Economic Week In Review | Issue 322 | 28 March 2022

Materials and commodities

• Timber | Trade body Timber Development UK has warned of a fresh wave of price volatility as timber from Russia and Ukraine is now classified as “conflict timber” as the industry recovers from the surge in demand following the pandemic and decarbonisation programmes encourage the use of wood.
• Fuel duty was cut by 5p/litre and the reduction will last until next March. The RAC criticised the cut saying that it only took prices “back to where they were a week ago”. The red diesel rebate removal is still set to come into effect next month, but users will benefit from the 5p duty cut.

Spring Statement

The Spring Statement was focussed on the cost of living crisis, with few significant announcements for construction. There was no delay to the red diesel rebate reversal, and the increase to National Insurance remains, although the threshold has been increased. VAT relief on green housing solutions, R&D tax relief, and bringing forward the date for business rate exemptions for renewable energy generation should positively impact the sector.

UK construction and property news

• Labour | After falling in January, self-employed labour pay rates increased in February, increasing just over 7% on an annual basis. The highest annual increase was seen in London at 13.6%, followed by Yorkshire and the Humber at 12.3%. Only the North East saw an annual fall (-2.9%).
• Apprenticeships in London construction companies have fallen over the last three years according to data from the London Assembly Economic Committee. 18% fewer people began apprenticeships in 2020/21 than in 2017/18. Recommendations have been made to ministers such as financial incentives for employers to hire apprentices who are disabled or under the age of 19.
• Insurance | The CLC has launched a survey looking for views on the ongoing professional indemnity insurance crisis. The survey is available here.
• Payments | Research carried out by Lloyds Bank Commercial Banking found that 65% of contractors have seen payments slow since the beginning of the pandemic with 26% saying it now takes customers more than 30 days to settle outstanding invoices. Common reasons cited were cashflow issues and late payments from other customers.
• Investment | A recent report by Cushman and Wakefield found that Chinese investment in UK commercial property has fallen, with the main catalyst being the Evergrande debt crisis and many companies repatriating capital and reducing debt burdens.

UK economy

• Retail sales in Britain fell 0.3% between January and February (following a 1.9% increase the previous month) as inflation began to bite and storms affected much of the UK.
• Natwest is to buy back £1.2bn worth of shares from the UK government, which will cut the Treasury’s ownership of the bank to less than 50% for the first time since 2008.
• Energy strategy | An energy security strategy for the UK has been delayed as the Spring Statement held back from any new commitments. The strategy would require spending on new nuclear power stations and wind energy.

Global news

• Germany has vowed to end its dependence on Russian gas by 2024. The US will deliver a minimum of 15bn cubic metres of LNG to Europe to facilitate the move.
• China has seen “unprecedented outflows” of capital, according to a study by the Institute of International Finance. The report noted that similar outflows are not being seen in other emerging markets. Official data also showed that foreign investors reduced their holdings of Chinese government bonds by the most on record in February, as the war in Ukraine spurred redemptions among global fixed-income investors.
• Shanghai remains in lockdown due to a rise in the number of Covid-19 cases.