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Economic Week In Review | Issue 356 | 21 November 2022

UK construction and property

• Leeds | Construction activity in Leeds has increased to its highest level in 15 years according to consultants DPP. The firm carries out a visual survey of the number of cranes across the city.
• Housing market | Gleeson housebuilder claims that since the UK’s “Mini-Budget” in September, cancellations have doubled to more than 40%. It blamed “market volatility” and the sharp increase in interest rates.

Materials, commodities and currencies

  • UKCA marking | The post-Brexit transition away from CE marks (which has already been postponed from the end of 2021) has been delayed until January 2025, as testing capacity has not been able to scale up to meet demand.
  • US dollar | Expectations that the Federal Reserve will slow its rate rises have pushed the dollar from its 20-year high and it has fallen 4% against a basket of its peers, its largest monthly fall since September 2010. It is still 11% higher in the year to date.
  • US oil prices fell 10% in the week on concerns over China’s demand and thoughts that the EU could impose more significant restrictions on Russia. The International Energy Agency has warned about a “myriad of headwinds” facing the oil industry including rising odds of a recession.

UK economy

  • Solvency | Reforms mean that banks and insurers can reduce the amount of capital they need to set aside and allows them to invest money from life insurance and pension policies into a broader range of assets.
  • Cost of borrowing | Mortgage rates are expected to stay close to 5% over the coming years, staying above 4.5% through the first quarter of 2028, according to the OBR forecast.
  • Inflation | CPI was recorded at 11.1% in October
  • Retail sales increased 0.6% in October but still remain lower than pre-Covid levels. The reading was double the level expected by economists and reflects something of a rebound from the low levels seen in September.

Autumn Statement announcements and forecasts

  • Infrastructure | The Autumn Statement saw the Chancellor maintain current capital spending on infrastructure, and recommit to Sizewell C, Northern Powerhouse Rail, the new hospital programme and the rollout of gigabit broadband.
  • Bricks vs clicks | Big warehouse operators’ business rates bill will increase by 27%, and rates for retailers by 20%.
  • Housing market | The Stamp Duty cut will continue through to 31st March 2025.
  • Super deduction | Due to changes in Corporation Tax, this allowance will not be extended and will expire on 31st March 2023.
  • The Living Wage will increase by nearly 10%.
  • The unemployment rate will increase to a peak of 4.9% at the end of 2024.
  • House prices are forecast to fall by 9%
  • Disposable income is forecast to end the period 1% lower than the pre-pandemic level.

Global economy

  • Shipping | The World Container Index published by Drewry fell 7% this week, the 38th consecutive weekly fall. It is now 31% lower than the five-year average suggesting a return to normality.
  • Italy | The government plans to announce 30 billion euros of spending in its Budget for next year. It has already spent 75 billion this year tackling the energy crisis.

Friday to Friday

Price / Index Week %
change
Annual %
change
FTSE 100 7,385.52 0.92 2.24
FTSE 250 19,283.05 -1.70 -17.92
Nikkei 27,899.77 -1.29 -6.21
CSI 300 3,801.57 0.35 -22.26
S&P 500 3,965.34 -0.69 -15.59
Nasdaq 11,146.06 -1.57 -30.59
CAC 40 6,644.46 0.76 -6.58
Dax 14,431.86 1.46 -10.69
$ per £ 1.1900 0.86 -11.66
€ per £ 1.1500 0.73 -3.40
Gold £/oz 1,472.36 -1.61 7.26
Brent Oil $/barrel 87.62 -8.72 11.07

Weekly Summary

With warnings of a recession on the horizon, many in the industry were awaiting the Autumn Statement to find out whether publicly funded projects would continue as the Government trailed the idea that major cuts were coming down the road. Recent history has shown us that infrastructure projects are often first to be cancelled or to have delayed funding, so it was positive to see a continued commitment to projects such as Sizewell C and the Northern Powerhouse Railway. This will be good news for many contractors who have reorganised their order books to account for more public sector projects, but it also means that the high demand for materials will continue.

However, the Autumn Statement and associated OBR report were not without dark clouds. It warned that the UK was already in recession and that unemployment levels and house prices will fall (although, with some context, the current unemployment rate is historically low and the fall in prices will cancel out the increases seen this year).

Author contact

Rachel Coleman
Rachel Coleman,
Associate Research Analyst

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