Economic Week In Review | Issue 343 | 22 August 2022

Energy

• Coal | The recent heatwave in China has boosted its coal usage as droughts have affected its ability to create hydroelectric power, causing many factories (including Toyota and Foxconn) to close. It will increase its coal-fired power production by 15%.
• Cables to the Sahara | The world’s longest subsea cable will deliver clean energy from Morocco to Devon after planning permission was granted for a factory in Scotland. Four 3,800km long cables will power seven million homes using solar and wind by 2030.
• Deficit tariff scheme | Some UK energy suppliers have written to the Chancellor to call for a deficit tariff scheme under which commercial banks could deposit money into a state-backed fund which suppliers could draw on for households struggling with bills. The scheme’s cost would be paid back over 10 to 15 years through a surcharge on bills or via taxation but would create a debt pile of up to £50bn.
• Smelters in Slovakia and the Netherlands (aluminium and zinc, respectively) have announced shutdowns due to high energy costs. Tom Mulqueen, research strategist for metals at Citi warned that smelter cuts “will come deeper and sooner than we anticipated”.
• Carbon price | The cost of carbon emissions has increased to a record high in Europe as more coal is being used. Carbon permits in the UK have also reached new highs.
• Windfall | States in the Middle East are expected to see $1.3tn additional oil revenues over the next four years, according to the IMF.

UK construction and property

• Pay in the construction industry fell 1.6% between May and June but is 4.7% higher than a year ago. Wages in the general economy rose 2% in the month.
• Attitudes to construction | According to a survey by NBS, 56% of 18-29-year-olds find construction an “attractive” prospect. Being part of a sector “going through massive change” was given as the main reason for its appeal. Over 20% of women were “very interested” in the sector and half of the female respondents saw it as a diverse sector.
• Future of work | JLL’s latest survey revealed that 73% of business decision-makers are planning to reconfigure how their office operates by removing desk spaces to make them more appropriate for collaborative work. 74% of firms also said they were likely to pay a premium for green credentials.
• Housing | A study by Shelter announced that only 6,644 social rent homes were delivered in 2019-2020, an 83% fall since 2010. 90,000 affordable homes are needed every year and 52,000 were delivered in 2020-21.
• Machinery demand | Demand for used construction machinery remains strong, with sales at a recent auction totalling 25% more than in August 2021 and the number of lots for sale also up by 10%. Sales have been recently boosted by certain models being unavailable.

UK economy

• Consumer confidence reached a record low as the cost of living fuelled concerns over economic expectations, according to GfK’s survey which tracks back to 1974.
• Overseas workers | Data from the ONS shows that nearly 200,000 overseas workers have been lost from the UK’s hospitality industry. A report from academics at Oxford University also highlighted that Brexit has exacerbated labour shortages, particularly in sectors reliant on EU labour, and that there is currently no evidence that wages had increased to attract UK-born workers.

Global economy

• China’s property market | China’s largest property group has warned of a 70% reduction in profit in the first half of the year. Country Garden saw its investment grade reduced to “junk” by Fitch last week.
• VAT | Germany will cut VAT on gas sales in an effort to reduce the impact of increasing prices.