Making progress

Economic Week In Review | Issue 472 | 24 March 2025

UK construction and property

  • Project starts have fallen by 32% in value over the past three months, driven by a decline in projects over £100m and weak business confidence, when compared with the equivalent period last year, according to data from Glenigan. It attributed the slowdown to “delays in planning approvals, higher borrowing costs and weak business confidence, prompting developers to delay investment until the economic outlook improves.” Major project awards increased by 35% year on year, suggesting an increase in future activity, but detailed planning approvals fell by 21%.
  • Building Safety Levy | The Home Builders Federation (HBF) has written to the Chancellor warning that the forthcoming building safety levy will result in fewer homes – including affordable homes – being built. The levy will see developers pay a fee on new housing developments which require building control approval and is expected to raise £3.4bn over 10 years. The HBF claims that the need for the fund (which was originally set to be implemented by Michael Gove) has not been clearly demonstrated so has called for the publication of an impact assessment.
  • Insolvency | 305 construction firms in England and Wales became insolvent in January – the second most of any industry, just behind wholesale and retail and representing 15.7% of all business collapses. In total, 4,031 businesses became insolvent in the year to January. Despite the “strong pipeline of work,” the sector is not seeing an increase to the volume of work. Delays are being caused by slow mobilisation, expensive debt issues and economic uncertainty in the wake of the governments Autumn budget.
  • CITB Levy exemption | The Construction Industry Training Board (CITB) has is consulting on changes to its levy. Proposed changes include raising the total wage bill threshold at which companies pay the charge from £135,000 to £150,000, and companies with a monthly wage bill of between £150,000 to £499,999 pay 50% less (an increase at the upper end from £449,999).
  • “Site-ready workers” | The Chancellor announced £600m of funding to train 60,000 construction workers. The fund will be split across new Technical Excellence Colleges, more funding for construction courses, Skills Bootcamps, and funding for colleges to develop relationships with local construction firms to ensure relevant skills can be taught. New foundation apprenticeships will be introduced in August this year and as part of the new offer, employers will be given £2,000 for every foundation apprentice they take on and retail in the industry.
  • BCIS tender prices | The latest report from the BCIS showed UK tender prices increased by an average of 0.5% in the first quarter of this year compared with the last three months of 2024. Overall, annual growth in the BCIS All-in Tender Price Index stood at 2.3%. David Crosthwaite, chief economist at the BCIS, said the relatively slow price movement in the first quarter of 2025 reflected how “ongoing economic uncertainty is impacting activity.” However, challenging financial conditions, combined labour shortages, have led contractors to become more risk-averse, particularly on bigger projects.

Global economy

  • Transatlantic tariff dispute | The European branch of the American Chamber of Commerce in a report titled “The Transatlantic Economy 2025,” warned that tariff conflict threatens transatlantic business valued at £7.1 trillion annually. The Chamber noted that trade was only part of the transatlantic exchange with the real point of reference being investments. Majority of American and European foreign investments do not go to emerging markets, but rather to the US and the EU.
  • Germany | Germany’s parliament approved plans for a substantial increase in spending, a move which reverses decades of fiscal conservatism in the hopes of reviving economic growth and scaling up military spending. Incoming Chancellor Friedrich Merz’s conservatives and Social Democrats (SPD) – who are in talks to form a centrist coalition after last month’s election – want to create a $500 billion euro fund for infrastructure and to ease constitutionally enshrined borrowing rules to allow higher spending on defence. This announcement has encouraged economic sentiment with the index soaring to 51.6 points in March 2025, up from 26 points in January and well above the market expectations of 48.1. This marks the highest level of economic optimism since January 2023.
  • Debt service | Research by the Organisation for Economic Cooperation and Development (OECD) has found that interest payments are consuming the largest portion of economic output since 2007. Within the 38 OECD countries, debt service as a percentage of GDP has reached 3.3%, a steep increase from 2.4% in 2021. In comparison, the World Bank calculates that the same group of countries spent 2.4% of GDP on the military in 2023.

UK economy

  • Interest rates | The Bank of England held interest rates at 4.5% as it aims to tread more carefully amid fears of resurgent inflation. UK inflation have risen in recent months, reaching 3% in January. The increase has primarily been driven by energy prices, water bills and bus fares. The next decision will take place on the 8th of May, with much depending on what happens to the rate of inflation, but also the health of the overall economy.
  • Wage growth | UK earnings growth was unchanged at 5.9% in the three months to January, staying at the highest level since the three months to April last year. Wage outstripped CPI inflation by 3.2%. Vacancies rose for the first time in more than two-and-a-half years despite worries over incoming wage cost pressures on firms brought about by the rise in NIC for employers and a rise in the national minimum wage.
  • Government borrowing last month was £15bn more than last year, with the deficit higher than economists predicted. The gap between what the government takes in and what it spends was £10.7bn in February, as spending was higher, and tax takes were lower than forecast.
  • Services growth | The UK S&P Composite Purchasing Managers’ index is considered a measure for the health of the private sector, and it rose to 52 in March, an increase on February’s 50.5, and the highest reading in six months. The reading was higher than expected and shows positivity in the market ahead of the Spring Statement this week.

