At what cost?

Economic Week In Review | Issue 379 | 15 May 2023

UK construction and property

  • Super prime property | According to Knight Frank, sales of super prime properties in London have reached a post-Brexit vote high. Between March 2022 and March 2023, 161 super prime properties totalling £3.1bn were sold.
  • Leaseholding system | Plans to abolish the leasehold system for residential properties have been abandoned. Instead, the government will press on with a raft of reforms after warnings that they were running out of time to legislate the move away from leaseholds before the next election.
  • Output | Total output increased marginally by 0.2% as an increase of 0.7% for new work countered a 0.6% fall in repair and maintenance. Four of nine sectors saw an increase in the month. New orders in Q1 2023 fell 12.4%, with private commercial and private new housing leading the fall at -22.3% and -18.4% respectively.
  • Prefab | Legal & General has closed its house-building factory, citing long planning delays in the UK and recent major macro events which have stopped the business from securing the necessary pipeline of work.
  • Purplebricks | Even if the online estate agent finds a buyer, it is expected that investors will lose out as its market capitalisation has fallen from £1.5bn in 2017 to £6.3m.
  • Specialists | A  league table compiled for the Building Engineering Services Association (BESA) shows that the top 30 MEP contractors saw a 7% increase in revenue with collective turnover increasing to £4.706bn, more than the £4.451bn pre-Covid level, although some of it is due to high levels of inflation.

Materials and commodities

  • Transport | The Government has approved the use of longer (2.05m) lorries on British roads in a push for efficiency and lower emissions. The move is expected to result in £1.4bn of economic benefits and remove one standard-size trailer from the road for every 12 trips.
  • Lithium | Tesla has broken ground on a new lithium refinery plant in Texas. It claims the plant will produce enough material for 1 million electric vehicles by 2025 and will make Tesla the only American manufacturer to process its own lithium, reducing reliance on China.
  • Copper | The International Copper Study Group has warned that the expected surplus of copper may not materialise this year and that China’s use is returning faster than expected. This means that the market may not return to normal until next year.
  • Coal | The Australian Government has approved plans for the first new coal mine since it was elected, despite its 2022 campaign being based on a climate action program.
  • Energy | Dubai is emerging as a major hub for energy trading as its commodities hub draws traders away from other global hubs due to its low tax rate whilst bonuses are low elsewhere.
  • Dollar | Suzano SA, the largest producer of hardwood pulp is considering selling its products to China in yuan, suggesting that the dollar is losing its significance in commodity markets.  Other commodity sellers are also contemplating the move for oil and nickel.

UK economy

  • Inflation probe | The Government’s Environment, Food and Rural Affairs Committee is to examine the earnings of all components of the food supply chain from “farm to fork” in order to discover if there is any discrepancy between wholesale and retail pricing. It will also consider the cost of imported food and global commodity markets.
  • UK growth ranks at the bottom of the G7 league table at 0.5% smaller than pre-pandemic levels. France has grown 1.3% and Germany has fallen 0.1% in the same time. The US leads the way at 5.3%.
  • Bank of England expectations | After increasing interest rates from 4.25% to 4.5%, the Bank warned that inflation likely to stay higher for longer as food prices are taking longer to come back down. Its most recent forecast expects the economy to flatline in the first half of the year before returning to growth. Its upgrade of 0.75% represents the largest upgrade to its forecasts since it became independent in 1997. However, it has also upgraded its view for inflation; it previously suggested CPI would fall to 3.9% at the end of the year, but the forecast is now for 5.2%.

Global economy

  • Swedish rate rises | Concerns are growing over Sweden’s real estate sector as investors expect higher interest rates to expose its reliance on bank lending, and begin to weigh on prices. One of its largest landlords was recently downgraded to junk status by credit rating agency S&P due to its high leverage and tightening levels of liquidity.
  • Greedflation | The president of the European Central Bank suggested that companies are taking advantage of the current inflationary environment, pointing to the number of firms that have been able to increase their profit levels despite high inflation levels.
  • Turkey | The presidential election saw a record-high turnout and the most significant challenge to Recep Tayyip Erdoğan’s leadership in two decades as it is expected to head to a second round of voting.

Friday to Friday

Price / Index Week %
change		 Annual %
change
FTSE 100 7,754.62 -0.31 4.54
FTSE 250 19,188.37 -1.36 -3.68
Nikkei 29,388.30 0.79 11.20
CSI 300 3,937.76 -1.97 -1.27
S&P 500 4,124.08 -0.29 2.49
Nasdaq 12,284.74 0.40 4.06
CAC 40 7,414.85 -0.24 16.54
Dax 15,913.82 -0.30 13.44
$ per £ 1.2463 -1.46 1.79
€ per £ 1.1480 0.07 -2.38
Gold £/oz 1,615.45 1.17 9.47
Brent Oil $/barrel 74.17 -1.50 -34.01

Weekly Summary

The enduring impacts of high levels of inflation and frequent political changes are now becoming known as some companies reduce their innovative efforts, or countries resort to less sustainable, pollutant ways to fuel “business as usual”.

Therefore, it is of no comfort that the Bank of England expects higher inflation to persist throughout 2023. However, its upgrade to forecast growth levels is positive, and in recent weeks this publication has tracked some collaborative approaches to sustainable and efficient use of resources.

Author contact

Rachel Coleman
Rachel Coleman,
Associate Research Analyst

Related reviews

Website &AGENCY