Construction output in Great Britain: Apr 2017 and new orders Jan to Mar 2017

• Output in the construction industry fell 0.6% in the 3 month on 3 month time series; driven mainly by a 0.9% fall in all new work, representing the first 3 month on 3 month fall in construction output since September 2016.

• Construction output also fell month-on-month in April 2017, dropping 1.6%; driven by falls in both repair and maintenance, and all new work.

• The fall in all new work in April 2017 was somewhat offset by a sizeable rise in infrastructure, which grew by 5.7% compared with March 2017.

• Construction output for Quarter 1 (Jan to Mar) 2017 has been revised up, from 0.2% to 1.1%; this will lead to a 0.05 percentage point revision to gross domestic product (GDP), all else equal.

• New orders increased by 0.7% in Quarter 1 2017, following 2 quarters of decline. This increase was driven by rises in both private housing and private commercial work.

The monthly business survey, Construction Output, collects output by sector from businesses in the construction industry within Great Britain. Output is defined as the amount chargeable to customers for building and civil engineering work done in the relevant period excluding VAT and payments to sub-contractors.

The survey’s results are used to produce seasonally adjusted monthly, quarterly and annual estimates of output in the construction industry at current price and at chained volume measures (removing the effect of inflation). The estimates are widely used by private and public sector institutions, particularly by the Bank of England and Her Majesty’s Treasury, to assist in informed decision-making and policy-making. Construction output is an important economic indicator and is also therefore used in the compilation of the output measure of gross domestic product.

This April 2017 release contains revisions for January 2017 onwards. This means that we have incorporated additional data since this period.

Revisions can be made for a variety of reasons, the most common include:

• late responses to surveys and administrative sources, or changes to original returns
• forecasts being replaced by actual data
• revisions to seasonal adjustment factors, which are re-estimated every month and reviewed annually

On 11 December 2014, the UK Statistics Authority announced its decision to suspend the designation of Construction Output and New Orders as National Statistics due to concerns about the quality of the Construction Price and Cost Indices used to remove the effects of inflation from the statistics.

We took responsibility for the publication of the Construction Price and Cost indices from the Department of Business, Innovation and Skills (BIS) on 1 April 2015, introducing an interim solution for measuring output prices in June 2015 for all periods from January 2014 onwards. We are currently developing a long-term solution for the deflation of construction statistics.

Summary information can be found in the Construction Output Quality and Methodology Information.

New orders in construction measures the value of new orders of main contractors by type of work and region within Great Britain. Since April 2013, data have been supplied directly from Barbour ABI with a sample size of all local authorities in England, Scotland and Wales plus 10,000 contractors per annum. It should be noted that there may be some discontinuity in the data around Quarter 3 (July to Sept) 2013 where the Barbour ABI data were used for the first time to compile these statistics.

Summary information can be found in the New Orders Quality and Methodology Information.

In April 2017 construction output fell both month-on-month and 3 month on 3 month, by 1.6% and 0.6% respectively. The monthly time series shows how volatile construction output can be, therefore the rolling 3 month time series is also shown in Figure 1, providing a more comprehensive picture of the underlying trends within the construction industry.

Although construction output has fallen in April 2017, the figure for March 2017 has now been revised to a growth of 0.7%, having previously been published as a retraction of 0.7%. January 2017 has also been revised upwards, from negative 0.1% to 0.3%. These revisions have occurred as a result of late data being received, causing upward revisions across all types of work, in particular infrastructure and private housing.

As a result, growth in construction output for Quarter 1 (Jan to Mar) 2017 has been revised from 0.2% to 1.1%. This will lead to a 0.05 percentage point revision to gross domestic product (GDP) in Quarter 1 2017, all else being equal.

Construction output can be broken down by different types of work, these are categorised into new work, and repair and maintenance as shown in Figure 2.

Figure 2 shows that through to mid-2014, new work, and repair and maintenance followed a similar pattern but since reaching a level peak in August 2014, repair and maintenance has slowly contracted. Over the same period, new work has continued to increase steadily, largely down to a rise in new housing work.

Month-on-month growth was negative in both all new work, and repair and maintenance. All new work fell 1.8% in April 2017, after positive growth in the previous month. Repair and maintenance fell for the second consecutive month, declining by 1.0% in April 2017. It is worth noting that all new work accounts for approximately two-thirds of all work, while repair and maintenance accounts for approximately one-third.

Figure 3 shows the difference in month-on-month volume from the different sectors in terms of real value growth, taken from our chained volume measure series. When compared with March 2017, the most notable downward pressure on construction output came from private housing, which fell by 6.9%, equating to a real value fall of £168 million.

