How to do more with more?

Economic Week In Review | Issue 380 | 22 May 2023

UK construction and property

  • Infrastructure | Water companies in England have committed to tripling investment plans and undertaking the biggest modernisation of the sewers since the Victorian era to reduce sewage spills. However, the plans quickly drew criticism as it was revealed that the £10bn investment would be passed on through higher bills.
  • HS2 will hold a bidders day in July in Manchester for the next tranche of work including MEP, urban realm, station fit out and drainage work. However, in the Midlands, teams are being stood down as the recently announced “rephasing” comes into effect. Works are coming to a “safe stop” between Birmingham and Lichfield.
  • Civils work | Trade body CECA has warned that evidence of falling orders for civil engineering activity should concern policymakers. The sector is struggling under rising inflation, supply chain disruptions, and a loss of business confidence. Preliminary works and motorway trunk roads showed the greatest slowdown but non-renewable electricity, local roads and airports are also declining compared to 12 months ago.
  • Highways England announced that it will focus on projects less than £25 million, and motorway renewals after its smart motorways programme was cancelled.
  • Railways plan | Network Rail has set out its £44bn spending plan for the next five years. A top priority is to find £3.8bn in efficiency gains on programmes and it will also work to improve climate resilience in the network by doubling spending on embankments and drainage to £1.8bn between 2024 and 2029.
  • Pipeline | Data from Glenigan shows that project starts have fallen in all sectors except for education in the last 12 months, yet planning approvals grew 65% in Q2 2023, and are 27% higher than last year. Office approvals were up 8%.
  • Second staircase | Uncertainty over the rules requiring second staircases has encouraged Clarion to pause work on 15 schemes containing over 2,000 affordable units.
  • Property register fines | Fines worth as much as £1bn on foreign companies breaking transparency laws are yet to have been enforced. In 2022 the Economic Crime Act introduced a register to reveal money laundering through UK property and also to understand the extent of Russian ownership.

Materials and commodities

  • Bricks | Forterra will mothball one of its plants in response to falling demand as housing output calms. After high demand drove four price increases in the last twelve months the company announced plans to open a new brick factory. Changes in the market mean that they will now operate “disciplined capacity management”.
  • Shipping | The cost index for dry shipping has reached a four-week low due to falling demand. Tanker shipping (for oil) also fell and there are significant concerns over the size of the fleet in years to come as 34% of ships are more than 16 years old and new orders for ships are low. The ageing fleet also raises environmental concerns due to the high probability of leaks.
  • Iron ore prices in China rose driven by increasing steel margins and persistently low stockpiles at steel mills.
  • Timber | UK demand for softwood is increasing despite pessimistic forecasts for the construction industry this year. Timber Development UK reported that whilst softwood imports are increasing, overall demand for timber is 6% lower than in 2022, largely due to hardwood and plywood volumes falling 20% and 30% respectively.

UK economy

  • Consumer confidence in the UK has increased to its highest levels in more than a year. It rose by three points to -27, having increased from a low of -45 in January.
  • House prices | An economist at the OBR has forecast the era of “massive” house price increases to end soon. In a speech at the Economic Statistics Centre of Excellence’s conference in London, David Miles cited slowing population growth and increased borrowing costs as the main reasons.
  • Pay cut | Perhaps contrary to recent news, Asda has announced plans for a 5% pay cut for its staff outside of the M25. It will remove the 60p/hour supplement for workers working near, but not in, London.
  • Trade rules | Car manufacturers have warned that they will be unable to continue building cars in Britain unless changes are made to the Brexit agreement. Stricter Rules of Origin legislation comes into effect next year that will require 45% of an electric vehicle’s parts by value to be sourced in the EU or UK if it is to be sold in the EU without a 10% tariff. Most EV batteries come from Asia. Later it was announced that Jaguar Land Rover has been offered a £500m subsidy package to build a battery plant in the UK.
  • AI | BT announced that 55,000 jobs will be cut and a fifth of those will be replaced by Artificial Intelligence. 15,000 losses are due to the completion of its fibre network system.
  • Parliament | The Public Accounts Committee, in its annual report, concluded that there is a “real risk” that the Palace of Westminster could be destroyed by a “catastrophic” event before its restoration is complete. Full restoration is expected to be complete before 2030 and will cost £4bn.

Global economy

  • New York real estate | According to Colliers, office vacancy rates in New York are expected to stay above 19% until at least 2026, after passing 22.7% this year.

Friday to Friday

Price / Index Week %
change		 Annual %
change
FTSE 100 7,756.87 0.03 4.96
FTSE 250 19,289.10 0.52 -2.76
Nikkei 30,808.35 4.83 15.22
CSI 300 3,944.54 0.17 -3.26
S&P 500 4,191.98 1.65 7.45
Nasdaq 12,657.90 3.04 11.48
CAC 40 7,491.96 1.04 19.20
Dax 16,275.38 2.27 16.40
$ per £ 1.2461 -0.01 -0.26
€ per £ 1.1518 0.33 -2.62
Gold £/oz 1,589.20 -1.62 7.51
Brent Oil $/barrel 75.58 1.90 -31.40

Weekly Summary

Messages across the economy are still mixed with no clear overall positive or negative trend as a certain level of post-Covid catch-up comes to an end. However, concerns over the continued high cost of work are a consistent call for action with many giving serious thought to productivity as a way to counter some of these increases.

Author contact

Rachel Coleman
Rachel Coleman,
Associate Research Analyst

Related reviews

Website &AGENCY