Planning for confidence

Economic Week In Review | Issue 462 | 13 January 2025

UK construction and property

  • Output | The S&P Global Purchasing Managers’ Index (PMI) for the construction sector dropped to 53.3 in December from November 55.2, its lowest since June. Builders have been suffering from high interest rates and fragile consumer confidence. Although there has been a rise in the number of tenders for commercial construction, this increase has not been enough to offset a fall in house building and a lack of new infrastructure work.
  • Bid rigging | The Competition and Markets Authority (CMA) announced that it is using AI to tackle bid rigging. CMA head Sarah Cardell voiced concerns of collusion which would make public sector contracts more expensive. It claims that AI’s ability to scan bidding data at scale to spot anomalies and identify areas of potential anticompetitive conduct has been proven quite successful during its pilot programme with one unnamed government department so far.
  • Dust exposure |The Health and Safety Executive (HSE) has issued a warning for companies installing stone worktops due to the risk of exposure to respirable crystalline silica (RCS). Workers are at risk of particles of dust containing RSC when processing stones, including engineered stone, by cutting, chiselling, and polishing leading to irreversible and often fatal respiratory conditions. The Trades Union Congress (TUC) recently called for a UK ban on the material.

Global economy

  • China’s trade | Exports from China reached a record in 2024, ahead of expected tariffs from the US. Its trade surplus reached a record $922 billion, 21% higher than in 2023. However, this increase was partly helped by a lack of growth in import levels.
  • Bond selloff | Threats of fresh trade wars have sparked a global rout in government bond markets, raising yields. The UK’s 10-year Treasury yield reached 4.7%—a post-2008 high. Germany’s 10-year Bund yield rose to a five-month high, and Japan’s hit a 13.5-year high of 1.185%.
  • German inflation | According to Reuters, in December German inflation rose to 2.9%, more than the forecasted 2.6% predicted by analysts. The rise was attributed to higher food prices and a smaller drop in energy prices compared to previous months. Eurozone inflation is expected to have risen to 2.4% in December from 2.2% in November. The overall annual average inflation rate in Germany is expected to stand at 2.2% in 2024, well down from 5.9% the previous year.
  • Special economic zone | Malaysia and Singapore signed an agreement on Tuesday to create a special economic zone to attract global investment and ease the cross-border flow of goods and people. The zone will offer tax breaks and include several flagship areas for various sectors, from manufacturing and aerospace to tourism, energy, and healthcare. The move is beneficial to Singapore, a global financial hub with scarce natural resources and land.

UK economy

  • Economic concerns | Surveyed economists expect UK inflation to reach above 3% this year, driven in part by increasing energy bills after the energy price cap was moved. They have also raised concerns after increasing yields have put pressure on government finances.
  • Retail sales | The British Retail Consortium (BRC) has warned that sales were near to flatlining in the “golden quarter” between October and December, which could create pressure on jobs. Total sales in 2024 were only 0.7% higher than the year before, which the BRC suggests indicates that consumers are becoming more cautious. Additional figures released in the last week by Barclays show that consumers cut back on essential items and pub or restaurant food instead, spending money on experiences.
  • Skills chasm | Economic growth in the UK risks being held back by a skills shortage between regions with the gap already wider than in many comparable countries and is forecast to further widen according to a report by the Learning and Work Institute. If trends continue, 71% of Londoners will have a degree by 2035, compared with 29% in Hull and East Yorkshire, and 39% in Norfolk. According to the think tank, closing the gap between London and the rest of the UK would require more than 4 million extra people outside London to gain a higher education qualification. 
  • Combustion vehicles | Transport Secretary Heidi Alexander in a statement to parliament published on Monday, stated that no new petrol and diesel cars will be sold after 2030. This reinstates the 2030 date which had been moved to 2035 last September by the previous Conservative government. Meanwhile, the Secretary of State confirmed that all new cars and vans must be 100% zero-emission by 2035. This comes at a time when Britain has become Europe’s largest electric car market for the first time outselling Germany last year and surging ahead of France after a rise in EV registrations at the end of 2024.
  • NIC implications | British businesses are expected to increase prices and reduce staff numbers in response to an increase in employers’ social security contribution that will take effect in April. A survey by the Bank of England’s Decision Maker Panel of more than 2000 firms showed that 61% of companies expected reduced profits, 54% planned to raise prices, 53% expected lower employment and 39% intended smaller pay rises due to the rise in NIC set out in the autumn Budget.
  • Industrial strategy | Manufacturers have urged the government to fulfil its promise of an effective industrial strategy, with Make UK saying that “setting investor confidence on a path to growth” is key to overcoming additional employment costs. However, Whitehall officials have warned that there is little money available to meet the industry’s expectations

