Economic Week In Review | Issue 456 | 18 November 2024

UK construction and property

• Wages | The latest data from Hudson Contract – the industry’s largest payroll provider – shows that the average weekly earnings for self-employed tradespeople in the UK increased by 1.9% in October to £1,044. The average wage in London rose almost 5% to £1,147.
• Output | Total construction output increased by 0.8% in Q3, driven by new work output in September. The largest contributor to growth was private housing repair and maintenance, and infrastructure new work. New orders fell 22% in Q3, led by falls in private residential and private commercial work.
• House building | New home registrations increased 40% in the year to Q3 2024 but were slightly lower than in Q2 of the same year. Registrations are low compared to the pre-Covid years but appear to have stabilised and the National House Building Council (NHBC) suggests an “emerging mood of cautious optimism”.
• AI commitment | The Construction Leadership Council (CLC) has issued a sector directive on using AI and data to drive better health and safety outcomes. The CLC’s push for greater technology use in the sector follows a study by Costain last month, which said wider use of technology in construction could boost the sector by £417bn within two and a half decades.
• Cladding remediation | Safety chiefs have warned that clumsy remediation work is leaving critical building fire-response systems unable to do their job. Cross UK has issued a red safety alert regarding smoke vents. The group has received several reports of automatic opening vents (AOVs) being rendered inoperable by building works, including those related to façade replacement.
• Business administrations | The number of businesses filing for administration has surged by 37% since 2022, with real estate being one of the most affected industries according to law firm Shakespeare Martineau, using data from The Gazette of Public Record. It also warned that the new tax burdens announced in the Budget could cause greater financial distress.
• Office for Place | Housing minister Matthew Pennycook has revealed that the Office for Place – the government body set up in 2021 to champion good design and placemaking – will be scrapped. Its staff will be absorbed into the Ministry of Housing, Communities and Local Government (MHCLG). MHCLG will establish quarterly steering boards, focusing on design and placemaking to ensure work is guided by those with relevant professional and practical expertise.

Global economy

• US debt | According to the Institute of International Finance (IIF) America’s national debt is “set to explode” under Donald Trump. Analysts at the Washington-based institute said the incoming president’s plans to slash taxes without equal cuts to spending would push US national debt up from around 100% of GDP today to more than 135% in a decade. Inflation is also likely to rise if imports are made more expensive through tariffs. Such price pressures will likely force the Federal Reserve to leave its plan to cut interest rates, keeping borrowing costs higher for longer.
• Hungary | Prime Minister, Viktor Orbán, has been increasing Chinese capital flows into Hungary, increasing Hungary’s share of Chinese investment into Europe to more than a quarter in two years.

UK economy

• Unemployment rate | The rate of unemployment stood at 4.3% in the three months to September up from 4% the previous quarter. While wage growth has eased, pay is still rising faster than inflation. Excluding bonuses, pay grew at an annual rate of 4.8% between July and September – the lowest in more than two years.
• Workplace pension rules | The Chancellor announced plans to change workplace pension rules in favour of creating British ‘megafunds’ led by both local governments and the private sector. She claims that it will unlock up to £80bn in investment by pooling funds together. Ms Reeves also unveiled plans to condense the Local Government Pension Scheme (LGPS), currently a collection of 86 separate funds worth a combined £360bn, into fewer, bigger pots.
• Economic growth | The latest data from the Office for National Statistics shows that the UK economy unexpectedly shrank 0.1% in September.

Materials and commodities

• Lithium | The world’s largest lithium producer, Albermarle, has said that it is uneconomical for countries to move their lithium supply chains away from China because of low lithium prices and high operating costs.
• Concrete | Swiss carbon removal company Neustark and UK-based building material supplier Aggregate Industries launched a new technology designed to capture and permanently store carbon in recycled concrete. Their first UK site in Greenwich is expected to store up to 1000 tonnes of carbon dioxide per year – equivalent to the carbon absorbed by over 16,000 tree seedlings over a decade.
• Copper | Resource management company Veolia has developed a method to safely handle wires to recover copper from decommissioned nuclear plants, disposing of the plastic coating which surrounds and protects the copper wire within it from radiation. Previously these cables had to be incinerated. Veolia says that electric cables will make up hundreds of tonnes of waste during the planned decommissioning across various projects and an initial trial of 12 tonnes of cable that were stripped of their contaminated plastic coating found that the cores of the wire were tested for radioactivity and found to be safe, producing four tonnes of copper for recycling.  

Environment

• Carbon emissions | According to Deepki’s latest ESG index, the energy performance of Europe’s real estate stock has improved year on year. However, the UK and Germany have lagged behind the rest of Europe with the UK commercial property market having the highest emissions per square metre. Deepki found that the hotel sector had become the sector with the highest average carbon emissions per square metre. Average carbon emissions for the hotel sector increased by 8% since 2022 attributed to the hotel sector’s post-pandemic recovery. Europe-wide carbon emissions from the hotel sector also increased, by 24%, on average since 2021. This was followed by the health, retail, logistics, offices, and housing sectors.
• Electricity | Plans have been approved for the National Grid’s Lionlink and Nautilus interconnector cables to connect the UK to wind farms in the Netherlands and Belgium. Ofgem gave its backing despite concerns over huge substations and cabling systems where the interconnector comes ashore. It comes amid a long recent spell of gloomy weather (‘anticyclonic gloom’) for the UK with little wind, rain, or sunshine, which has seen renewable power generation fall significantly. The new underwater connections will sit alongside other interconnectors which give the UK access to nuclear power from France and hydroelectricity stations in Norway. Ofgem has confirmed plans for 18 more interconnectors by 2032, with the goal of becoming a net exporter of energy by 2030.

COP29

Kier Starmer has committed the UK to a more ambitious climate goal at the United Nation’s COP29 climate summit with plans to cut greenhouse gas emissions by 81% by 2035. The new goal is in line with a recommendation from a committee of climate advisers who last month, said the target should exceed the current 78% cut to emissions, measured against 1990 levels. Starmer said the new targets will not burden the British public, which excludes international aviation and shipping emissions. 

COP29 is taking place between the 11th to 22nd of November 2024, in Baku, Azerbaijan, and has been marred by controversy as climate organisations have criticised countries involved for continuing to invest in fossil fuels, even striking new deals at the summit itself.  

One of the main points at COP29 so far is focussed on the EU’s Carbon Border Adjustment Mechanism (CBAM), essentially a carbon tariff. The COP29 Presidency decided this topic will not be part of the official agenda, but the topic will be discussed informally at the global climate summit. South Africa has repeatedly called CBAM discriminatory, whilst India has been considering retaliatory measures and China has raised concerns with the WTO. Over the two weeks, eight crucial topics are expected to dominate discussions in Baku – each of them representing key challenges and opportunities for actions. 

Those eight topics include: 

• Climate finance  

• Loss and damage 

• Nationally Determined Contributions (NDCs) and emission reduction 

• The Global Goal on Adaption (GAA) and National Adaption Plans (NAPs) 

• Unequal climate impacts and Locally Led Adaption (LLA) 

• Nature-based solutions (NbS) and Indigenous rights 

• Carbon markets  

• Geopolitical context, conflicts and tensions – energy security concerns 

One of the key takes away from COP29 so far is based on a report by the Climate Action Tracker Project, which reveals that current policies would lead to a disastrous 2.7C of warming, above the IPCC’s goal of holding the increase in global average temperature below 2C above pre-industrial levels.