Hurdles

Economic Week In Review | Issue 290 | 26 July 2021

Materials

  • Inflation | The latest statement from the CLC’s Products Availability Group warns of “rapid and sustained” price inflation, increasing lead times, and uncertain deliveries with products for housebuilding and domestic repair being the most affected. It also raised the importance of “regular, accurate and transparent communication throughout the supply chain to the end client”.
  • Steel and aluminium trade | The resolution to the EU / US disputes from the Trump administration may not remove all barriers, as it will consider the willingness of the US to protect its steel industry, but in a less disruptive way for EU businesses. It is thought that one possible solution may be licensing or monitoring of EU exporters into the US.
  • Thermal coal | Disruptions to supply and increased electricity demand have pushed up thermal coal prices, making it one of the year’s best-performing assets, increasing 86% since the start of the year, its highest level since late 2008.
  • Water | A drop in water usage by businesses has encouraged Ofwat, the UK’s water regulator to allow utility companies to increase prices temporarily to offset bad debts.

Property and construction news

  • Isolation | The CLC has called on the government to speed up the end of self-isolation for people notified by the Covid-19 app. Exemptions for some key workers are being put in place until 16th August, at which point, people who have had both vaccines will not have to isolate. The CLC has suggested that bringing that date forward could help boost the number of fully vaccinated people.
  • Nuclear power | The government is looking at ways to remove China General Nuclear (China’s state-owned nuclear energy consortium) from all future projects in the UK, including Sizewell.
  • Forecasts | The Construction Products Association expects construction output to grow 13.7% this year and 6.3% next year, driven by infrastructure and private housebuilding, after a 14% fall in 2020. It forecasts commercial output at the end of 2023 to still be 10% smaller than in 2019.
  • Schools | The Department for Education has named the next wave of 50 schools to be part of the planned ten-year rebuilding programme which will deliver 500 projects.

UK news

  • Growth | EY Item Club’s latest predictions expect the vaccine rollout and a bounceback in consumer spending to push GDP growth to 7.6%, the fastest annual growth since 1941. However, it also warned that the “future pattern of the pandemic and any renewed pandemic-related restrictions” could significant impact the forecast.
  • Private sector growth | The Flash UK Composite PMI showed that shortages of staff and materials hampered July’s economic activity, pushing it to a four-month low, although the index still stands at 57.7. Manufacturing fell to 60.4, from 63.9 in June.
  • Factory workers | The number of employees in UK factories has increased at the fastest rate for nearly 50 years as factories sought to handle the post-lockdown surge in orders. Jobs, investment, output, costs, and prices were all experiencing the strongest period of growth since the mid-1970s.

Global news

  • Eurozone activity | PMI readings from IHS Markit rose to 60.6 in July, up from 59.5 in June. Company orders rose at the fastest pace in 21 years.
  • US Infrastructure | Lawmakers in America are nearing a deal on a $1tn infrastructure package, with senators reporting they are “about 90% of the way there”. The plan would fund investment in roads, bridges, ports, airports, water facilities, and broadband networks.
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 7,027.58 0.28 14.76
FTSE 250 22,883.39 1.85 32.54
Nikkei 27,548.00 -1.63 21.08
CSI 300 5,089.23 -0.11 12.95
S&P 500 4,411.79 1.96 37.20
Nasdaq 14,836.99 2.84 43.17
CAC 40 6,568.82 1.68 32.53
Dax 15,514.51 -0.17 20.85
$ per £ 1.3755 -0.21 7.57
€ per £ 1.1695 0.20 6.42
Gold £/oz 1,310.55 -0.44 -11.83
Brent Oil $/barrel 74.10 0.69 70.97

Weekly Summary

The UK and construction are bouncing back, but not without several hurdles to overcome. In construction, other sectors are recovering faster than the commercial sector, leaving it vulnerable to outside pressures. Whilst in the wider economy, suppliers and consumers are faced with repaying debts and challenges which have built up over the last year which could impact consumer confidence and spending.

For projects, these hurdles need to be carefully watched and managed and will differ in cause and scale, depending upon project timescales and other specifics. The most significant of these hurdles, at the moment, being mounting pressures on materials, but we should continue to look at whether these pressures are temporary or ongoing in order to plan a way through them.

Author contact

Rachel Coleman
Rachel Coleman,
Associate Research Analyst

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