Is the recovery in sight?

Economic Week In Review | Issue 307 | 22 November 2021

UK construction and property news

  • Inflation | RIBA’s latest Future Trends survey showed that architects in all regions are expecting workloads to grow, but are increasingly concerned about the rising cost of materials and labour.
  • Headquarters | Shell is to relocate its headquarters from the Netherlands to the UK as it moves to simplify its structure.
  • Office starts | Deloitte’s latest Crane Survey shows that the volume of new starts has increased 10% since May, to 3.4m sqft, which is above the long-run average of 2.4m sqft. The survey found that many developers were expecting occupancy and demand to rebound, even if the future of office work changes.

Integrated Rail Plan

The hotly anticipated Integrated Rail Plan was launched as the “biggest ever public investment in Britain’s rail network”, pledging £96bn. However, the document saw HS2’s eastern leg reduced to £18bn, from the £185bn announced in the original HS2 and Northern Powerhouse Rail plans.
Many have criticised the new plans saying that they cast doubt on the government’s commitment to leveling up and that constant readjustments will continue to push up costs of infrastructure development in the UK.

Materials, commodities and currencies

  • Red diesel | Sir Robert McAlpine has confirmed that it will switch to hydrogenated vegetable oil (HVO) and will no longer buy diesel to power machinery by April 2022.
  • Aluminium | A stockpile of $5bn of scrap aluminium in Vietnam could end the global shortage if it returns to the market. It was seized as part of a US anti-dumping investigation and is held under guard. Commodity analysts CRU has removed it from its inventory tracker as most of the metal is over 10 years old.
  • Iron ore prices fell to an 18 month low, driven by a poor outlook for steel products and raw materials. Prices for the benchmark 62% Fe ore have fallen from a recent peak of $220 / tonne to $92.

UK economy

  • Inflation | Consumer price inflation in October rose to 4.2%, more than double the target set by the Bank of England, driven by rising energy bills and fuel costs as the energy price cap was lifted, as well as second-hand car prices and food. It is the highest annual rate of inflation since 2011. Core inflation, which excludes food fuel prices, rose 3.4%. Andrew Bailey – Governor of the Bank of England – alluded to a December rate rise, saying that data was giving a mixed signal and that the key signal would be whether a tight labour market will persistently push rates up, which would push inflation up.
  • Confidence | Consumer confidence rose and retail sales increased for the first time in six months as Christmas shopping began earlier prompted by concerns over supply.
  • Rebound | Data from the New West End Company showed that footfall in the West End is 13% above the same period in 2019, whilst data for Greater London from Workman rose 13.7% in October.
  • Covid fraud | HMRC expects to recover less than half of the £5.8bn spent in fraudulent Covid claims and errors as it will reach a point of diminishing returns in terms of resources. The average rate of tax fraud is 4.9%, but across the Covid support schemes, it is higher, at 7.9%.

Global economy

  • German factory | Prices from German factories increased at their highest rate since 1951, driven by energy prices and supply issues. Producer prices rose 18.4% in the year to October.
  • US infrastructure | The $1.75tn bill has been delayed after Kevin McCarthy, the top Republican in the US House of Representatives, delivered a four-hour long floor speech.
  • Covid in Europe | New lockdowns and mandatory vaccines in some European countries have prompted fresh concerns that the recovery may not be sustainable.
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 7,223.57 -1.50 13.73
FTSE 250 23,492.49 -0.28 20.43
Nikkei 29,745.87 0.46 16.53
CSI 300 4,890.06 0.03 -1.08
S&P 500 4,697.96 0.32 32.06
Nasdaq 16,057.44 1.24 35.45
CAC 40 7,112.29 0.29 29.41
Dax 16,159.97 0.41 23.01
$ per £ 1.3471 0.46 1.35
€ per £ 1.1905 1.60 6.20
Gold £/oz 1,372.71 -1.26 -2.50
Brent Oil $/barrel 78.89 -3.99 75.47

Weekly Summary

Whilst the majority of the week’s news was dominated by the Integrated Rail Plans, there were some significant good news stories for the industry, such as increased office starts and the return of West End footfall, suggesting a return of confidence, and crucially, companies committing to spending.

However, the spectre of inflation cannot be overlooked, especially given the recent history of low interest rates and stalled cashflows because of Covid.

Author contact

Rachel Coleman
Rachel Coleman,
Associate Research Analyst

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