Construction growth hit – business news 7 October 2021
James Salmon, Operations Director.
Construction growth hit by shortages and price rises. UK managers plan slow return to office as Covid concerns remain. Johnson’s conference speech dubbed “economically illiterate”. IMF inflation predictions. Markets predict price rises could exceed 6%. And more business news.
Construction growth hit by shortages and price rises
The IHS Markit/CIPS UK construction purchasing managers’ index (PMI) fell to an eight-month low of 52.6 in September – down from 55.2 in August and below economists’ forecasts of 54. Supply chain disruption and staff shortages put pressure on costs and rising prices weighed on demand, dragging on momentum. “The volatile price and supply environment has started to hinder new business intakes as construction companies revised cost projections and some clients delayed decisions on contract awards,” said Tim Moore, director at IHS Markit. “As a result, the latest survey data pointed to the worst month for order books since January’s lockdown.”
UK managers plan slow return to office as Covid concerns remain
A survey by the Chartered Management Institute has found that businesses have an average of 44% of staff back in the workplace at least some of the time, with the figure expected to increase to just 56% by the end of 2021.
Johnson’s conference speech dubbed “economically illiterate”
Boris Johnson delivered an upbeat speech to the Conservative Party conference yesterday claiming a high-wage, high-skilled economy was being created in the wake of Brexit and the pandemic. Johnson insisted there would be no going back to the “old” economic model involving “uncontrolled immigration”.
The Prime Minister focused on the theme of “leveling up” saying that reducing gaps between regions would ease pressure on south-eastern England, while boosting places that felt left behind. He also defended tax rises to pay for the NHS, arguing that it is what Margaret Thatcher would have done, and vowed to fix social care.
But Mr Johnson’s vision for a “high wage economic revival” in the wake of supply chain chaos failed to inspire think tanks and trade organisations.
The Adam Smith Institute condemned the speech as “vacuous and economically illiterate”, saying: “Shortages and rising prices simply cannot be blustered away with rhetoric about migrants.” Tony Danker, director-general of the CBI, said Johnson had set out a “compelling vision” of a high-wage, high-skill economy. But he warned: “Ambition on wages without action on investment and productivity is ultimately just a pathway for higher prices.”
IMF inflation predictions
The International Monetary Fund expects inflation across the world’s richest countries to surge above the central banking elites’ targets. In a pre-released chapter from its global economic outlook report, the IMF said inflation in rich countries will hit 3.6% in the final months of this year.
Markets predict price rises could exceed 6%
Rising inflation is hampering the global economic recovery from the pandemic, the International Monetary Fund has warned. Kristalina Georgieva, the fund’s chief, is calling on central banks to take action if needed to keep rising prices under control. In the UK, analysts are predicting a 7% rise in the cost of living in 2022, up from the current 4.8%. This would be the highest rise in the Retail Price Index since the 1990s. Even if RPI were to average 4.8% for this year, a further £13bn in interest would need to be paid on the national debt, according to economists at BNP Paribas. Derek Halpenny, head of global markets research at MUFG, said: “Inflation is obviously being priced higher everywhere but it’s certainly more problematic in the UK and that’s a reflection of the supply constraints being a bit more severe on the ground as we speak.”
Lookers
Lookers upgraded its outlook on annual profit following ‘strong’ third-quarter performance amid ongoing demand for new and used vehicles. The company said it now expects underlying pre-tax profit for 2021 to be ‘materially ahead’ of its previous expectations.
Mondi
Packaging specialist Mondi reported a rise in core earnings as higher average prices and ‘strong’ volume growth boosted performance in the third quarter. Underlying EBITDA for the third quarter was €388 million, up 27% from a year earlier, and 9% on a sequential basis.The company also flagged higher energy, resins, transport and chemical costs quarter on quarter.
Carnival
Cruise ship company Carnival announced plans for more ship restarts for January and February, as it worked toward the return of its full fleet sailing from US homeports in the spring of 2022. Carnival Sunshine will restart from Charleston on Jan. 13 and Carnival Liberty from Port Canaveral on Feb. 11. ‘Our restart plan continues to excel across all metrics, and we are looking forward to completing the restart of the fleet in the new year,’ said Christine Duffy, president of Carnival Cruise Line.
House Prices
UK House Prices rose an average of 7.4 per cent more than a year ago with monthly prices rising at the highest rate for over a decade. In September the average UK home cost £267,587, up from £249,122 a year ago and a jump of 1.7 per cent compared to the previous month, the highest monthly growth rate since February 2007.
