Economic Week In Review | Issue 346 | 12 September 2022
All of the community at alinea would like to extend our condolences to the Royal Family. The Queen’s commitment to a lifetime of service has remained a constant throughout times of great change, she will remain an inspiration to many and her loss will be felt around the world.
Materials and currencies
Steel prices attracted new increases from British Steel, adding £150/tonne. This most recent increase follows one of £100/tonne in August and £250/tonne in March. High energy costs were cited as the cause.
Net zero lime | ArcelorMittal and SigmaRoc have formed a JV to produce green quicklime for steel production, planning to build three new lime kilns in France. Heat will be reused from a nearby ArcelorMittal plant and the production plant will use biofuels in order to offer net-zero lime.
Material inflation | The latest data from BEIS shows that material prices softened slightly in July but the annual growth rate was almost 20%.
UK construction and property
PMI | The construction purchasing managers’ index remained below the 50.0 marker signifying falling growth despite increasing to 49.2. Civil engineering saw the steepest decline and housing output increased. New orders slowed further.
Infrastructure | Tunnelling under the Thames river at Silvertown has started for the 1.4km Silvertown Tunnel which will link Newham to the Greenwich Peninsula. The 11.91m wide tunnel boring machine will progress 10m per day.
GDP rose by 0.2% in July, after falling 0.6% in June as the Platinum Jubilee bank holiday reduced output. Monthly growth this year has been frenetic, showing unpredictable bursts of growth and contraction. The ONS reports that staff shortages are an issue across the economy with hotels and hospitality, manufacturers of health and beauty products, sheet metal fabricators, haulage companies, solicitors and cleaning companies all reporting problems.
Interest rates | The Bank of England announced that it has delayed its next interest rate announcement by a week to account for the national period of mourning.
Homebuyer enquiries | The latest RICS survey shows a fall in homebuyer enquiries in August 2022, at the steepest rate since 2020 and sale expectations are at the lowest since the survey began in 2012.
Rates in Europe | The European Central Bank has increased base rates by 0.75%, a record movement. President Christine Lagarde warned that the rate will continue to move upwards in the coming months. It also reduced growth forecasts and increased inflation expectations. The bank had previously expected economic growth of 2.1% in 2023 and inflation at 3.5% but the new view is for 0.9% and 5.5%.
Shipping | Drewry’s composite World Container Index decreased by 5% last week and is 48% lower than its recent peak in September 2021 but is still 46% higher than the five-year average.
Energy in the EU
Energy ministers in the EU have been called to an emergency meeting to discuss proposals to jointly combat the energy crisis (and the invitation has been extended to the UK). Ministers have pointed out that due to recent price increases, and the EU’s reliance on Russia, they are currently paying Russia the same amount of money but receiving less, therefore the ambition of the collective group is to reduce the amount of gas used. Proposals currently include:
mandatory targets to reduce electricity use in peak times as that drives up electricity prices;
cap revenues of energy companies who produce cheaper energy and use that windfall to help businesses;
cap revenues of oil and gas companies and use that windfall to invest in renewable energy;
help utility companies to stay afloat;
cap Russian gas prices.
UK energy plans
Domestic price cap frozen at £2,500 for the next two years from 1st October – although this is still an increase on the current level and much higher than last year.
Equivalent scheme for businesses to provide support for 6 months. Plan for “focussed support” for vulnerable industries which it noted as hospitality, not energy hungry production companies.
There will be a financial statement later this month from the new Chancellor outlining how the measures will be funded, but we do not expect additional taxes (note that a Financial Statement does not require input from the OBR like a Budget does).
Creation of a new Energy Supply Taskforce to ramp up supply from international gas suppliers and explore domestic supply, with 100 new gas and oil extraction licenses). It aims to speed up clean energy generation too, and negotiate the price down.
The measures are expected to reduce inflation by 5% which they are relying on bringing down the cost of debt.
New Bank of England scheme of £40bn to ensure companies operating in wholesale energy markets have the liquidity they need to manage price volatility.
Review of energy regulation systems and a review of the ability to achieve net zero by 2050.
“Back gas as part of our transition to net zero.”
Ends the moratorium on extracting shale by fracking “where locally supported”.
Launch Great British Nuclear at the end of the month which will deliver a quarter of our energy by 2050.
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
$ per £
€ per £
Brent Oil $/barrel
The week’s news was rightly overshadowed by the death of Queen Elizabeth II, with implications for the day-to-day running of government and therefore the Energy plan which was announced on the same day. The period of mourning will impact key political and economic events such as the Bank of England rate decision and the reorganisation of junior ministers.
The cookie settings on this website are set to "allow cookies" to give you the best browsing experience possible. If you continue to use this website without changing your cookie settings or you click "Accept" below then you are consenting to this.