Is it temporary?

Economic Week In Review | Issue 308 | 29 November 2021

UK construction and property news

  • HS2 | Excavation work started at Old Oak Common. The 850-metre long underground reinforced concrete box, supported by 160 columns will be built by Expanded.
  • Private residential rents have returned to pre-pandemic levels in London at the end of October according to data from Colliers. The firm found four key factors driving the increase: real wage growth, a net outflow of buy-to-let landlords, the continued return of generally younger workers, and the return of overseas students, which will continue to see confidence in the market for the rest of the year.
  • Regional demand | Cheap brownfield land, low industrial rents, and ample power supply in South Wales and the North East could attract more industrial developments outside of the current key markets, according to Savills. It suggests that the UK will need 50million sq ft of industrial and warehouse space by 2040 to deliver enough batteries for electric vehicle production.
  • Environmental protection | The CLC has written to housing secretary Michael Gove asking for a relaxation to the protection of wetlands as it is stalling house-building in Somerset, the Solent, and Kent. It also suggested that the guidance should be updated to “weigh-up the costs associated with the small release of nutrients in the short term against the wider public-interest benefits of housebuilding and other development”.

Materials, commodities and currencies

  • Sales of materials at builders’ merchants in Q3 2021 reached the second-highest level on record. Year-on-year sales (by value) of timber and joinery products were up nearly 39%.
  • Product testing | The government has been told that the switch from the EU’s CE mark to the UKCA mark on construction products is not working because of a number of issues including a lack of testing capacity in the UK. The transition has already been delayed from the end of 2021 to 1st January 2023. The CLC warns that unless there is a further delay to the transition, the government’s targets for housebuilding, infrastructure, building safety, and net zero carbon will be compromised.
  • Sterling | The pound fell to an 11-month low against the dollar as the US dollar strengthened after the Federal Reserve announced it will taper its asset purchase scheme.
  • Shipping | The dry bulk market is still in demand despite recent downsides in the market and corrections to freight earnings.

UK economy

  • Factories | The CBI raised concerns over British factories struggles to meet demand and are running down stores of finished goods to meet order books which are the strongest since records began in 1977. In a survey, 47% said order books were above normal while 20% said they were still below normal.
  •  Retail | The Confederation of British Industry’s quarterly survey has found that selling prices in shops grew at the fastest pace since May 1990 with 77% of firms reporting higher prices. Its measure of sales also jumped from -1 to +35 as people tackled their Christmas shopping earlier.

Global economy

  • German bubble risk | The Bundesbank said that German banks are increasingly vulnerable to a housing bubble. Germany cut the countercyclical buffer for banks to zero at the beginning of the pandemic, having previously been set at 0.25% of the banks’ total risk exposure.
  •  German inflation is expected to surpass the 5% threshold this month when the data is announced this afternoon. It will be the first time it has happened in nearly three decades.
  • European cash glut | Banks in Europe are struggling to find places to store cash. ESTR, the ECB’s overnight rate, rose 0.4 basis points to -0.570%. Three-month Euribor dropped to a record low of -0.583% making it more expensive to borrow money overnight than it is to borrow for three months.
  • Supply chain problems | The chief of the World Trade Organisation said that she expects the current supply chain disruptions to be short-lived, stretching into 2022 but will resolve after several months.
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 7,044.03 -2.49 10.62
FTSE 250 22,537.89 -4.06 15.80
Nikkei 28,751.62 -3.34 7.91
CSI 300 4,860.13 -0.61 -2.42
S&P 500 4,594.62 -2.20 26.28
Nasdaq 15,491.66 -3.52 26.92
CAC 40 6,739.73 -5.24 20.39
Dax 15,257.04 -5.59 14.41
$ per £ 1.3321 -1.12 0.12
€ per £ 1.1786 -1.00 5.90
Gold £/oz 1,351.63 -1.54 0.64
Brent Oil $/barrel 72.72 -7.82 50.93

Weekly Summary

As the construction market appears to rebound, we need to be sensitive to some of the risks that come with that recovery, such as the draw of materials and machinery to Old Oak Common at a time when factories are under pressure, and stockholdings are depleted, as well as the counter-effects of measures put in place throughout Covid which could impact.

It is, however, positive to see the World Trade Organisation categorising supply chain issues as “transitory” or temporary. We will continue to track these issues and additional ones (and their associated time frames) as they appear.

The new Omicron variant raised concerns of fresh lockdowns and an impact on economic activity, and initially had a marked impact on the markets, but this calmed slightly on Monday as investors took a more long-term view and waited to see the impact.

Author contact

Rachel Coleman
Rachel Coleman,
Associate Research Analyst

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