Construction in focus

Economic Week In Review | Issue 469 | 3 March 2025

UK construction and property

  • Chief advisor | The government its looking to appoint someone as a chief construction advisor “shortly” to oversee regulatory reform. The post was abolished in 2015.
  • Strategic plan | The CITB released its strategic plan for 2025-2029. The plan includes £554m to attract diverse and skilled people into construction, £315m to support training and retention, £137m to develop a skills and training system to meet current and future needs and £143m for its own operations. The CITB is targeting 15,000 new entrants into employment which would deliver an increase in employer confidence around the availability and quality of training and supporting 35,000 employers with upskilling.
  • Bidding practices | The Construction Leadership Council (CLC) recommended a move away from a relative price model, where compares prices against each other to an absolute price model, which typically marks against a pre-set price. The commonly used model often sees bids ranked according to price, with the lowest price receiving the most points, or sees bids marked according to the mean average of price submissions. The group criticised the model for producing irrational and unexpected results, with price outcomes unable to be predicted prior to the evaluation stage.
  • Waste permits | The Mineral Products Association (MPA) has criticised the move by the Environmental Agency (EA) to impose a new 10% levy on waste permits. The new levy comes into force on sites in England which are regulated by the EA from the 1st April 2025. The EA estimate this levy would generate £3.2m extra per year and reduce offending in the waste sector by increasing enforcement activity by 30%.
  • Grenfell inquiry | The government’s response to the Grenfell inquiry introduced a raft of changes including a new “super-regulator” for the entire industry, which is to be introduced in 2028, in addition to tighter controls on construction products including new requirements for previously unregulated products, as well as measures to ensure greater transparency and oversight of testing. The government has accepted the recommendation to introduce licensing of principal contractors on higher risk buildings. The industry has warned that the changes could create disruption in the market.
  • Groundworks training | Oxford North, a £700m innovation district which is under construction will host free, on-site training for groundworkers who hold a CSCS card, and Careys will guarantee a job interview upon completion of the three-week course. It marks the latest in Careys’ plan to roll our campuses across the UK after seeing its success at Wembley in 2024.
  • Infrastructure delays | Sections of tunnelling work along HS2 into London’s Euston station have been rescheduled with some works put on hold for up to two years. A spokesperson for HS2 was reported as saying the whole HS2 programme was being reviewed as part of a major reset.
  • Gatwick expansion | The transport secretary has said that she is “minded to approve” the £2.2bn expansion plans at Gatwick subject to the development of noise mitigation plans. The plans would bring the airport’s northern runway into full use.
  • Energy sale | The National Grid has sold its US renewables arm to Brookfield in a £1.4bn deal to help fund its investment plans.

Global economy

  • Tariffs | President Trump confirmed that the previously announced tariffs against Canada and Mexico would be implemented next week, once the one-month negotiation period between the countries has passed. He has also unveiled a plan to impose a 25% tariff on cars and other manufacturing goods from the EU. An investigation into copper imports to the US has been considered as the first step towards tariffs on the metal.
  • China’s population | China’s political heads are to consider lowering the marriage age in an attempt to reverse its falling birth rate. The current age for marriage is 22 for men and 20 for women. China’s population fell for the first time in six decades in 2022 and has fallen every year since.

UK economy

  • Defence spending | The Prime Minster announced the biggest sustained increase in defence spending since the end of the cold war. Defence spending will rise from its current 2.3% share of the economy to 2.5% in 2027, which means that the UK will spend £13.4 billion more on defence every year from 2027. He said he wants that figure to reach 3% of GDP during the next parliament. To fund this spending the development assistance aid will be slashed from its current level of 0.5% of gross national income to 0.3% in 2027.
  • Investment cuts | According to the Confederation of British Industry, British retailers plan to cut investment by the most in more than five years. The CBI’s quarterly survey of retailers showed that the investment intentions balance – the difference between the percentage of stores planning to invest more or invest less – sank to its lowest since May 2019 at -56% in February, down from -29% in November driven by the impact of the autumn Budget and weak consumer demand, despite wages now rising faster than inflation.
  • Vehicle production | The number of vehicles built in the UK last month fell by 17%, compared to last January, according to the Society of Motor Manufacturers and Traders (SMMT), reflecting weakness and softening demand in important markets such as the EU, China and the UK itself. Four out of five cars built in the UK were exported, with the EU remaining the most important region, taking just over half of exports.
  • Youth unemployment | Figures from the ONS show there were almost 987,000 young people aged 16 to 24 not in education, employment, or training (NEETs) in October to December last year, up 13% when compared to Q4 2023, the highest level in more than a decade. Labour announced plans late last year for a “youth guarantee” to ensure every young person has access to education or training to help them find a job, including through a programme of “youth trailblazer” schemes in eight English mayoral authority, which is scheduled to launch this spring. Experts say the rise in the number of NEETs is a result of years of underfunding for employment support, alongside the impact from Covid lockdown and a sharp rise in youth mental ill-health, alongside challenges for employers.
  • Energy bills | The average energy bill for households will rise in Great Britian by £111 in April to £1849 a year, after the energy regulator announced the third consecutive increase in the cap on gas and electricity charges. The 6.4% rise from April largely reflects an increase in wholesale prices.