Complaints about Land Registry delays soar by more than 200%
The Land Registry with has been flooded with complaints as property buyers face losing thousands of pounds in stamp duty savings and seeing purchases collapse due to delays at the Government’s record office. More than 1,000 complaints about the organisation were made in June alone this year – a 208% increase compared with June 2020 and a 253% rise compared with June 2019. Buyers who completed before June 30 could save a maximum of £15,000 in tax. Those buying between July and September could save up to £2,500. Tax bands returned to normal from October 1st. William Marriott of Charles Russell Speechlys, said: “It’s probable that if a title had not been registered, or if there were outstanding queries with Land Registry, that some transactions would have failed to complete before the deadline.”
PM pledges no homes will be built on green fields
Boris Johnson signalled to the Conservative Party conference yesterday that proposals for a vast overhaul of planning rules would be abandoned, acknowledging grass roots concerns that the countryside would be “desecrated by ugly new homes”. Mr Johnson said: “You can also see how much room there is to build the homes that young families need in this country not on green fields, not just jammed in the South East, but beautiful homes on brownfield sites in places where homes make sense.”
Markets
Markets are looking positive this morning after recent nervousness as signs are that US lawmakers are about to reach a deal to avoid a government debt default and shutdown. Although worries persist about global supply constraints, rising hydrocarbon prices and inflationary pressures. The US dollar is softening again.
Gas
As gas prices surged in Europe by 40% yesterday, Putin stepped in to say that Russia could potentially export record volumes of the vital fuel to the continent this year, easing prices and stabilizing the market.
Meanwhile experts are warning that consumers must be prepared for household energy bills to go up by hundreds of pounds with prices remaining volatile and suppliers collapsing.
Oil
Oil Prices dropped on Wednesday after hitting a multi-year high above $83 a barrel, pressured by an American Petroleum Institute (API) report showing rising crude inventories in the United States and technical indicators suggesting prices have rallied too fast.
Gold
Gold Prices edged lower pressured by a resilient dollar and higher US bond yields in the run-up to Friday’s US labour report that could determine the Fed’s tapering schedule.
GSK & Malaria
The World Health Organisation endorsed use of GlaxoSmithKline’s malaria vaccine jab, called RTS,Sfor children at risk of infection. The first of its kind. The WHO said that the jab was safe and reduced by 30% cases of severe malaria in young children. In much of sub-Saharan Africa youngsters contract malaria several times a year with a child under five currently dying every two minutes.
Arron Banks loses tax fight over political donations
Brexit-backing businessman Arron Banks has lost his Court of Appeal fight with HMRC over his almost £1m in donations to UKIP between October 2014 and March 2015. Donations to political parties which had two MPs elected at the last general election, or one MP elected and a total of 150,000 votes, are exempt from inheritance tax. While UKIP received almost 920,000 votes across the UK in the 2010 general election, the party did not return a single MP to the House of Commons, prompting HMRC to bill Mr Banks for nearly £163,000. Mr Banks challenged the decision at two tribunals, arguing that the law on political donations being exempt from inheritance tax breached his human rights and EU law. However, three judges found on Wednesday that he had failed to establish a breach of his human rights and dismissed the appeal.
From Panama to the Pandora papers: what’s changed in offshore tax
The FT reviews rules around the use of offshore tax havens following the latest exposé from the ICIJ, which has so far not alleged tax evasion. The main points are that such structures are not available to ordinary people, and that governments should change the law if they do not want such mechanisms used. Meanwhile, EU tax commissioner Paolo Gentiloni said on Wednesday that the European Commission will propose new rules to expand the information that needs to be automatically exchanged among national tax authorities following the release of the Pandora Papers. He also said the Commission would present proposals by the end of the year “to tackle the misuse of shell companies for tax purposes”.
Pay gap between men and women fails to improve
Analysis by the BBC has found that the average gender pay gap of all firms that reported in the past financial year is 10.4% – the same as the average of all firms reporting in 2019-20. by sector, the worst gender pay gaps on average are in education (26%), finance and insurance (24%) and construction (23.8%). The private household services sector had the smallest average gender pay gap at 0.75%, closely followed by accommodation and food (0.1%) and health (0.5%). A spokesperson from the Government said that gender pay gap reporting had “helped to focus and motivate employers to tackle inequality in their workforce”. “Given the circumstances of the last 18 months, the EHRC was right to suspend enforcement action and we are pleased that so many organisations have submitted their reports on time,” the spokesperson added. Rosie Campbell, professor of politics at King’s College London and director of the Global Institute for Women’s Leadership, commented: “We’d like to see the Government take the initiative by strengthening our gender pay gap reporting legislation to make it a tool for action not just measurement, by including employers with more than 50 staff and by introducing mandatory action plans.”
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