Closing the gap in time?

Economic Week In Review | Issue 473 | 31 March 2025

UK construction and property

  • Building Safety Levy | The introduction of the building safety levy has been pushed back a year and will now come into effect in autumn 2026. The delay will give housing developers 18 months to factor the levy cost into their financial planning. The levy rate are applied per square metre, and are set per local authority area. The government published details on the levy last Monday, revealing that developments in Kensington and Chelsea will see the highest levy of £100.35/m2 and the lowest rate of £12.70/m2 will apply in County Durham. A discount of 50% applies on brownfield sites.
  • Planning and Infrastructure Bill | The Bill passed its second reading with a majority of 256 MPs supporting the reforms.
  • Affordable housing | The Chancellor announced an additional £2bn in grant funding for the development of affordable housing. This increase is expected to deliver 18,000 new homes, across schemes due to complete before the end of parliament. House builders have until March 2027 to start construction on the homes.
  • Infrastructure pipeline confidence | A report by the National Audit Office (NAO) has called for the government to improve the level of detail in the National Infrastructure and Construction Pipeline in terms of upcoming investment opportunities to ensure investor confidence and create a more competitive market. The report includes 12 lessons the NAO believes the government needs to take on board to prevent cost and delivery overruns on infrastructure programmes such as adopting a commercial strategy to deliver successful outcomes.
  • Construction Spring Statement | The government announced £13bn additional capital infrastructure investment over the next five years. The Office for Budget Responsibility (OBR) also predicted housebuilding will reach a 40-year high, with 305,000 homes a year by the end of the forecast period, this would deliver 1.3m homes over the next five years. The government also announced a construction training package which would train 60,000 workers to build homes, as well as an additional investment of £2bn in social and affordable housing.  The OBRs report forecast that 1.3 million new homes will be built by the end of parliament: a significant increase from the 12-year low in 2025-26 but below Labour’s manifesto pledge of 1.5 million.
  • EPC work | Research by Impact Data Metrics (IDM) has found that upgrading the UK’s housing stock to meet energy efficiency standards of a benchmark EPC C or better could cost between £6,220 and £11,120, a total of nearly £120bn.

Global economy

  • US consumer confidence fell for the 4th consecutive month to a 12-year low amid rising concerns over tariffs and inflation. The Conference Board reported last Tuesday that its consumer confidence index fell 7.2 points in March to 92.9. The report also stated that the measure of Americans’ short-term expectations for income, business and the job market fell 9.6 points to 65.2, the lowest reading in 12 years. A reading well below 80 is considered to indicate a recession in the near future.
  • Eurozone activity | The latest PMI survey revealed that the eurozone’s private sector expanded for a third consecutive month in March, with the Eurozone’s manufacturing output returning to growth and expanding for the first time in two years and reaching the highest level since May 2022. This resilience largely stems from a surprising rebound in Germany’s manufacturing sector, where producers have grown more confident following the announcement of a new fiscal package. Another bright spot was the easing of input cost inflation which slowed to its lowest since November, ending a five-month streak of acceleration with selling price inflation softening as well, with the pace of increase the weakest in 2025 so far.
  • Italian inflation grew by more than expected, reaching the European Central Bank’s target of 2% for the first time in 18 months. Its main drivers were energy and food costs.
  • Anti-foreign sanction laws: The Chinese government has implemented new rules to strength its countermeasures to foreign sanctions. Any individual or entities involved in making discriminatory measures against its citizens or entities could put them on an anti-sanctions list by the Chinese government. The new regulation details the sectors that foreign individuals and organisations can be restricted from as well as providing stipulations on what steps the Chinese government can take to enforce the countermeasures, including banning or restricting individuals or organisations from import and export of related goods and technologies.
  • Tariffs | President Donald Trump said last Monday that the US will impose a 25% tariff on imports from any country that purchases oil or gasoline from Venezuela. Venezuela’s oil exports increased by 10.5% in 2024, with China accounting for 68% of Venezuela’s crude oil exports, followed by the US at 23%, Spain and Cuba at 4% and Singapore, Malaysia and Russia at less than 1%, according to the US Department of Energy. Canda and Mexico may also see some relief after Donald Trump said that the April 2nd ‘reciprocal tariffs’ may not be as harsh as he once promised. This week president Donald Trump also announced a new 25% tariff on cars and car parts not built in the US. The current rate of import tax is 2.5% for cars. Mexico is the top supplier of cars to the US, followed by South Korea, Japan, Canada and Germany.

