14 August 2017

Bank of England releases August Inflation Report

The Build UK State of Trade Survey collects data from across the contracting supply chain, offering a fantastic insight into the sector’s performance.

The results of the survey are of great interest to institutions such as the Bank of England whose Agents, particularly Peter Andrews, regularly consults with Build UK as part of their work to understand how the state of the construction industry contributes to the overall economic situation in the UK.

The information that is gathered by the Bank of England’s Agents feeds directly into their policymakers as they decide how best to guide the economy through these uncertain times.

The Bank of England recently published its August Inflation Report, its latest quarterly assessment of the economic outlook.

It has also announced the following:

• Bank Rate, a reference point that banks use when setting interest rates on savings and loans, would remain on hold at 0.25%.
• The Monetary Policy Committee – which sets Bank Rate – also said that the rate would probably have to rise gradually in the coming years for the MPC to hit its 2% inflation target.
• Inflation is currently above that figure, largely because the value of the pound fell sharply following the vote to leave the European Union.
• Weaker sterling makes imports more expensive for UK companies, resulting in higher prices for UK households. It is expected that inflation will peak later this year at around 3%, before falling back towards 2% as the effect of the fall in sterling fades.
• Unemployment is at its lowest since the 1970s, which does mean some companies are finding it harder to recruit the right people for a wide range of jobs and skills, including in construction and engineering. In some cases firms are responding by increasing wages.
• There is a stronger outlook for exports, which is helping the UK growth. This comes from the recovery in world growth and the fall in the pound. Together these should also encourage businesses to invest more.
• This should help offset a slowdown in consumer spending and contribute to modest growth in economic activity.

The Bank will continue to keep a close watch on the economy and stands ready to respond to changes in the economic outlook to ensure a sustainable return to 2% inflation.

You can keep up to date with what the Agents are hearing from their conversations with contacts in London and beyond on their website and their latest summary can be found here.

Build UK will continue to work with the Bank of England to share information and ensure that the construction sector contributes to future UK economic analysis.