Why context matters

Economic Week In Review | Issue 335 | 27 June 2022

Materials and commodities

  • Russian oil | The G7 is seeking to impose a price cap on Russian oil exports.
  • Steel imports | The UK is considering extending steel tariffs on imports from China and limiting steel imports from several developing countries. Critics have warned that this would violate WTO rules.
  • Steel market | Steel inventories are piling up in Chinese warehouses due to falling demand as lockdowns have created a stop-start economy.

UK construction and property

  • Leasing activity | According to Cushman and Wakefield, a record number of new companies leased offices for the first time in London last year.
  • Wages | The latest Hudson Contract data shows that self-employed construction wages rose 2.8% between April and May, and 3.8% annually. The largest annual increases were seen in Plastering (+12.2%) and roofing (+11.9%) whilst bricklayers saw wages fall 4.2%. However, overall wages were  4.2% smaller than in spring 2022.
  • Contract awards | Barbour ABI’s latest data shows contract awards and planning permissions have slowed after a post-Covid boom. Infrastructure was worst hit by the slowdown and commercial awards have fallen in value by over half since March (from £1bn to £400m). Despite the negative headlines, Barbour ABI’s economist points out that new construction activity is still “at broadly long-term average levels”.
  • Infrastructure | Costs have increased £100m at Tideway’s London Super Sewer and Tideway has warned of further possible cost increases. Tunnelling is complete, the lining is progressing and the next focus is moving to the above-ground public spaces.
  • Value | A Value Toolkit has been developed by the Construction Innovation Hub with government funding and industry partners. It aims to support the CLC’s Procuring for Value report and sets out a new way of assessing suppliers based on best value, rather than just lowest price.
  • Carbon | Proposals to amend building regulations to cut carbon emissions during construction which had been shelved in March as the original backer was appointed to a job in the housing department have been re-tabled by a Conservative MP. The plans would see mandatory limits placed on embodied carbon at the design stage of projects

Global economy

  • G7 investment | At the G7 meeting in Germany, Joe Biden said that the G7 collectively aims to mobilise nearly $600bn by 2027 through an investment programme which has now been named “the Partnership for Global Infrastructure and Investment”.
  • Energy | Governments in the EU are exploring the risk that low gas storage could bring. Energy ministers will meet to discuss risk preparedness and the possibility of storing gas across the EU and helping each other. Next month Russia’s Nord Stream line to Germany will shut for ten days for maintenance, and is already only running at 40% capacity.
  • High inflation | The Bank for International settlements has warned that leading economies are close to “tipping” into high inflation environments where rising prices are difficult to stop and dominate everyday life. It has recommended that central banks should not be shy of inflicting short term pain to prevent a persistently high-inflation environment.

UK economy

  • Strike action | Barristers specialising in criminal court cases in England and Wales are set to strike this week over inadequate funding. Younger legal aid barristers earn £12,000/year.
  • Outlook | KPMG’s latest Economic Outlook suggests that the cost of living crisis could trigger a “mild recession” next year. It suggests that if three key events happen, GDP in the UK could fall by 1.5% between Q3 2022 and 2023. The three headwinds are; a recession in the US-led by monetary tightening, a recession in the EU due to Russian gas prices, and a worsening squeeze on UK household incomes.
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 7,208.81 2.74 1.02
FTSE 250 19,123.71 1.05 -15.55
Nikkei 26,871.27 3.50 -7.55
CSI 300 4,394.77 1.99 -16.13
S&P 500 3,911.74 6.45 -8.62
Nasdaq 11,607.62 7.49 -19.17
CAC 40 6,073.35 3.24 -8.30
Dax 13,118.13 -0.06 -15.95
$ per £ 1.2272 0.59 -11.70
€ per £ 1.1644 -0.06 0.02
Gold £/oz 1,488.67 -1.12 16.00
Brent Oil $/barrel 113.12 0.00 48.49

Weekly Summary

Supply and demand chains have been disrupted for over two years and as economies truly emerge from lockdowns and covid patterns of spending, it’s easy to lose sight of what’s normal. At first glance, Barbour ABI’s headlines of new contract awards look devastating, but the key point is that construction is still at broadly long term average levels. Recent volatility or stop-start patterns make periodic comparisons somewhat misleading and reinforce the need for context.

Over the recent weeks, workforce data, wages and strikes have all compounded the idea that labour will be a key factor in inflation over the coming quarters.

Author contact

Rachel Coleman
Rachel Coleman,
Associate Research Analyst

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