Materials and commodities

  • Cement | Data from the Mineral Products Association show that since Brexit, cement imports have increased from around a fifth of the UK’s market to a third. In 2003, imports accounted for around 10% of UK sales, in 2019 – when the UK was still part of the EU – it was 22%, but data from 2023 shows imports now account for 32% of sales.
  • LNG demand | Global demand for Liquid Natural Gas (LNG) is estimated to rise by 60% by 2040, driven largely by economic growth in Asia and efforts to cut emissions in heavy industries and transportation according to an annual report by Shell. More than 170 million tonnes of new LNG supply are set to be available by 2030, however the start times of new LNG projects remain uncertain due to supply chain bottlenecks, geopolitical tensions, regulatory hurdles and labour shortages. Significant growth in LNG supply will come from the US, potentially accounting for a third of global supply by 2030 with the expansion of Qatar’s North Field project set to come online in 2026, could mean the US and Qatar could provide around 60% of global LNG supply by 2035.
  • Oil | OPEC+ is debating whether to raise oil output in April as planned as it struggles to read the global supply picture because of fresh U.S sanctions on Venezuela, Iran and Russia. Since then, prices have fallen from above $82 to $73 on hopes Trump would clinch a peace deal with Russia and Ukraine and boost Russian oil flows.
  • FX volatility | Expectations of volatility in the currency markets have fallen after a rocky start to the year as traders become increasingly dismissive of President Trump’s tariff threats after feeling “burnt” by trades earlier in the year made after unsubstantiated claims.

Environment

  • Wind overtook gas as the largest source of electricity in the UK for the first time last year providing a record 34.4% of the country’s power needs in 2024 taking it above gas-fired power stations at 33.8%. The growing reliance on wind reduces reliance on the UK’s 32 main gas-fired power stations. There are still concerns around how reliable wind generation during periods of calmer weather, particularly given the expected increased demand in the coming years. For example, Britain’s wind generation plunged to virtually zero in November, with wind farms only meeting between 3-4% of the country’s electricity demand with gas-fired plants needed for around 60%.
  • Solar expansion | China’s expansion of solar energy is expected to slow down for the first time in six years, according to the China Photovoltaic Industry Association (CPIA). The industry suffered setbacks last year, with oversupply causing manufacturers to incur losses, while countries such as the US imposed high tariffs on cheap solar cells to protect their domestic companies. The CPIA said it expects an increase of between 215 to 255 gigawatts in output this year compared to 277.57 gigawatts of new solar cell capacity installed last year. The association expects an increase in new installations again from 2026.
  • Hydrogen fuel | Novelis successfully tested the use of hydrogen fuel to power a recycling furnace.  Using hydrogen instead of the same volume of natural gas when operating a melting furnace can reduce carbon dioxide emissions by up to 90%. With significant expansion of local recycling capacity, the aluminium giant’s UK plant in Latchford, Warrington will be transformed into a prototype for high-recycled content and decarbonised aluminium production. The demonstration project at Novelis Latchford is part of the UK government’s Industrial Fuel Switching Competition Programme.

Friday to Friday

Price / Index Week %
change		 Annual %
change
FTSE 100 8,809.74 1.69 14.67
FTSE 250 20,326.38 -1.39 5.02
Nikkei 37,155.50 -4.18 -7.27
CSI 300 3,890.05 -2.22 9.96
S&P 500 5,954.50 -0.98 15.91
Nasdaq 18,847.28 15.51 38.57
CAC 40 8,111.63 -0.53 2.24
Dax 22,551.43 1.18 27.16
$ per £ 1.2588 -0.44 -0.49
€ per £ 1.2103 0.07 3.63
Gold £/oz 2,272.23 -2.24 38.04
Brent Oil $/barrel 72.81 -1.67 -12.85

Weekly Summary

The return of a chief construction advisor to government is a positive step forward. The industry has lacked a stable voice in Westminster, with 25 construction ministers since 2001. The role will provide ministers with expert advice, highlight those in the industry who are driving positive change, and to also hold the industry to account. However, the reaction from the industry is understandable; regulatory reform can usually be expected to create uncertainty, especially when many higher-risk buildings are still struggling to achieve gateway 2 sign off.

Government’s focus on the construction sector this week, brings the opportunity to put it at the heart of the plans for growth by instilling confidence in the sector.

Author contact

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

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