Issue 301 | 11 October 2021 - Turner & Townsend alinea

Economic Week In Review | Issue 301 | 11 October 2021

Materials and commodities

Coal | China has ordered miners to increase the production of coal in light of the global energy crisis, a move that compromises the country’s climate change policies.
Iron ore remains under pressure as output curbs in China and the energy shortage reduces demand. The S&P Global Platts iron ore index fell 43% in Q3 as the market became oversupplied as mills sold on contracts.

UK construction and property news

Output | Construction PMI fell to 52.6 in September as unpredictable pricing slowed new orders. Subcontractor availability also fell, causing subcontractor charges to record the steepest rise since the survey began in 1997. Housing and civil engineering showed the sharpest decline (but only by a slight margin).
Construction commitments | The CLC has written to the Chancellor advising how value for money can be achieved from money committed to construction delivery and maintenance. It urges the Chancellor to use the Budget and Spending Review to commit to maintaining current levels of investment and promote future skills allowing the industry to organise around committed plans.
Future labour | The latest Labour Force Survey by the ONS shows that a large number of the UK’s domestic workforce is between 50-60 years old and therefore 500,000 workers could retire in the next 10-15 years.
Sellafield concrete | Sellafield is looking for delivery partners for a combined concrete structures, groundworks and blockwork package worth £1bn over 18 years, using Project 13-style integrated collaborative teams.

UK economy

Energy prices | Ofgem hinted that the energy price cap may be reformed and supplies may be more regulated as large increases to wholesale prices have led to big increases in customer bills. 10 energy companies have collapsed this year as wholesale costs have increased more than 250% since January.
Interest rates | The Bank of England has warned that it could increase interest rates “significantly faster” as inflation pressures increase. Inflation is expected to pass 4% at the end of the year.
Sustainability targets | High gas prices and low wind output have made coal-generated energy much more profitable and has also made many question how attainable a net zero carbon future is.

International news

Food costs | The UN’s food price index has increased by a third over the last year because of harvest setbacks, strong demand, and supply chain disruptions. Almost all food groups have seen increases, causing concern for inflation.
Global tax | The OECD is nearing a final global deal on corporate tax as the last of the holdout countries signaled their agreement with the plan. It will impose a 15% minimum global tax rate and shift more of a company’s tax bills to countries where they conduct business.
ECB inflation worries | Minutes from its September meeting reveal the European Central Bank’s concerns over “upside risks” to its inflation forecast. Last month the group forecast inflation to fall from an annualised rate of 2.2% this year to 1.7% and 1.5% in 2022 and 2023.
Growth in China | Barclays has downgraded its forecast for economic growth in China to below 6% because of its targets to decrease energy reliance. Most expect China’s economy to grow by 8% this year. China aims to decrease the “energy intensiveness” of its economy by 3% this year to reduce pollution, measuring the amount of energy used per unit of GDP.

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	7,095.55	0.97	17.93
FTSE 250	22,536.17	-1.59	24.69
Nikkei	28,048.94	-2.51	18.75
CSI 300	4,929.94	1.31	5.31
S&P 500	4,391.34	0.79	26.29
Nasdaq	14,579.84	0.09	25.90
CAC 40	6,559.99	0.65	32.61
Dax	15,206.13	0.33	16.51
$ per £	1.3630	0.43	4.81
€ per £	1.1778	0.67	7.05
Gold £/oz	1,290.57	-0.74	-12.79
Brent Oil $/barrel	82.38	3.91	92.25

Weekly Summary

There was a consensus that construction was “over the hump”, having seen the bulk of any disruption from material pressure and covid-disruption (albeit with some real, lingering labour pressures), but with clouds gathering on the horizon, such as the energy crisis and its impact on growth, it looks as if there may be a perfect storm of upward and downward pressures in both the supply of and demand for construction.

A very real concern is that these clouds could limit the country’s ability to achieve net zero carbon targets. We hope that the Autumn Budget at the end of the month will help support the industry and these targets.

300 editions : A lookback

To follow on from our 300th edition last Monday, we have issued the first in a series of posts looking back at the highs, lows, and key themes we’ve tracked through the Economic Week in Review’s six-year history.

You can find it here.