Taking care of the big things

Economic Week In Review | Issue 465 | 3rd February 2025

UK construction and property

  • Output forecasts | The Construction Products Association has revised its forecasts, and now expects that construction output will grow by 2.1% this year, and 4.0% in 2026. Its last forecast – which was published just before the autumn Budget – suggested growth of 2.5% for 2025. Its new forecast recognises higher inflation levels and fewer interest rates than previously expected.
  • Heathrow expansion | The government voiced its support for the expansion to a third runway at Heathrow airport and is inviting proposals. The expansion is expected to create over 100,000 jobs, boost the economy, and ease flight pricing whilst reducing delays. The Chancellor highlighted that the expansion must be delivered in line with the UK’s legal, environmental, and climate obligations.
  • Commuter hubs | The government has pledged to make it easier to build housing around train stations as part of its planning reforms and its target of 1.5 million homes, suggesting the default answer to development in such areas should be “yes”. Currently, developers must mitigate environmental harm before they are granted permission. It is hoped that the new Natural Restoration Fund will allow development to continue while providing funds for natural recovery.
  • Infrastructure planning | The Government issued a working paper seeking feedback from stakeholders on ways to “streamline the development of critical infrastructure”. The paper says that upgrading major economic infrastructure – which includes electricity networks, clean energy sources, roads, public transport links, and water supplies – is “essential” to delivering basic services.
  • Build-to-rent | According to the British Property Federation, planning consents for build-to-rent (BTR) homes increased by a third in 2024, with London as the leading market for the first time in two years. However, analysis by Savills shows that starts in Q4 2024 fell by 18% year-on-year.
  • Skills | The Department for Education has published its response to Mark Farmer’s 2023 review of industry training boards. The report recommends that the Construction Industry Training Board (CITB) and Engineering Construction Industry Training Board (ECITB) “should be merged into a single rebranded body tasked with improving workforce resiliency through a single combined strategy”, an idea which has been rejected by the Minister of State for Skills. A steering group will be set up to consider and implement the recommendations.

Global economy

  • Tariffs | President Trump has threatened the BRIC group of emerging economies with tariffs of 100% if they move away from the US dollar as an international means of payment. The group aims to act as a counterweight to the G7. Economists assume that far-reaching tariffs will lead to an increase in prices in the US. Brazilian President Luiz Inacio Lula da Silva said on Thursday that if the US hiked tariffs on Brazilian products, he would reciprocate but also stated that he would prefer improved relations over a trade war.
  • Federal reserve | The US central bank maintained its current interest rate of 4.25% to 4.50%, adding that it will remain on hold until the committee has more time to assess how the new President’s trade, tax, and immigration policies will impact inflation.
  • European rates | The European Central Bank has cut interest rates, easing the cost of borrowing across the 20-member eurozone group. The bank adjusted the rate down by a quarter of a percentage point to 2.75%.
  • Eurozone growth | Economic growth stalled in the fourth quarter of 2024, dragged down by contractions in Germany and France. Annual growth for 2024 as a whole stood at 0.7%, a small improvement from 2023’s 0.4% growth. Europe has suffered from the impacts of increased energy costs which led to cutbacks in a range of sectors such as chemicals and car manufacturing. Germany has also suffered from weak demand for its exports and structural issues like labour shortages.

UK economy

  • Sterling | The pound headed for its fourth consecutive monthly loss on Friday, falling 0.7% in January against a basket of currencies. It has lost more than 7.5% since September after it reached a two-and-a-half-year high. The pound has been under pressure from investors who are concerned about the outlook for the economy.
  • Recession concerns | A survey by the Confederation of British Industry (CBI) found that bosses in the private sector expect a significant fall in activity in the next three months. Companies are battling the impact of rising National Insurance Contributions and concerns that the economy may be facing a recession after economic growth flatlined in November after contracting in September and October.
  • Incinerator tax | The Government is set to impose pollution charges on waste incinerators under the emissions trading scheme. The move is expected to cost councils more than £1bn a year, and has fuelled concerns that they could send more rubbish to landfill.

Materials, commodities and currencies

  • Oil | Opec+ is meeting this week to assess President Trump’s push for increased oil production in the US. The President has set out plans to maximise oil and gas output which could disrupt global supply, but experts don’t expect it to star a price war. US oil production tends to swing around shale oil output, which is more costly to extract and BMI analysts estimate that Opec+ has spare capacity of less than $50/barrel which would make shale oil unviable.
  • Self-healing roads | Researchers at Swansea University have found that mixing tiny plant spores into bitumen could extend surface lifespan by 30%. The spores fuse cracks back together which in turn, prevents potholes forming.
  • Copper: This week copper has dropped from a two-month high, amid concerns of weak economic growth and factory activity in China, despite Beijing’s recent efforts to boost its economy. China’s manufacturing PMI index fell to 49.1, the lowest since August. The uncertain path for China’s economic recovery remains one of the key downside risks to industrial metals outlook for 2025. The implication of Trump’s potential tariffs on steel, aluminium and copper imports are unlikely to help business sentiment.
  • Iron ore the key raw material in the manufacturing of steel is on track for a soft start this year as China’s imports in January fell to multi-month lows. China is the world’s biggest importer of iron ore and expects to import 99.5 million metric tons of ore in January, down from the official custom figure of 112.5 million tons of ore in December.
  • Gas cap | The gas cap the European Union (EU) introduced during its 2022 Russian gas crisis will expire on Friday. The cap was designed to kick in if European gas prices hit 180 euros per megawatt hour – a price which has not been reached since the depths of the energy crisis in 2022. The cap has split opinions among EU countries and industries with Italy wanting the EU to keep the cap and redesign it to limit prices at far lower levels.

Environment

  • Water | The Water Industry National Environmental Programme (WINEP) sets out 24,000 actions water companies must take over the next five years to meet their legal requirements for the environment and represents a £22.bn investment. The programme will lead to improvements in water infrastructure to secure future supply, habitats and biodiversity and drinking water quality. Further goals set out in the programme is to upgrade storm overflows including installing monitors at these sites, protection and enhancement of rivers and reducing the amount of water abstracted, leading to an estimated 60 million litres of water being retained in the environment every day.
  • Fire concerns | The UK’s National Fire Chief’s Council has said that the UK is not prepared for a climate breakdown and the ability of the fire service to tackle weather-related emergencies was at risk. They called for investment and access to longer-term forecasts.

Friday to Friday

Price / Index Week %
change		 Annual %
change
FTSE 100 8,571.96 0.82 12.56
FTSE 250 20,950.48 2.11 9.27
Nikkei 39,572.49 -0.90 9.44
CSI 300 3,817.08 -0.41 20.05
S&P 500 6,040.53 -1.00 21.82
Nasdaq 19,627.44 -1.64 25.58
CAC 40 7,950.17 0.28 4.71
Dax 21,732.05 1.58 28.45
$ per £ 1.2445 -0.39 -1.43
€ per £ 1.1967 0.71 2.23
Gold £/oz 2,258.60 1.76 39.88
Brent Oil $/barrel 76.76 -1.02 -0.74

Weekly Summary

The Government’s 10-year infrastrcuture working plan should be welcomed by the industry as it aims to tackle planning delays and provide certainty of outcome, and gathering views from industry should enable some of the blockers to be addressed.

However, successive governments have committed to significant infrastructure pipelines and construction sector deals, only for them to remain as aspirations – as underlined by several of the recent announcements relating to schemes that have been around for a while. To truly drive growth, these projects need not just funding solutions, but delivery solutions too.

Author contact

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

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