Economic Week In Review | Issue 313 | 24 January 2022

Materials, commodities and stocks

• Steel | British Steel has added another £50/tonne onto steel section prices, following increases totalling £340/tonne over the course of 2021. It blamed energy price increases and general inflation.
• British stocks are historically cheap having lagged behind global peers for six years. Simon Nixon in The Times wrote, “On a price to book value basis, they trade at a record discount to the MSCI World index”.

UK construction and property news

• “High Risk Towers” | An online service to track applications to the Building Safety Fund has been launched with the government saying it will help expose owners who fail to take action. The Leaseholder and Resident Service will allow those living in tower blocks to see updates on an application.
• Growth | The Construction Products Association has forecast that UK construction output will grow by 4.3% this year despite ongoing supply issues, before settling down at 2.5% in 2023. It still expects infrastructure to be the main driver of growth but warns that supply issues could see 2022 output delayed to 2023.
• Cladding and insulation manufacturers have been told by Michael Gove that they have two months to come up with a way to fund cladding remediation works or they could be banned from the market.

Future of offices

• Government Property Agency | The GPA is considering reducing its office footprint by 25% after staff surveys revealed that it could be more efficient in space planning. The government currently occupies 26.9m sqft of office space, 35% (9.4m sqft) of which is managed by GPA.
• Central London Offices | £11.8bn was invested into offices in Central London, a 25% increase from 2020, and Colliers expects a further 53% increase to £18bn this year which would take it above the long-run average.
• London office deals | Native Land is under offer to buy New London House in the City. A competitive process pushed the final price above £70m. It is the most recent of a few large deals to have taken place recently.

Supply chain disruption

IHS Markit predicts that supply chain disruption will continue through 2022 and that intense inflation adds urgency to understand what is ahead for supply chains this year. Its report says “As 2022 begins, the situation is not improving. We would like to be able to say that we see signs of the log jam breaking. But frankly, we don’t”. A key area under stress is the car manufacturing industry which has always operated as leanly as possible, but supply chain pressures could mean that it is now more advantageous to take on inventory than suffer the consequences of line stoppage.

UK economy

• High streets | Marks and Spencer is to close one of its oldest branches. The store on Sauchiehall Street, Glasgow has occupied the site since 1935 but will close as the retailer looks to “focus investment on the right stores in the right places” as shopping habits change.
• Retail sales fell sharply in December as Omicron cases grew and supply chain worries encouraged Christmas shoppers to buy early. The fall of 3.7% was much worse than the 0.6% decline economists expected.
• Cost of living | CPI increased to 5.4% in December with housing and household services and transport contributing the most, but all sectors were positive. Debates have begun over how the cost of living and whether the CPI basket which includes items such as lamb, gold chains, and champagne is an adequate view of the cost of living as these items tend to fluctuate less than more basic items of food.
• Gigafactory | Britishvolt has secured funding for its gigafactory in Northumberland from the government’s Automotive Transformation Fund and hopes to use that to unlock £1.7bn in private funding. At full capacity, the factory will produce enough battery cells for 300,000 electric cars and will employ 3,000 people, plus another 5,000 supply chain jobs.