Materials, commodities and currencies

  • Pound sterling | The pound has had a difficult start to the year, falling below US$1.22, its lowest level in over a year.
  • Steel | The UK government has launched a new Steel Council to advise on rebuilding the industry and developing its upcoming Steel Strategy. The council will be led by the Business Secretary and Chair of the Materials Processing Institute Jon Bolton and will bring together industry figures, experts, trade unions and devolved governments to secure the long-term future of steelmaking in the UK.
  • Minerals | The UK Critical Minerals Intelligence Centre (CMIC) has highlighted supply bottlenecks for critical minerals in the UK, suggesting that the UK needs to stockpile, in addition to a domestic equivalent to the US Inflation Reduction Act which gave subsidies for domestic production of some minerals. In 2024 the CMIC issued a list of minerals which were most at risk for UK supply chains, and niobium – a mineral vital to many types of steel – was at the top of this list.
  • Sustainable construction materials market | Research by Global Market Insight has predicted that the sustainable construction materials market will reach $734.9 billion by 2032. This expansion is largely driven by the growing adoption of green certifications and standards, such as BREEAM and LEED.
  • Oil | Joe Biden has banned drilling across a large area of coastal water, weeks before Donald Trump takes office. The incoming President has already vowed to reverse the ban. In the UK North Sea gas production is forecast to drop by 11% a year for the foreseeable future as windfall taxes and a net zero crackdown impact investors’ appetite. According to the UK Government’s latest Statutory Security of Supply report this fall is double the predicted rate in 2022 before higher taxes were imposed. 
  • Gas prices | The recent cold snap has drained the EU’s stores of gas at the fastest rate in seven years, and pushed wholesale prices up (although below the levels seen during the Ukraine crisis).

Environment

  • Carbon emissions | 25 companies across the country have received nearly £52 million to reduce their carbon emissions to boost the UK’s mission as part of the Plan for Change, to become a clean energy superpower and accelerate to net zero. This funding aims to help businesses of all sizes expand and innovate, including supporting new jobs through construction and operations.
  • Climate change | 2024 has been confirmed by the Copernicus Climate Change Service to be the warmest year on record globally. It was the warmest year on record for Europe, with an average temperature of 10.69 degrees Celsius, 0.28 degrees warmer than the previous record set in 2020. Human-induced climate change remains the primary driver of extreme air and sea surface temperatures; while other factors, such as the El Nino Southern Oscillation, also contributed to the unusual temperatures observed during the year.

Friday to Friday

Price / Index Week %
change		 Annual %
change
FTSE 100 8,248.49 0.30 8.18
FTSE 250 19,733.94 -4.16 2.79
Nikkei 39,190.40 -0.18 10.16
CSI 300 3,732.48 -1.13 13.65
S&P 500 5,827.04 -1.94 21.81
Nasdaq 19,161.63 -2.34 27.98
CAC 40 7,431.04 2.04 -0.46
Dax 20,214.79 1.55 21.01
$ per £ 1.2213 -1.64 -4.18
€ per £ 1.1929 -1.15 2.58
Gold £/oz 2,203.76 3.68 37.14
Brent Oil $/barrel 79.76 4.25 1.88

Weekly Summary

With economic confidence seeming to wane recently, it is unsurprising to see calls for the delivery of a strong industrial strategy growing louder. Many see it as a way to reinvigorate growth and give some certainty after several years of feast-to-famine behaviour, and uncertain project deadlines. Whether these plans are at a broader, economy-wide level, or with a smaller, more specific focus, they will be vital to achieving the goal.

Author contact

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

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