What goes up...

Economic Week In Review | Issue 350 | 10 October 2022

UK construction

  • Output | Construction PMI returned to growth (above 50.0) to 52.3, despite forecasters expecting a reading of 48. Whilst supply chain pressures have eased, business optimism has degraded below levels seen in July 2020 and new orders have stalled.
  • Insolvency | Tax advisory firm Mazars has found that almost 17,000 construction-related businesses are at “significant risk” of insolvency, with high inflation and rising interest rates, increasing the number of financially stressed firms by 54%. The ONS also highlighted that the number of company insolvencies in Q2 was at a thirteen-year high and the number of companies becoming insolvent was 46% higher than the average recorded over the four years before the pandemic.
  • HS2 Labour | The construction of HS2 is currently employing more than 27,000 staff across 350 sites. In London, the first of six tunnel-boring machines was started.
  • Arbitration | The Law Commission is consulting on reforms to the Arbitration Act 1996 to ensure that it remains “state of the art”. The consultation will remain open until December.
  • New starts fell 27% in the third quarter, according to Glenigan, and are 23% lower when compared annually.
  • Cladding | The Department for Levelling Up has taken its first step towards legal action against a building owner over failure to fix unsafe cladding following two years of delays by the building owner.

Materials and commodities

  • Winter energy | Ahead of concerns about energy over winter, the number of LNG carriers being used as offshore storage has reached a global high with traders expecting spot prices for immediate delivery to be higher than futures pricing between November and January.
  • Semi-finished steel products from Russia face fresh sanctions from the EU.
  • Copper prices have fallen due to a weakening global outlook and a strong dollar.
  • Smelters | Glencore has placed its zinc smelter in Nordenham, Germany on “Care and Maintenance”. The cessation of production will remain in place until the macroeconomic position improves.

UK economy

  • Credit outlook | Rating agency Fitch has downgraded its outlook for British Government debt to “negative” from “stable” following risks from the UK Growth Plan. It warned that the “unfunded fiscal package could lead to a significant increase in fiscal deficits over the medium term”.
  • Power shortage | National Grid has warned that some customers could see three-hour power cuts on cold, calm days as the UK’s back-up power supplies are at their lowest in seven years.
  • House price growth has “cooled” according to Halifax as increased borrowing costs reduced affordability. However the average house price fell just 0.1% from its record high last month.
  • Recruitment | Placements of permanent staff increased at the slowest rate since February 2021, according to a report by KPMG and the Recruitment and Employers Confederation. As well as hiring freezes, it was also caused by recruiters struggling to find the right candidates due to the shortage of labour but also an increasing hesitancy of people to change jobs which has reduced growth in vacancies.
  • Investment zones | Councils have until 14th October to apply to host one of the new, deregulated Investment Zones which were set out in the UK Growth Plan.
  • Fusion | A site in Nottinghamshire has been selected as the site for a prototype commercial nuclear fusion energy plant. It should be operational by the early 2040’s.

Global economy

  • Instability | The IMF has warned that there has been a “fundamental shift” towards an age of “global economic instability” because of fragile global relationships and more frequent natural disasters. The IMF will publish its newest forecast next week which will downgrade growth for next year.
  • Jobs market | Data updates in the US and Europe show falling growth in employment suggesting that vacancies are falling from their historic highs as firms are becoming more cautious. Central banks are hoping that this will alleviate some of the pressure on wages, in turn reducing inflationary pressures.

Friday to Friday

Price / Index Week %
change
Annual %
change
FTSE 100 6,991.09 1.41 -1.47
FTSE 250 17,353.28 1.08 -23.00
Nikkei 27,116.11 4.55 -3.33
CSI 300 3,770.70 -0.90 -23.51
S&P 500 3,639.66 1.51 -17.12
Nasdaq 10,652.40 0.73 -26.94
CAC 40 5,866.94 1.82 -10.56
Dax 12,273.00 1.31 -19.29
$ per £ 1.1129 0.01 -18.34
€ per £ 1.1361 -0.09 -3.54
Gold £/oz 1,528.25 2.74 18.42
Brent Oil $/barrel 97.92 15.01 18.86

Weekly Summary

Energy over the winter period is clearly a key concern for material producers (as well as households) and could be a reason for material prices staying high as factory closures will reduce the supply of materials.

Price increases or material unavailability could create additional pressures on contractors who fixed a price at the beginning of a longer project and are now looking to source supply. Together with the news on increased insolvency risk, this price pressure or the need to re-source products, understanding your supply chain is becoming increasingly important.

Author contact

Rachel Coleman
Rachel Coleman,
Associate Research Analyst

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