All change...again?

Economic Week In Review | Issue 479 | 12 May 2025

UK construction and property

  • Construction PMI | The UK Construction Purchasing Managers Index from S&P Global recorded 46.6 in April, marginally up from the previous month’s 46.4, but it marks a fourth consecutive decrease. Anything below 50 represents a contraction in the sector. Increasing business uncertainty has caused decision-making to slow down on projects, leading to further declines in total order books and cutbacks to staffing numbers. Civil engineering remained the weakest performing sector in April. Commercial work decreased for the fourth consecutive month, while the pace of decline accelerated to its fastest rate since May 2020.
  • Fitout costs | The Turner & Townsend Global Office Fitout report found that the cost of fitting out high specification commercial space in London is higher than anywhere else in the world. The report found the average high specification project cost in the capital was £4,671 per sq. m, followed by New York (£4,470), Zurich (£4,299), and San Francisco (£4,293). High material costs, specialist skill shortages, increased building safety regulations, and an ongoing shortage of chartered fire engineers are driving up costs, specifically in high rises, and a race for quality workspaces was attributed to driving up prices. Link to report: Home – Global office fit-out cost guide 2025
  • Planning and infrastructure reform | The Ministry of Housing, Communities and Local Government’s impact assessment for the Bill found that investments in the next decade could benefit from lower costs for businesses, fewer delays, and increased certainty because of measures in the Bill. Over the 10-year appraisal period, in present values, the total benefits from the Bill are estimated at £5.2 billion at the lower end, while the total costs are estimated at £2 billion.
  • Project starts | Glenigan’s May construction index found that activity has picked up pace in the three months to April, with the value of underlying project starts rising 7%, 3% above the same time last year, buoyed by a surge in house building. Civil engineering saw a sharp decline on the back of a slowdown in infrastructure and utilities projects, with starts down 22% compared with both the previous quarter and the same period last year. Starts in the office sector soared by 61% compared with the preceding three months, and were up 26% on 2024 levels, with London overall experiencing a 22% increase in activity compared with the previous quarter, though it was still down 10% on the previous year.
  • Insolvencies | Construction firm failures in April decreased by almost a third compared to the previous month, reversing the trend seen in February and March. Twenty-one firms entered administration in April – a drop of 32% compared to March. However, the latest figure is still more than 60% higher than in April 2024, when there were just 13 business failures. Fixed-price contracts, cost inflation, and tighter lending conditions continue to strain firms’ working capital.
  • Power grid upgrades | The Britain’s National Wealth Fund will lend £600 million to Iberdrola-owned Scottish Power to help fund upgrades to the country’s power grid. The funding will help speed up priority transmission grid upgrade projects, including its Eastern Green Link projects 1 and 4, which will help transport renewable power generated in Scotland to England. The financing will also deliver grid upgrades in five Scottish locations, including the building of new substations, overhead line reconfiguration, and the improvement of overhead transmission cables to increase capacity and resilience.

Global economy

  • China announced several measures to counter the impacts on its economy from the global trade war. Beijing’s central bank governor and other top financial officials outlined plans to cut interest rates and reduce bank reserve requirements to help free up more funding for lending. They also said the government would increase the amount of money available for factory upgrades and other innovations.
  • US-China tariff deal | The US and China released a joint statement which agreed to temporarily lower tariffs levied on each other. The US will lower its tariff from 145% to 30% and China will reduce its levies from 125% to 10%.
  • Retaliatory tariffs | The European Union published a list of US imports that it would target with retaliatory duties if no solution is found to end the tariff war. The list of American imports for possible targeting is worth around €95 billion, with the list broken down into sectors and broad categories of products rather than brand names.
  • US imports | The US trade deficit grew to a record $140.5 billion in March, roughly doubling compared to the same time last year, as consumers and businesses tried to get ahead of President Donald Trump’s tariffs, with federal data showing an enormous stockpiling of pharmaceutical products. Consumer goods led the import surge, increasing by $22.5 billion in March, with pharmaceutical products climbing $20.9 billion, suggesting broader signs of front-loading may be visible in the coming months. Capital goods, like computers, as well as automotive parts and cars, also increased in March, with industrial supplies and materials falling – notably as steel and aluminium tariffs and other levies impacting energy took effect. Service-based imports, like travel, also decreased.

