Balancing act

Economic Week In Review | Issue 291 | 2 August 2021

Materials and machines

  • Bricks | Forterra is to invest £27m on its Wilnecote factory to increase production by 20% and produce a wider range of bricks. The work means that the factory will be closed for nine months in 2022. However, Forterra also invested £95 million in its Desford plant in 2019 and is expected to see output from that in 2022.
  • Plastics | The environment agency has designated a special team to tackle the illegal export of contaminated waste plastics. It particularly focuses on contaminated plastic film and wrap from construction and demolition. An increasing number of “contaminated” shipments have been exported under “low risk” waste controls.
  • Construction equipment | Sales of construction equipment in the UK have increased 70% compared to last year, and have also increased compared to 2018 and 2019 levels according to Systematics International. Mini/midi excavators continue to be the most popular type of equipment.
  • Manufacturing PMI | Input prices at UK factories have increased at a near-record pace with 72% of manufacturers seeing an increase in prices. The index currently stands at 60.4, down from May’s record high of 65.6 but still significantly above the 50.0 marker for no change.

Property and construction news

  • Labour | According to HMRC, one in ten construction workers are still on furlough despite industry warning of skills pressures.
  • Vacancy rates in the City of London have reached 9% according to data from Savills, however, June also saw the most space under offer since the beginning of the pandemic. Take up remains 38% below the five-year average despite increasing for the last four months.
  • Stonehenge tunnel | A court has ruled that the decision to approve the £1.7bn Stonehenge Tunnel within a World Heritage Site was unlawful. The transport secretary will now have to appeal the judgement, if it is to proceed.
  • Financial distress | The latest report from Begbies Traynor shows that the number of firms in financial distress has fallen from 96,000 to 85,000, but is significantly higher than a year ago (65,000). It warns that the relaxing of Covid support in September could see an increase in failures.
  • State of trade | The latest survey by the Federation of Master Builders shows that increased workloads are being matched by increasing material and labour pressures causing a “perfect storm for future building work”. 71% of SME builders received more enquiries for work, 98% are faced with material price increases and 80% have increased the price of work.
  • Housing market changes | Large number of Londoners are still moving out of the capital. According to Hamptons, 8.6% (61,800) of all purchases outside of London were made by Londoners in the first half of 2021.

UK news

  • Retail HGVs | In an effort to reduce the labour shortage, Tesco is to offer a “golden hello” of £1000 to HGV drivers who join before 30th September. Other retailers are trialing similar initiatives to train staff to become lorry drivers. The Road Haulage Association estimates there is a shortage of 100,000 HGV drivers in the UK.

Global news

  • USA renewables | 26GW of renewable power came online in the USA, giving it enough power for 50 million homes, and clean power now delivers 10.7% of the nation’s electricity.
  • Inflationary pressures | AEW’s research and insight team suggests that whilst inflation has increased to 5% in the US and more than 2% in Europe, these rises are temporary “due to remaining and lingering Covid-19-related disruptions to the global supply chain.
  • Global house price boom | Low interest rates and additional savings have pushed house prices up in nearly every major economy. Annual house price growth across the OECD group reached 9.4%, the fastest pace for 30 years.
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 7,032.30 0.07 19.24
FTSE 250 22,948.83 0.29 35.53
Nikkei 27,283.59 -0.96 23.61
CSI 300 4,811.17 -5.46 1.59
S&P 500 4,395.26 -0.37 34.37
Nasdaq 14,672.68 -1.11 36.55
CAC 40 6,612.76 0.67 38.24
Dax 15,544.39 0.19 26.24
$ per £ 1.3911 1.13 5.96
€ per £ 1.1725 0.25 5.56
Gold £/oz 1,304.70 -0.45 -16.60
Brent Oil $/barrel 76.33 3.01 75.47

Weekly Summary

The industry is currently balancing material, labour and corporate viability pressures. Whilst some of these, such as material pressures, may resolve in the medium term as supply chains recover to a more normal state, others such as labour are expected to be a longer-term disruption. But the news that 10% of construction workers are still furloughed should question whether training systems in the construction industry are suitable to retrain currently underused staff to more in-demand roles or whether company finances are stopping staff from being returned to full-time roles.

As the economy returns to some sort of normality, we need to look at what has fundamentally changed elsewhere that could affect construction. For example, the encouragement of HGV drivers into the retail sector could worsen the impact on construction if similar schemes are not created in the construction supply chain.

Author contact

Rachel Coleman
Rachel Coleman,
Associate Research Analyst

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