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On the economic roundabout again

If you can keep your head when all about you
Are losing theirs and blaming it on you,

What goes around comes around. We talk a lot about economics being a cycle, of recessions coming every seven to 10 years and sometimes things happen that drive that thought home.

So it is with the news that Forterra (ex Hanson Building Products) is to mothball two of the brick factories it re-opened only a few years ago, having had to shut them at the beginning of the recession as the tap was turned off housebuilding.

Accrington Brickworks and Claughton Brickworks were reopened in 2015 and 2013 to much fanfare – yours truly was even interviewed on BBC Radio Lancashire about it. Twice!

So, are we heading back to those dim and dark days? Well probably not – yet. I was chatting to the Brick Development Association’s CEO Andrew Eagles about this and asking whether this is likely to be repeated and is it something to worry about. He believes that the industry isn’t an overcapacity situation and that supply and demand is still more or less in line with expectations.

“Everyone wants us to get building again, the Government has been showing signs of getting something moving and, of course, the interest rate cut that the Governor of the Bank of England warned us about will probably help that.”

The Construction Products Association Spring Forecasts – admittedly delivered pre-Brexit decision – shows output is forecast to rise 3.0% in 2016 and 3.6% in 2017, with private housing starts expected to rise 5.0% in both 2016 and 2017. And, as Eagles was, understandably, keen to point out, brick is still the preferred choice for what private houses look like.

So Forterra’s actions are not as doom-laden as they might at first seem – unless you work at those particular factories of course. Rather they are an indicating that, once again, supply and demand has got slightly out of kilter. This has less to do with Brexit than with the fact that merchants have been stocking up to ensure that they aren’t caught out again like they were in 2013. As a result, Forterra is mothballing the two plants “temporarily” and it believes that it’ already shown that it can “unmothball” them successfully and effectively.

The effects of Brexit on the wider economy so far have been sharp and painful or rather beneficial, depending on one’s relationship with the Eurozone. Anyone exporting has suddenly found their goods are coming across as cheaper than they were a month ago. Conversely, anyone who is importing has suddenly had to find extra cash down the back of their corporate sofa. If you are a FTSE 250 company or you have any type of UK pension fund, chances are you are feeling pretty damn sorry for yourself. And, of course, anyone who didn’t stock up on their summer holiday Euros when they went to the NMBS conference is kicking themselves.

We have a new PM as of today, we may or may not have a new leader of the Opposition and there are calls from the Lib Dem benches for a new general election. Well, sorry Tim Fallon, I get where you’re coming from as your party has never seemed so strong since the heady “I agree with Nick” days, but that’s the last thing we need right now.

It’s uncertainty that is the killer in all this. The old cliché about a week being a long time in politics has never been more apt. Although, if you look back at the past couple of weeks, it seems as though an hour is a long time in politics.

I’m not even going to check the news before I post this, on the grounds that it’s all probably changed again.

About Fiona Russell-Horne

Fiona Russell-Horne
Group Managing Editor across the BMJ portfolio.

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