UK economy

  • Interest rates | The Bank of England reduced interest rates by 0.25% to 4.25% on Thursday, following a slowdown in inflation in recent months. The base rate is now down from a high of 5.25% to a level last seen in May 2023.
  • Migration curbs | The Prime Minister announced a series of reforms to Britain’s immigration system, including a proposal to end automatic settlement after five years (instead migrants will need to spend a decade in the UK unless they can show a “real and lasting contribution to the economy and society”). The proposals also include heavily restricting employers’ ability to recruit overseas for lower-skilled rolls.
  • UK-India trade deal | The UK and India have agreed on a long-stalled free trade agreement more than three years after negotiations started under the previous British government. The UK government has said the deal will reduce Indian import taxes on whiskey, cosmetics, medical goods, car and aeroplane parts as well as other goods from the UK. Whiskey and gin tariffs will be halved to 75% before falling to 40% by year 10 of the deal – India is the world’s largest whisky market by volume. Automotive tariffs will fall from over 100% to 10% under a quota. The Indian Trade Ministry said 99% of Indian exports would face no import duty under the deal. Britian said the deal is expected to increase bilateral trade by £25.5b a year “in the long run.”
  • US tariff agreement | The detail of an economic deal between the US and the UK has been released. It offers the UK relief from tariffs on car and steel, in exchange for giving America’s agricultural industry greater access to British markets.
    • Steel and aluminium: The US has removed the 25% tariff rate on UK steel and aluminium exports, reducing trade barriers for these goods to zero. Under the plan, the UK will “promptly” begin work to meet the US requirements for securing supply chains of steel and aluminium products.  
    • Car tariffs: American tariffs on British cars fall to 10% for the first 100,000 vehicles exported to the US. The parts needed for those cars will also receive special trade treatment. Trump had set the tariff rate on car exports to the US at 27.5%.  
    • Other tariffs: A 10% baseline tariff on most goods remain in place, with talks over lowering the reciprocal tariffs still undergoing, but there is no deadline on how long they may continue. The UK will also get preferential treatment in any further tariffs on national security grounds, as part of Trumps drive to protect US business. 
    • Agriculture: Both countries will gain new access to one another’s markets under the deal. UK farmers will be allowed access to the US market, having been given a tariff-free quota for 13,000 metric tonnes. Additionally, the UK will remove tariffs on 1.4 billion litres of ethanol, used to produce beer, which comes from the US.
    • Either side may cancel the deal by giving written notice to the other nation, according to the terms of the agreement. 

Materials, commodities and currencies

  • Exchange rate | The British pound has surged 10% against the US dollar since early April, following the introduction of new import tariffs by US President Donald Trump. The dollar slump was fuelled by market concerns that Trump’s tariffs could push up prices and slow US economic growth, with these expectations reducing the strength of the greenback. While the pound has rallied strongly, analysts say the rise was driven by global currency movements rather than changes in UK economic fundamentals.
  • Concrete | According to the latest data from the Mineral Product Association (MPA), sales of ready-mixed concrete and asphalt both fell by 6.3% in the first quarter of the year. Demand for ready-mixed concrete declined to around 3 million cubic metres per quarter, its lowest level in 60 years. Meanwhile asphalt sales were at their lowest since 2013, due to the cancellation or delays of key strategic road schemes and the continuing financial pressure on local authority maintenance budgets. Although there was strong demand for construction mineral products in the infrastructure sector driven by major projects such as HS2, Hinkley Point C and Sizewell C, this strength was offset by significant weakness in the roads sector.
  • Disposal costs | The government plan to ditch the lower level of landfill tax for less-polluting materials risks hitting construction and demolition firms with an unsustainable increase in disposal costs. The Treasury proposal for a reform in landfill tax will see the lower rate gradually increase until it catches up in 2030 with the standard rate, which stands at £126.15 per tonne. Currently the low rate is £4.05 per tonne. At the moment, the lower rate applies to inert, less-polluting materials such as small particles of crushed stone, sand or gravel, which have the potential to be recycled and reused.

Environment

  • Drought warning | England is facing the risk of summer drought after the driest start to spring in 69 years, which has led to low reservoirs reserves, struggling crops and wildfires. The Environment Agency (EA) has warned there is a “medium” risk of a summer drought absent of sustained rainfall. The warning comes after England saw half the expected rainfall in April. Across England, reservoirs are 84% full – below the 90% levels seen at the end of April in the 2022 drought year.

Friday to Friday

Price / Index Week %
change		 Annual %
change
FTSE 100 8,554.80 -0.48 1.44
FTSE 250 20,504.37 1.30 -0.68
Nikkei 37,503.33 1.83 -1.90
CSI 300 3,846.16 2.00 4.91
S&P 500 5,659.91 -0.47 8.37
Nasdaq 17,928.92 -0.27 9.72
CAC 40 7,743.75 -0.34 -5.78
Dax 23,499.32 1.79 25.18
$ per £ 1.3314 0.25 6.29
€ per £ 1.1813 0.77 1.60
Gold £/oz 2,499.24 2.33 32.61
Brent Oil $/barrel 63.91 4.27 -22.80

Weekly Summary

News of US trade deals to lower tariffs from recent highs will be positively received; however, the new tariffs are generally higher than a year ago, which will continue to put pressure on manufacturers who are no doubt struggling with the general uncertainty of the global market. According to the latest PMI figures and material purchasing news, construction output is still struggling in the face of economic headwinds and low confidence; however, surveys of sentiment and project starts continue to show a more optimistic outlook for the year ahead.

Author contact

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

Related reviews

Website &AGENCY