Layering up

Economic Week In Review | Issue 312 | 17 January 2022

Materials and commodities

  • Metals | Nickel is the latest commodity under pressure as traders brace for a historic supply squeeze as demand from electric vehicles grows. Zinc and aluminium production has also been affected by Europe’s energy crisis and expected regional increases in power prices are reigniting price concerns throughout the metals markets.
  • Assets | Blackrock has become the first asset manager to reach $10tn in assets after a boost from its exchange-traded funds at the end of last year.

UK construction and property news

  • Mortgage demand has fallen in the last three months of 2021 and is expected to fall further in the next three months as the impact of the stamp duty holiday fades, and fewer homes are available to buy. However, lenders expect credit conditions to loosen over the coming months.
  • Insolvency | The latest data from the Insolvency Service show that 266 construction businesses collapsed in October, the highest number since the start of the pandemic. Rising material costs, a reduction in covid support, energy costs, and labour issues have all worked against small builders in recent months.
  • London offices received a vote of confidence as Google bought Central St Giles to use as its UK office for £762.5m.
  • Temporary visas | Sadiq Khan, Mayor of London, has called on the government to create a temporary visa scheme for construction workers to help businesses that are struggling and to help the City meet its housebuilding targets. It has been suggested that the visas are for at least 12 months and allow builders to be self-employed.
  • Bricklaying | An Automatic Brick Laying Robot (ABLR) from Yorkshire-based Construction Automation has been accepted by the NHBC after more than a year of testing. The accreditation means the robot can now be used in the construction of homes with a warranty from NHBC.
  • Output | Total construction output rose past pre-pandemic levels, but new work remains almost 1.5% lower and reliant on infrastructure output. Commercial output is still 28% lower than in February 2020.

UK economy

  • Retirement | Data showing a decrease in life expectancy (at birth) in the UK has cast doubt on government plans to increase the state pension age.
  • Energy costs rose above £1,000/MWh as production from wind fell, revealing vulnerabilities in the UK energy market as the UK’s aging nuclear reactors are not set to be immediately replaced. Wind output is expected to fall below 1.5 gigawatts (against a ten-day average of 6.3 gigawatts).

Global economy

  • US retail sales fell in December, the first drop in five months and the most since February as Omicron reignited Covid-19 concerns. Retail sales, including food and fuel, fell 1.9% between November and December.
  • Manufacturing output in the US fell in December due to “Omicron-related employee absenteeism” according to Capital Economics who also warned that it may dip further in January as cases continue to rise.
  • Germany | GDP fell in the fourth quarter of last year and is headed for a second technical recession of the pandemic as conditions are not expected to improve. Economic growth in Germany is lower than in other European countries and its manufacturing industry is struggling to source components and a growing spectre of inflation.
  • China | GDP in China grew at its slowest pace in 18 months at the end of 2021 because of a slowdown in the property market as well as enhanced coronavirus restrictions. The reading of 4% was, however, ahead of economists’ expectations, but was significantly lower than the 6.5% seen in 2020.
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 7,542.95 0.77 11.98
FTSE 250 22,743.35 -2.61 10.32
Nikkei 28,124.28 -1.24 -1.38
CSI 300 4,726.73 -1.98 -13.40
S&P 500 4,662.85 -0.30 23.74
Nasdaq 14,893.75 -0.28 14.58
CAC 40 7,143.00 -1.06 27.29
Dax 15,883.24 -0.40 15.20
$ per £ 1.3669 0.65 0.52
€ per £ 1.1977 0.15 6.71
Gold £/oz 1,329.15 0.52 -1.24
Brent Oil $/barrel 86.06 5.27 56.19

Weekly Summary

Supply chain issues are becoming more apparent as they layer on top of one another. The removal (and repayment) of covid support at the tail end of last year, combined with labour and logistical constraints, and new VAT systems are causing cash-flow issues for smaller businesses. However, it is important to note that whilst insolvencies have increased, they are not historically high as throughout 2020 many firms were kept afloat by the extreme support measures put in place by the government to help firms.

It is welcome that construction’s reliance on foreign workers has been recognised and that there could be a temporary fix to some of the current pressures. This should not distract the industry from playing an active role in the plan for skills set out by the Construction Leadership Council last year.

Author contact

Rachel Coleman
Rachel Coleman,
Associate Research Analyst

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