitely in the air ahead of this week’s Budget, and the US election reaches its final week of campaigning.

Wednesday’s Budget will hopefully provide clarity on tax changes and the extent of public funding, and in turn, allow confidence to return to the market.

Author contact

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

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