Issue 267 15 February 2021 - Turner & Townsend alinea

Economic Week In Review | Issue 267 15 February 2021

Property and construction news

Profit warnings | According to the latest EY Profit Warnings Report, the FTSE Constructions and Materials sector issued 33 profit warnings in 2020, with 28 issued in the first nine months. It was the highest number of warnings seen in the sector, beating the previous record of 19 seen in 2008 and 2012.
Build-to-Rent | Research from the British Property Federation has found that the Build-to-Rent planning pipeline has grown 22% compared to last year, while the number of homes completed last year grew 23%. In London, one in five completed homes was build-to-rent.
Optimism | The RIBA’s Future Trends Survey fell from +10 in December to +3 in January. The sharpest fall in optimism was in Northern England (from +29 to 0) and became negative in the South.
Green Homes | Only £71m of the £1.5bn fund to help make homes less carbon-intensive has been given out due to delays. The Business Minister has confirmed that the scheme will not roll over into the next financial year. A much smaller fund — £320m — will be available in the next financial year. The scheme was part of the government’s 10-point plan for a green recovery.
Output | Overall output fell for the first time since April, with falls in every sector as the new lockdown came into effect.

Materials, stocks, and currencies

Iron ore | Capital Economics has forecast a fall in the price of iron ore by the end of the year as it expects both China’s rally and the supply deficit seen through 2020 to end, righting the imbalance.
Steel | Eurofer, the European steel association, suggests that steel consumption in the EU will recover this year, having fallen 13% in 2020.
Oil prices have increased above $60/barrel for the first time in over a year, but analysts are divided on what will happen next.
Sterling | The pound increased above $1.39 for the first time in almost three years on Monday morning. It is currently boosted by the UK’s vaccine success

UK news

GDP | The UK economy shrank 9.9% last year, but growth in the last quarter means that a double-dip recession was avoided. Surveyed economists have cautioned that the UK economy may not be “roaring back” for a few months. In addition to the Bank of England’s negative forecast for Q1 2021, the Centre for Economics and Business Research has predicted a 3.5% fall in Q1.
Trading hub | Amsterdam has replaced London as the largest financial trading centre in Europe. €9.2bn of shares per day were traded in Amsterdam, compared to €8.6bn in London.

Infrastructure

HS2 | Phase 2a of HS2, the 36-mile, £4.5bn extension to Crewe has been granted Royal Assent. The works include two tunnels, 26 cuttings, 17 viaducts, and 65 bridges, creating over 5,000 construction jobs.
Airports | Planners have approved the construction of a new terminal building at Leeds Bradford Airport. It will support 850 jobs and is expected to start this year.

Global news

Dutch warehouse boom | UK companies are fuelling a boom in warehouse space in the Netherlands with a doubling of the number of firms looking for space in the last 18 months. Rules of origin are affecting products which are re-exported from the UK, such as Hornby trains.

Tender Price Index

Published every six months, our Tender Price Index is an analysis of inflation price deviation in construction prices. Click on the link above to view our most recent Index.

Friday to Friday

	Price / Index	Week % change	Annual % change
FTSE 100	6,589.79	1.55	-11.06
FTSE 250	21,037.47	-0.14	-3.45
Nikkei	29,520.07	2.57	24.62
CSI 300	5,807.72	5.91	45.64
S&P 500	3,934.83	1.23	16.41
Nasdaq	14,095.47	1.73	44.85
CAC 40	5,703.67	0.78	-6.03
Dax	14,049.89	-0.05	2.22
$ per £	1.3855	1.03	6.30
€ per £	1.1426	0.27	-4.99
Gold £/oz	1,316.27	-0.37	8.41
Brent Oil $/barrel	62.43	5.21	5.91

Weekly Summary

The construction sector continues to be a mix of bright spots and dark shadows. It is positive to see new infrastructure projects beginning, and forecasts of growth for 2021 following the UK’s successful vaccination programme. Yet it is concerning to see that the rest of the sector continues to lag behind its pre-pandemic level, and confirmation of the near 10% fall in GDP last year.

Ahead of next month’s Budget and clarification of what support will continue for companies, it is worrisome to see profit warnings amongst construction firms at a high.

Another ongoing concern is the continued pressure on materials driven by constraints throughout the entire supply chain. As economies experience some recovery this year and consumption increases, this pressure will need to be monitored closely.