UK construction output falls again; steel job cut fears at Scunthorpe – business live | Business

Jasper Jolly

British Steel’s plan to replace the Scunthorpe blast furnaces with electric arc furnaces will be subject to consultation with unions, who are likely to argue against job losses.

Under the proposals the two blast furnaces at Scunthorpe would be replaced by an electric arc furnace at Scunthorpe and another at a site in Teesside, marking the return of steelmaking to Redcar, where the blast furnace was demolished last year after its closure in 2015.

It is understood that problems with the electricity grid connection at Scunthorpe would make it difficult to install a second electric arc furnace until at least 2029, forcing British Steel to look into other options.

British Steel plans to shut Scunthorpe furnaces putting up to 2,000 jobs at risk

Jasper Jolly

British Steel is expected to announce plans to replace two blast furnaces in Scunthorpe, in a move that would further reshape the UK steel industry and imperil the jobs of as many as 2,000 steelworkers, my colleague Jasper Jolly reports.

The company, owned by China’s Jingye, is expected to inform workers that the blast furnaces will be replaced by greener electric arc furnaces, at a meeting on Monday, according to people briefed on the plans.

Electric arc furnaces offer the ability to recycle scrap steel using clean electricity. However, they require far fewer workers than enormous blast furnaces that dominate the skylines of Scunthorpe and also Port Talbot in south Wales.

Tata Steel, which operates the Port Talbot plant, is planning a similar shift, although it delayed an imminent announcement last week.

However, there is an important difference between the two companies’ proposals: British Steel is understood to be considering keeping its blast furnaces open until the electric arc furnaces are in operation. That would put off any job losses for at least three years.

British Steel has not yet told workers how many jobs could be affected, but unions have estimated that as many as 2,000 fewer people could be required to operate the plant.

The BBC, which first reported the plans, said that British Steel had been offered £500m in UK government support to make the switch. That would match the package offered to Tata Steel.

Just in: Britain’s Information Commissioner has apologised to former NatWest CEO Dame Alison Rose, for suggesting she had breached data protection rules over the debanking scandal involving Nigel Farage.

Last month, an ICO report said that Rose had broken data protection rules, first by revealing to the BBC that Farage had a banking relationship with its private bank, Coutts; and secondly by providing “misleading information” that led the BBC to believe the bank was closing his accounts for purely commercial reasons, linked to his wealth.

But today, the ICO has apologised for ‘suggesting’ it had found she had broken General Data Protection Regulation (GDPR) rules.

The data protection watchdog says:

“The ICO recently investigated a complaint from Nigel Farage. The ICO’s investigation was solely into NatWest’s actions as a data controller.

“Our comments gave the impression that we had investigated the actions of Alison Rose, the former CEO of NatWest Group. This was incorrect. We confirm that we did not investigate Ms Rose’s actions, given that NatWest was the data controller under investigation.

“We accept that it would have been appropriate in the specific circumstances for us to have given Ms Rose an opportunity to comment on any findings in relation to her role and regret not doing so.

Finally, we apologise to Ms Rose for suggesting that we had made a finding that she breached the UK GDPR in respect of Mr Farage when we had not investigated her. Our investigation did not find that Ms Rose breached data protection law and we regret that our statement gave the impression that she did.”

Last month’s cancellation of the northern leg of the HS2 rail line is a major issue for construction contractors, reports Max Jones, director in Lloyds Bank’s infrastructure and construction team:

Jones explains:

“Following last month’s HS2 decision, businesses are now turning their attention towards identifying opportunities from improvements to regional transport and infrastructure links. In turn, the investment will better connect towns and cities and boost economic growth, which could create additional opportunities for those in the construction sector.

“Looking at the near- and medium-term picture, contractors we speak to are mindful of risks building up across their supply chains. The concern is that contracts priced as the country was coming out of the pandemic have had their margins eroded by inflation, and this could eat into profits as projects are completed in the coming months.”

Toby Banfield, financial restructuring partner at PwC UK, says weak demand is hurting housebuilders:

“Sector headwinds showed little signs of relief in October, as the PMI recorded 45.6 in October, a marginal increase from 45.0 in September but the second-lowest reading since May 2020, fuelled by an eleventh consecutive monthly decrease for house building which continues to battle with sales weak demand which is prompting delays and hesitance with new projects.

