• Supply chain disruption intensifies demand for businesses to have the correct business interruption insurance cover in place.
• It is anticipated that we will see higher shipping costs and more delays in the second half of 2024 due to driver shortages and adverse weather conditions.
• The most common actions businesses are taking to de-risk their supply chains are: developing alternative suppliers; improving business continuity management; and identifying and remediating supply chain bottlenecks. (Source: Allianz)

There was a 0.1% rise in the price of monthly housing and household services in July 2024. This was mainly due to gas prices, although electricity prices also contributed to this rise. (Source: Office for National Statistics)

Unprecedented levels of rainfall in the UK during summer 2024 has caused significant delays to solar energy projects across the country.

Typical household energy bills will rise by £149 per year in October. (Source: BBC News)

It’s predicted there will be an overall upward trend in UK gas and electricity prices throughout the winter of 2024 and into 2025.

Higher energy prices mean the costs of materials, manufacturing, maintenance and labour will increase.

High priced energy has contributed to many failures in the sector. A move to electric has already been seen in construction vehicles, but sustainable power is very much needed as the sector looks towards hydrogen as an alternative in the future. (Source: Allianz)

• The additional costs of materials etc have contributed to record losses for insurers in recent years.
• The insurance industry continues to be hard hit by the escalating frequency and severity of global climate events. 
• Proactive risk management will help businesses minimise the impact of extreme climate related events.
• Thanks to AI and digital transformation, insurers are now able to collect datasets from more sources than ever before. Insurers can utilise this information to cover global environmental risks more accurately. (Source: Allianz)

Emerging markets stand to benefit from supply chain diversification and resilient domestic demand will support GDP growth across all regions in 2025. (Source: Allianz)

Extreme weather events resulting from climate breakdown will lead to widespread UK food shortages and increased prices in 2024 and 2025.

The first release of the new annual UK Food Security Index was published in July 2024. The index shows a broadly stable picture as supply chains remain steady. However, long term risk from climate change will pose significant challenges to some domestic food production in 2024/2025 and beyond.

• Businesses will need to make sure they lessen the financial impacts of claims made as a direct, or indirect, consequence of food shortages, and adjust their insurance cover accordingly.
• When food shortages occur, risks relating to terrorism and political violence, political risk, business interruption, marine and aviation, agriculture, product liability and recall, and environmental liability increase, and these will impact insurance premiums.
• The rising cost of food and supplies may result in people being less able to afford insurance premiums.

The cost of building materials has remained steady, but this could be due to a decline in demand due to the sluggish construction market.

Currently there are good levels of building materials available.

The greatest price increase in the twelve months to June 2024 was flexible pipes and fittings which was up by 17%. The greatest decrease was in fabricated structural steel which went down by 16%. (Source: BCIS)

The market for metals and critical minerals has doubled in size over the past five years because they are crucial for the green transition. It is expected to double again by 2040 to reach a value of more than USD64bn. (Source: Allianz)

• As the cost of some materials falls, insurers may reduce customers’ insurance premiums.

As a result of Brexit, China is now a major supplier of building materials in the UK, overtaking Germany and Spain. This raises questions about sustainability and the UK’s reliance on imported goods.

Overall construction output remains low, and the volume of new builds and commercial developments remains sluggish due to economic uncertainty, labour shortages and regulatory changes.

Despite labour and material costs remaining high, increased consumer spending and economic stability are expected to trigger investment which will lead to an increased number of construction projects being started in 2025.

Construction output will fall by 5.3% this year but grow in 2025 (by 3.8%). (Source: Currie Brown)

The global construction market is predicted to grow by over 70% in 2025. (Source: Currie Brown)

The goal of constructing 300,000 homes remains a government priority and numerous trades within the sector, including civil contractors, roofers, and fit-out companies, stand to gain from these initiatives. (Source: Allianz)

• Construction firms need to have the correct business interruption insurance in place to cover them in the event of stalled or delayed projects.

The owners of electric cars are currently exempt from Vehicle Excise Duty (VED) but in April 2025 this exemption will end meaning many drivers will face increases in their car tax.

The Society of Motor Manufacturers (SMMT) reported the fifth consecutive quarter of growth for the UK’s bus market, with a 60% increase in the number of new buses, coaches and minibuses joining the roads in the second quarter of 2024.

The price of used cars fell by an average of 13% in 2024 compared to 2023 prices and are expected to continue to fall. (Source: London Motor Sports)

In August 2024, it was reported that the UK’s used car market has grown for the sixth consecutive quarter

New EU CO2 emission standards will be coming into effect next year and there will be a pressing need for more electric vehicles in Europe. (Source: Allianz)

• The average price paid for motor insurance continues to rise, driven by record increases in the cost to insurers’ pay claims.
• This year the average price of car insurance exceeded £600 for only the second time since records began.
• In the first quarter of 2024 the average premium paid for private motor insurance was £635, a 1% increase from the previous quarter. 

Rent costs for people moving home to take on a new tenancy has risen at its slowest rate for nearly three years. (Source: Zoopla)

Interest rates have led to mortgage payments rising and consequently, landlords have increased rents. Many renters are now paying higher housing costs.

Supply chain challenges and rising inflation continue to impact the commercial property sector.

The UK’s commercial property market seems to be recovering more quickly than the rest of Europe and both deal volumes and property values have increased in the first half of 2024.

The office market has shown the weakest performance so far in 2024.

• Allianz Economic Research – Allianz global research analysing economic and industrial developments.
• Underinsurance – Resources, information and guidance to help customers understand the issue of underinsurance.
• Ludonomics – Ludovic Subran, Allianz Group’s Chief Economist, publishes a weekly update on Allianz markets, macro, sector and insurance.