Materials and commodities

  • Copper prices surpassed $10,000 per tonne last week as demand increased fuelled by the threat of tariffs. President Trump ordered an investigation into “ the threat to national security from imports of copper” which would bring about a 25% levy on the metal.
  • Aluminium |Concerns that metal tariffs could divert a wave of aluminium towards Europe have prompted the European Commission to consider possible curbs on imports. The EU is also considering duties on its own exports of scrap metals to shore up the industry. The EU already has safeguards in place, which includes import limits for steel, however both the steel and aluminium industries have been calling for more action to protect them from a global glut, which is set to worsen for Europe as metal is diverted away from the United States. To further boost trade defence measures, the commission will implement a “melted and poured rule.” The rule would stop importers from changing the metal’s origin “by performing minimal transformations.”
  • Steel | The European Commission released its “Action Plan for Steel and Metals” which intends to protect its steel industry. In the UK, MPs heard from steel suppliers that US customers have already cancelled orders for steel produced in the UK.

Environment

  • Solar panels | GB energy will lead a £200m solar panel project for hospitals and schools, in the first investment for the state-owned company since it was set up last year with the aim of lowering energy bills. The government has said the first installations are expected to be made this summer.
  • Construction emission success | Emissions from the construction sector have stopped rising for the first time since 2020, according to the Global Status Report for Buildings and Construction 2024/25 from the United National Environment Programme (UNEP), showing global emissions from construction in 2024 remained at the same rate as in 2023, despite continued urbanisation. The report found that stronger energy efficiency measures and the introduction of stricter building codes are starting to pay off, with the energy intensity of the global building sector dropping by nearly 10% while shares of renewable energy has risen by almost 5%. However, the report highlighted that half of all new buildings worldwide are still constructed without mandatory energy codes, this gap being more pronounced in emerging economies. Therefore, the UN report set out targets for governments to accelerate this action. It called on major carbon-emitting nations to adopt mandatory zero-carbon building codes by 2028, with other countries following no later than 2035. According to the UN, given that half the world’s buildings expected by 2050 have yet to be constructed, the lack of stringent standards could lock in decades of unnecessary emissions.
  • Carbon markets | Britain is considering linking its Emission Trading System (ETS) with the European Union’s carbon market ahead of a UK-EU Summit in May. Britain is seeking enhanced cooperation on security, law enforcement and on removing trade barriers with the EU, when leaders of both sides meet at the Summit. The UK quit Europe’s ETS in 2020 launching its own carbon market in 2021. Both the UK and EU ETSs charge power plants and other industrial entities for each ton of carbon dioxide they emit. Currently prices in the UK trade scheme are £45 per metric ton lower than the EU. Analysts have said linking the two systems would likely see UK prices rise to meet those of the EU.
  • UK emissions | According to new analysis by Carbon Brief, the UK’s greenhouse gas emissions (GHG) fell by 3.6% in 2024 as coal use dropped to its lowest level since 1666. The closure of UK’s last coal-fired power station in Nottinghamshire and one of its last blast furnaces at Port Talbot steelworks, Wales were a large part of the fall. Another contributing factor was a nearly 40% rise in the number of electric vehicles being sold. The report also stated that UK emissions are now 54% below 1990 levels. Last year at COP 2024 the UK pledged an 81% cut to emissions by 2035 when compared to 1990 levels. This forms the UK’s Nationally Determined Contribution (NDC) – a commitment that countries make to reduce their greenhouse gas emissions to mitigate climate change.

Friday to Friday

Price / Index Week %
change		 Annual %
change
FTSE 100 8,646.79 0.17 9.03
FTSE 250 19,911.50 -0.42 0.95
Nikkei 37,677.06 2.41 -7.85
CSI 300 3,914.70 -2.29 10.01
S&P 500 5,667.56 0.51 8.28
Nasdaq 17,784.05 0.17 8.25
CAC 40 8,042.95 0.18 -1.34
Dax 22,891.68 -0.41 25.74
$ per £ 1.2897 -0.15 2.34
€ per £ 1.1932 0.44 2.40
Gold £/oz 2,340.87 1.45 36.45
Brent Oil $/barrel 71.61 1.46 -16.18

Weekly Summary

The government’s recently announced Planning and Infrastructure Bill will be debated in the House of Commons this week before going through the committee stage to negotiate the fine detail, before being sent for a third and final reading and finally, the House of Lords and Royal Assent. At the end of this fairly long process, the Bill promises to remove red tape, streamline planning and accelerate decision-making could reduce administrative delays leading to the strong pipeline of work materialising into an increase in the volume of work. While this is a promising development it will take some time to materialise.

There are several good news stories this week for two of construction’s greatest challenges: the skills crisis and its emissions. Positive news in these two areas seems to be increasing lately, possibly indicating how much focus is being given to them.

Author contact

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

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