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Economic Week In Review |15 November 2021

UK construction and property news

Construction output |?All work volume grew 1.3% in September and is now 1% below pre-pandemic levels according to data from the ONS. New work is still 3.5% lower than February 2020 with huge variations between sectors.

VAT repayments |?Contractors have reported significant delays in VAT repayment claims from HMRC following the move to reverse charge earlier this year.

Shortages | House-builder Vistry is the latest firm to warn that labour inflation could continue into next year but that material pressures should ease earlier.

Modular reactors |?Rolls Royce has raised funding to build small modular nuclear reactors. The company will invest ￡195m alongside BNF Resources UK and Exelon Generation, unlocking a ￡210m in grant funding from UK Research and Innovation.

Net zero |?The UK Green Building Council has launched a Net Zero Whole Life Carbon Roadmap developed by 100 collaborating companies to set out a shared ambition to achieve net zero carbon by 2050.

Rail plans |?HS2’s eastern leg to Leeds is expected to be scrapped this week as the government publishes the long-awaited plan for rail upgrades on Thursday. A downgrade to the ￡39bn Northern Powerhouse Rail (NPR) scheme is expected, with a focus on upgrades to existing lines instead.

Materials, commodities and currencies

British Steel?announced a ￡30/tonne price increase, it’s seventh this year. It also warned that it would be reducing output at both of its UK mills due to high production costs and some are concerned this could prompt a return to “allocations” or rationing.

Red diesel |?Construction Index published a report on the expected impact of the removal of the 47p/litre rebate on red diesel due in April. Many contractors said they were waiting to see whether the move was scrapped, while others expected it to add to current inflationary pressures. Only a quarter of respondents were ready for the change, with most saying they would just switch to standard, white diesel instead of a cleaner alternative. HMRC confirmed last week that rebated red diesel will still be available for use in horticulture, fish farming and forestry, sports clubs, golf clubs, travelling funfairs and all types of boat.

HS2 rebar |?It has been claimed that HS2 sites are using, and will continue to use rebar from France which does not have the correct approvals for use in the UK. HS2 says that it is only a small amount and UK plants cannot meet its needs, yet UK fabricators argue that early engagement could have overcome this problem.

Global news

US consumer prices?rose at their fastest rate since 1990, increasing 6.2% from October 2020 driven by energy, housing, food, and vehicles. Cost increases varied across cities, with Atlanta seeing a rise of 7.9%, more than twice that seen in San Francisco.

US infrastructure deal |?The bipartisan deal is expected to be approved by President Joe Biden after clearing both bodies of Congress. It could pave the way for $1tn of investment in infrastructure and add 1.5 million jobs every year for the next ten years, and impact commodity prices.

Global trade |?China has accused the EU of threatening global trade and inflation because of its move to boost self-reliance, and regulatory or trade barriers to countries outside of the bloc.

Return to work |?In Portugal new laws ban employers from contacting employees out of work hours and demand that employers contribute to energy and internet costs of home workers. Portugal’s labour minister, Ana Mendes Godinho, said “Remote working has great advantages provided we control the disadvantages…The pandemic accelerated the need to regulate what already needed to be regulated.”

Investment trends |?A study by McKinsey Global Institute of ten of the world’s largest economies which account for 60% of global income, showed that low interest rates have encouraged investment into real estate, rather than business investment. Two-thirds of net worth is stored in real estate or land.

UK economy

Living wage |?Current staff shortages have encouraged companies to adopt the voluntary, higher ‘real’ living wage at the fastest rate recorded. According to the Living Wage Foundation, one in 13 employees now work for a living wage employer. The ‘real’ Living wage is set at ￡9.90 or ￡11.05 in London, significantly higher than the statutory National Living Wage rate, which will rise from ￡8.91 to ￡9.50 in April.

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