UK economy

  • Economic rebound | Financial services and investment in technology has helped push the Purchasing Managers’ Index (PMI) from S&P Global to 52 in March; its highest level in six months. Despite the rise in services, other industries continue to struggle. Manufacturing activity shrinking at the fastest pace in 18 months. Employment in the private sector overall has shrunk in each of the past six months amid fears of National insurance increases due to hit next month and an increase in the minimum wage limiting companies’ ability to hire staff.
  • National Wealth Fund | The National Wealth Fund has added more than £70bn in private investment to help make the UK a clean energy superpower, strengthen the defence sector and deliver economic growth. The new strategic direction set clean energy, advanced manufacturing, digital technologies and transport as its priority for the National Wealth Fund, with the Chancellor stating there will be big investments made in green projects, such as carbon capture, green hydrogen, gigafactories, green steels and ports. Currently the National Wealth Fund economic capital limit is £4.5bn, and will be increased to £7bn, allowing it to take on greater risk and investment in more green projects that don’t have access to private finance.
  • UK finances | The OBR revised its UK growth forecast down to 1%, from 2% in the autumn. The Chancellor has tightened fiscal policies to restore the fiscal headroom – how much leeway the government must cut taxes or increase spending while sticking to its self-imposed fiscal rules. The OBR stated the £9.9bn surplus generated in the autumn Budget will have been more than wiped out by interest payments on government debt, leading to a £4.1bn deficit by 2029/30. It found that policy changes including welfare reforms and cuts to day-to-day departmental spending, will restore it to the £10bn surplus the chancellor had in October. However, the OBR has also stated that if “global trade disputes escalate to include 20 percentage point rises in tariffs between the USA and the rest of the world”, it could reduce economic growth by as much as 1%. Could wipe out the surplus the government is predicted to have by 2029-30, reducing it “to almost zero”.
  • ONS data | The Cabinet Office is to look into the performance of the ONS and its data, as fears build that the Chancellor is “flying blind” and that the data are not reliable enough to steer the UK’s economy. Earlier this month, the Bank of England’s Monetary Policy Committee reinforced the need for “high quality and reliable official data across the full range of economic and labour market statistics.”

Materials and commodities

  • Steel | British Steel announced that it will start a consultation on closing the UK’s last remaining blast furnaces at its Scunthorpe site after experiencing production instability and significant financial losses of around £700,000 a day. In a statement, British Steel said blast furnaces and steelmaking operations were no longer financially sustainable “due to highly challenging market conditions, the imposition of tariffs, and higher environmental costs relating to the production of high-carbon steel.”
  • Material prices | The Material Supply Chain Group has warned that some price increases have started to come through. The group expects the cost of construction products this year to increase between 2% and 8% dependant on product type, with energy-intensive products seeing the largest increase. There is also uncertainty about the price of steel as negotiations continue on UK-American tariffs.
  • Builders’ Merchants | The latest Builders Merchant Building Index (BMBI) show that the value of sales in January were 2.3% lower than a year earlier. Volumes were flat. In the 12-month period to January 2025, takings and sales volumes fell by 4.1%.
  • Windfall tax on oil and gas | The North Sea Transition Taskforce, which is backed by the British Chambers of Commerce, said ministers should remove the oil and gas windfall tax by 2030. It says that the current effective tax rate of 78% was “throttling investment” and risks lower revenues for the Treasury. The government has opened a consultation on the post-2030 fiscal regime.
  • “Tweet-driven uncertainty” | Commodity traders have complained that uncertainty in President Trump’s policies are adding additional costs and sparking volatility. Due to the timing of his tweets, traders are “semi-seriously” considering changing working hours.
  • Oil | Macquarie Group Ltd’s global economist has suggested that oil prices will likely fall near to $60-a-barrel amid a continued oversupply of oil. However, the bank also warned that if refinery capacity falls faster than petroleum demand, the longer-term outlook could be more positive.

Environment

  • Shipping emissions | As part of a new maritime net zero strategy, the UK government has pledged as to cut shipping emissions by 30% by 2030, with larger vessels such as tankers and cruise ships needing to decarbonise first, according to the Department for Transport. The new Maritime Decarbonisation Strategy sets out a path to reaching net zero by 2050 by reducing greenhouse gas emissions first by 30% by 2030, and then 80% by 2040 before meeting the final target.  
  • Wetter futures | Research by Bristol and Cardiff universities on behalf of WaterAid found that 52% of the world’s most populated cities show a wetter trend over the last four decades. At the same time, 44% are getting drier. According to the study, a quarter of a billion people live in cities which have transitioned from on extreme to another  in the past 40 years (such as Lahore in Pakistan) which poses questions about access to clean water, and 15% of the world’s 100 most populous cities experienced “climate whiplash”, with an intensification of both droughts and floods.

Friday to Friday

Price / Index Week %
change		 Annual %
change
FTSE 100 8,658.85 0.14 8.88
FTSE 250 19,864.98 -0.23 -0.10
Nikkei 37,120.33 -1.48 -7.59
CSI 300 3,915.17 0.01 11.20
S&P 500 5,580.94 -1.53 6.22
Nasdaq 17,322.99 -2.59 5.76
CAC 40 7,916.08 -1.58 -3.53
Dax 22,461.52 -1.88 21.46
$ per £ 1.2941 0.34 2.44
€ per £ 1.1956 0.21 2.23
Gold £/oz 2,383.99 1.84 34.97
Brent Oil $/barrel 72.76 1.61 -15.83

Weekly Summary

The govenment’s focus on capital investment in public sector projects to “drive forward the economy”, focussing on “growth-enhancing investments” such as infrastructure, housing, and defence innovation will be welcomed in the construction sector, especially for schemes with funding attached to them. In light of this additional expected work, news that the construction industry will benefit from extra training for skills will be encouraging, although this will take some time to lessen the impact of construction’s skills gap.

 

Author contact

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

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