Ongoing disruption to government infrastructure projects and the slowdown in the housing market is hurting constructors, says Kelly Boorman, partner and national head of construction at acccountancy firm RSM UK:

Boorman says there are signs of stabilisation:

‘This month’s slight uplift in the headline PMI to 45.6 brings surprisingly welcome news for the construction industry, especially after September’s steep drop. The increase was driven by an uplift in commercial activity to 49.5, which suggests stability is returning to the market and is a positive sign that construction output will continue to improve, albeit slowly.

The Bank of England’s decision to maintain its base rate at 5.25% for the second month, after 14 consecutive months of hikes is also encouraging, after months of disruption to pipelines with the housing market really feeling the pinch. It’s always a tough time of year for construction as we get into winter months, so hopefully this will facilitate some stimulation in the housing market.

There is one glimmer of good news, though – building costs are falling.

Today’s construction PMI shows that purchasing prices decreased at the fastest pace for over 14 years, as lower timber, steel and transportation costs were passed on by vendors.

Those cheaper raw material costs suggest that supply chain problems have eased, and also that weaker demand from building firms is forcing suppliers to offer more competitive prices.

Tim Moore, economics director at S&P Global Market Intelligence, explains:

“Total new work continued to fall more quickly than at any time since the initial pandemic lockdown period, which contributed to shrinking demand for construction products and materials during October.

Competitive pressure on suppliers to pass on lower commodity prices resulted in the fastest decline in input costs since August 2009. Sub-contractors meanwhile cut their charges for the first time in more than three years in response to a further downturn in workloads during October.”

Newsflash: UK construction output declined at a sharp pace again last month.

The latest poll of purchasing managers at UK construction firms has found that business activity falling for the second month running in October, amid a lack of new work to replace completed projects.

Housebuilding fell particularly sharply, as the sector was hit by falling buyer demand and higher costs.

Building firms blamed fragile client confidence and elevated borrowing costs, due to the surge in interest rates over the last two years.

The S&P Global / CIPS UK construction PMI has come in at 45.6 for October, up from September’s 45.0.

That’s the second-lowest reading since May 2020 and shows a marked decline in total construction activity (any reading below 50 shows a contraction).

The survey says:

House building decreased for the eleventh successive month in October and at a much steeper pace than elsewhere in the construction sector (index at 38.5).

Falling work on residential construction projects was widely linked to a lack of demand and subsequent cutbacks to new projects. Civil engineering activity also decreased sharply in October (index at 43.7) and the rate of decline was the fastest since July 2022.

The SMMT has lifted its forecast for car sales next year, but cut its forecast for the market share of electric cars.

It says:

Looking ahead to next year, the overall market outlook for 2024 is marginally more positive than previously anticipated, up 1.0% to 1.970 million units (a 4.4% rise on the 2023 outlook).

With an absence of consumer incentives and an overwhelming dependency on fleet registrations for growth, however, BEV market share outlook has been revised down slightly to an expected market share of 22.3%, despite registrations expected to reach 439,000 units, a 35.5% increase over 2023.

The growth in UK car registrations last month was driven almost entirely by large fleet registrations.

Fleet registrations (cars sold to companies, organizations, or government agencies) grew by 28.8% year-on-year to reach 87,479 units.

Private demand was stable at 62,915 vehicles, a 0.3% increase, while the much smaller business sector saw registrations fall -15.2% to 3,135 units, the SMMT says.

It’s official: UK car sales exceeded their pre-pandemic levels last month.

New data from the Society of Motor Manufacturers and Traders reports there were 153,529 new car registrations in October, up 14.3% year-on-year.

That’s 7.2% above 2019, and the best October since 2018, as the easing in supply chain problems helpd dealers deliver stock to customers.

So far this year, overall vehicle uptake is now up 19.6%, with the market currently enjoying its best year since 2019.

Mike Hawes, SMMT chief executive, says:

With demand for new cars surpassing pre-pandemic levels in the month, the market is defying expectations and driving growth.

As fleet uptake flourishes, particularly for EVs, sustained success depends on encouraging all consumers to invest in the latest zero emission vehicles. The Autumn Statement is a key opportunity for government to introduce incentives and facilitate infrastructure investment. Doing so would send a clear signal of support for drivers, reassuring them that now is the time to switch to electric.

The SMMT has also revised up its forecast for sales this year by 2.1% (as flagged earlier) to 1.886 million units with further growth anticipated in 2024.

