\section{Brexit ‘headwind’ plunges sector to three-month low}
\textit{By Ben Chu}

An "intense headwind" from Brexit played a part in plunging the UK's construction activity to a three-month low, the IHS Markit/CIPS index showed. The Purchasing Managers' Index in December came in at 52.8, down from 53.4 in November and the weakest since September.

Subdued demand conditions were the main factor behind disappointing output growth in December, but there were also some reports that wet weather had held back work.

"Subdued domestic economic conditions and an intense headwind from political uncertainty combined with the weakest upturn in commercial work for seven months," said Tim Moore of IHS Markit, which compiles the PMI survey.

"With a slight rise in new orders and a softer overall activity growth, firms continued to be impacted by Brexit-related uncertainty and reluctant clients to place orders, especially for commercial projects," added Duncan Brock of the Chartered Institute of Procurement \& Supply, co-sponsor of the survey.

\begin{figure}
\centering
\includegraphics{figure_1.pdf}
\caption{Construction accounts for about 6 per cent of UK GDP.}
\label{figure_1}
\end{figure}

Construction accounts for about 6 per cent of UK GDP.

The most recent official data showed that the sector grew by 2.3 per cent in the third quarter of 2018, although this was partly catch-up growth after heavy snowfall earlier in the year that hit activity.

"On past form, the average level of the PMI in Q4 is consistent with output remaining at 0.3 per cent," said Samuel Tombs of Pantheon Macroeconomics.

Research from the Construction Industry Training Board released late last year suggested a third of UK construction firms are already feeling the effects of Brexit in the sector for recruitment, while it will become harder over the next two years. It also warns that the manufacturing sector has shown firms stockpiling goods and materials ahead of Brexit set for March.

Construction has been in turmoil since the Brexit vote. Major current projects include Crossrail and plans to revamp Birmingham city centre.

\section{Costain's order book hits £4.2bn as delays go on at Crossrail}
\textit{By Holly Williams}

Infrastructure services firm Costain notched a record order book for 2018 as it hailed "another year of progress".

Shares in the group — one of the contractors working on the delayed Crossrail project — rose 4.5 per cent to 83p as it said it finished the year with an order book of £4.2bn, up from £3.9bn at the end of 2017, and remains on track to meet full-year forecasts.

It said this was helped by the strength of clients consolidating supply chains to deliver increasingly complex programmes.

The group — whose two largest customers are Network Rail and Highways England — said it had made further progress on its strategy to reposition itself to meet the "complex and fast-changing clients' requirements".

Costain, which employs 4,000 people, finished 2018 with a preferred bidder position on around £600m worth of contracts, up from £400m a year ago.

Chief executive Andrew Wyllie said: "This has been another year of progress for Costain." 

"The benefits of our integrated long-term strategic relationships with our clients and strong balance sheet position will see us well placed for the future."

The Crossrail project could require an extra £1.3bn in funding, on top of the original £15bn cost, in order to be completed. The opening is likely to be delayed beyond its planned autumn 2019 launch.

\section{Firms ‘should stop criminal record enquiries’}
\textit{By Alan Jones}

Firms are being urged to stop asking for criminal record details on job application forms because they give employers a false sense of security. Jobseekers are also put off applying for work if they have to declare any convictions upfront, according to a study for the Young Trustees Movement.

The study called on companies to fund more supportive ways to discuss potential recruits' criminal backgrounds. Some candidates with no criminal record may actually pose a greater risk of offending, it was claimed.

Jessica Rose, of Business in the Community, said: "Asking everyone who applies for a role about criminal convictions at the start of the process tells people who are trying to move on with their lives that you're not going to give them a chance." 

\section{The debate is heating up on carbon pricing}
\textit{Carl Mortished}

Everyone in the markets is feeling a little bruised after last year's rout. UK investors are on average markedly poorer and US stocks suffered one of their worst years since the financial crisis. No one except pessimists seemed to emerge unscathed — except for one rather special group of investors. Anyone owning a hoard of EUAs — that is EU Allowances — is sitting on quite a windfall.

These esoteric instruments, tradable permits to emit carbon dioxide, have soared by about 200 per cent in a year, a gain that is causing hand-wringing, nail-biting and even panic in businesses that consume a lot of energy. It is ringing alarm bells in governments from London to Warsaw and could yet provoke a political row in Westminster.

The EUAs are traded on the ETS, Europe's cap-and-trade carbon emissions trading system, created in 2005 as part of the EU's effort to encourage businesses to reduce their CO$_2$ emissions.

Businesses purchase a set number of allowances to emit CO$_2$ every year. If they reduce their emissions, they can sell the allowances on the ETS. If they emit more, they must buy extra allowances, thus setting the price for a tonne of CO$_2$ and establishing a market cost for carbon reduction.

It is the biggest such scheme in the world but in the early years governments issued too many free permits and the EUA price fell to around €5 per tonne, a level that made it profitable for power generators to burn coal rather than natural gas.

From being a bit of a joke, the Emissions Trading System is now working — too well for some.

After a crackdown on allowance issuance, the carbon price has soared to almost €25 per tonne from below €5, a level that is forcing heavy industry such as steel and chemical manufacturers to consider expensive new investments to cut emissions.

British steel-makers are up in arms; industry lobby group UK Steel reckons its members pay power prices up to double those paid by French and German competitors.

Last month, UK Steel published a series of demands, asking the government to increase exemptions from the Renewable Levy, a subsidy used to pay for green energy.

If Britain leaves the EU without a deal, it will fall out of the EU's cap-and-trade carbon trading system. Electricity prices could shift dramatically depending on the replacement policy adopted by the government.

But the government says that if this happens it will introduce a UK cap-and-trade system or a new carbon tax to bridge the gap. No one wants to be seen to trash the planet, but the debate highlights the tension between greener policies and cheaper electricity.

\section{From the business pages}

\subsection{Big plans for new high-speed railway}
China plans to build 3,200 km of new high-speed railway in 2019, with the total length expected to exceed 30,000 km, according to railway operator China State Railway. The country also manages electronic ticketing and flexible prices for high-speed trains.

\subsection{Manhattan home prices below \$1m}
The typical Manhattan apartment has fallen below \$1m for the first time since 2015. The drop partly reflects a slowdown in demand for luxury homes and rising supply in the market.

\subsection{New tax for fizzy drinks and tobacco}
Gulf News reported that the price of tobacco products and sugary drinks in Qatar has risen after a new tax came into force, aimed at reducing consumption and boosting public revenues.

\subsection{Western Canada oil prices still strong}
Western Canada oil prices remain strong as production cuts take effect. Analysts expect the market to remain supported as supply adjustments continue across the region.