However, it has trimmed its forecast for sales growth in battery-powered electric cars (BEVs) by -1.7% to 324,000 units.

Budget airline Ryanair has predicted it will make a record profit this financial year,

Ryanair says it benefited from strong trading over Easter, record summer traffic, and higher fares – offsetting the increased fuel costs this year.

It has posted a record profit of €2.18bn in the six months to the end of September.

It now expects to make a profit-after-tax for the full year of between €1.85bn and €2.05bn, despite its higher fuel bill, the risk of weaker consumer spending, and uncertainty over whether Boeing will deliver new planes in time.

Ryanair adds:

This guidance remains highly dependent on the absence of any unforeseen adverse events (for example such as Ukraine or Gaza) between now and the end of March 2024.”

The airline has also declared it will spend €400m on a maiden ordinary dividend.

Shares in Ryanair have jumped 6% in early trading.

Victoria Scholar, head of investment at interactive investor, explains:

Ryanair has been able to pass on additional cost pressures to consumers through higher airfares with ticket prices likely to continue to go up next year. Plus, it has been enjoying a tailwind from strong demand post pandemic which it expects will be even stronger next year, despite cost-of-living pressures with elevated inflation and interest rates. Ryanair has also been more focussed than rivals on keeping its debt down – the airline expects it will be debt-free by the end of 2026.

Investors have lots to be cheerful about in this set of results including its better-than-expected earnings, its outlook and its dividend announcement. Shares have staged impressive gains so far this year.”

Analysis by Bloomberg Economics this morning shows that Britain could already be falling into recession.

The research shows a 52% chance that the economy contracted in the third quarter of 2023, and also shrinks again in the current quarter, as household spending is hit by high interest rates and rising unemployment.

That would meet the technical definition of a recession (two consecutive quarters of contraction).

Bloomberg points out:

A recession would be a headache for Prime Minister Rishi Sunak, due to fight an election next year. A recession could increase the chances of the Bank of England pivoting toward reducing interest rates, especially if inflation has come down sharply.

Last week, the BoE said there was a 50-50 chance of a recession by the middle of next year.

Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.

UK car sales have climbed for the 15th month running, as the industry continues to shake off the supply chain problems suffered in the Covid-19 pandemic.

Registrations of new vehicles rose 14% year-on-year in October, according to preliminary figures from the Society of Motor Manufacturers and Traders. That extends a run of gains that began in August 2022.

Mike Hawes, chief executive of SMMT, says new car registrations have finally returned to pre-pandemic levels, after four years of disruption.

He told Radio 4’s Today programme that the supply chain issues the industry faced globally (such as shortages of semiconductors) have been easing.

We’ve been able to shore up demand, and the wait lists that so many people were experiencing over the last two or three years have eased, so we’ve been able to fulfill the level of demand that’s there.

The final sales figures for October are due at 9am.

A month ago, the SMMT reported a drop in the number of consumers buying electric cars, which is blames on a lack of incentives for households to shift to EVs.

Hawes says that business customers and fleet buyers are driving take-up of EVs, as they get the benefits of lower “Benefit in Kind” taxation on electric cars than other models.

Private buyers don’t get the same incentives, Hawes argues, so they need to calculate whether they’d be better off with an EV or not.

Repeating the SMMT’s previous calls for more incentives for consumers to buy EV cars, Hawes says:

”If we going to move the entire market, which we need to do, the government needs to be looking at pulling every single lever to try to incentivise this transition.”

Looking ahead, Hawes predicts that sales growth will probably tale off a little in the months ahead.

But, as he points out, car sales have been “counter-cyclical given the economic conditions”, and the SMMT still expects the market to grow next year.

Also coming up today

In the energy sector, Rishi Sunak will introduce an annual system to award new oil and gas licences.

The move, expected in tomorrow’s kings speech, is likely to anger environmental campaigners, as the PM looks to find new dividing lines with the Labour party ahead of the next election.

We also get a new healthcheck on UK building firms, eurozone services companies and German factories.

The agenda

• 7am GMT: German factory orders for September

• 9am GMT: UK car sales for October

• 9am GMT: Eurozone services PMI for October

• 9.30am GMT: UK construction PMI for October

• 5pm GMT: Virtual Q&A with Bank of England chief economist Huw Pill