Public housing also provided some downward drag on output, falling 7.9%, resulting in a £32 million fall. Total housing therefore fell by 7.1%; however, this comes in the shadow of particularly strong growth in March 2017, where total housing grew by 5.5%.

Elsewhere, downward pressure on output in April 2017 also came from repair and maintenance. Falls in both public and private housing repair and maintenance equated to a fall of £13 million in total housing repair and maintenance, while non-housing repair and maintenance also fell, decreasing by £28 million.

In contrast, the only sector to provide upward pressure on output was infrastructure. The 5.7% rise in infrastructure equated to an £83 million increase in real volume terms. This follows two consecutive month-on-month decreases for infrastructure.

Table 1 provides a detailed description of the growth rates of each work type, alongside the seasonally adjusted chained volume measure level of output.

Table 1 shows both the growth rate for each work type in terms of 3 month on 3 month, month- on-year and month-on-month, as well as the volume of work broken down by sector. Total all work endured its biggest real value decline since March 2016, falling to £11,507 million. Elsewhere, private housing fell to its lowest value since June 2016, dropping to £2,245 million.

Construction output dropped 0.6% on a 3 month on 3 month basis in April 2017, driven mainly by a fall in total all new work, which fell 0.9%. This fall was driven mainly by a 2.6% decrease in infrastructure, which fell for the first time in 6 months, as well as a 1.1% drop in private housing. The only sectors to endure positive growth were non-housing repair and maintenance and public new housing, which grew 1.0% and 3.2% respectively.

With regards to month-on-year growth, construction output also fell; decreasing 0.6%. This month-on-year fall is the first decrease in 13 months, the last fall coming in March 2016. This fall has been mainly driven by a 2.5% fall in repair and maintenance, with non-housing repair and maintenance falling 5.7%. Some upward pressure on output has come from infrastructure, which grew 3.6% compared with the same period in 2016.

Table 2 provides a detailed description of the growth rates of each work type, alongside the seasonally adjusted volume level of new orders.

Table 2 shows both the growth rate for each work type in terms of quarter-on-quarter and quarter-on-year, as well as the volume of work, broken down by sector.

New orders grew by 0.7% quarter-on-quarter in Quarter 1 (Jan to Mar) 2017. All new housing is up 1.1% quarter-on-quarter, despite some negative pressure from public new housing, which decreased 38.2% compared with Quarter 4 (Oct to Dec) 2016, but given the value of public housing, the effect is relatively small.

All other work is up 0.5% quarter-on-quarter despite public other new work being down 28.1% and infrastructure being down 2.0%. The quarter-on-quarter growth for all other work is predominantly driven by a 16.1% rise in private commercial work, which increased by £527 million in April 2017, to a level of £3,809 million. However, despite this quarter-on-quarter rise, private commercial is actually 3.3% down compared with the same quarter in the previous year.

The 3.7% quarter-on-year increase is driven mainly by a 35.5% growth in private new housing quarter-on-year. Private new housing is at its highest level since Quarter 2 (Apr to June) 2007, reaching a value of £3,659 million.

As seen in Figure 4, new orders can be broken down into housing and other work. New orders has recovered after two consecutive quarters of negative growth and is at its third-highest level since Quarter 3 (July to Sept) 2009, reaching £12,866 million.

New housing has been relatively flat since 2013 and is showing a recovery from the downturn in 2009. On the other hand, other work suffered a much greater slowdown in Quarter 1 2009 and had a further period of decline following a two-quarter upturn. Since Quarter 2 2014, other work has broadly endured a steady increase.

Output in the construction industry follows the Eurostat Short Term Statistics (STS) regulation for production in construction. Before any comparisons are made with the Euro area or EU28, it is worth noting that the UK is the only member state to follow the A method for compiling production in construction statistics.

The latest release of Production in construction, published by Eurostat on 17 May 2017 for March 2017, showed the seasonally adjusted production in the construction sector decreased by 1.1% in the Euro area (EA19) and decreased by 0.8% in the EU28 when compared with February 2017. It should be noted that an accurate comparison cannot be made as Eurostat data are calculated on a 2010 equals 100 basis, while Great Britain data are calculated on a 2013 equals 100 basis.

Outside the EU, the US Census Bureau release Value of construction put in place was published on 1 June 2017. This includes the total dollar value of construction work done in the US.

VAT turnover implementation into National Accounts: June Update was published on 1 June 2017. This update explains that the first use of VAT in the national accounts will be in the Quarterly National Accounts (July to Sept) 2017 and the Index of Services: Oct 2017 bulletins, which are both due for publication on 22 December 2017.

Other useful links

• Department for Communities and Local Government (Housing starts and completions)
• Construction statistics in Northern Ireland

Our Monthly Construction Output Survey measures output from the construction industry in Great Britain. It samples 8,000 businesses, with all businesses employing over 100 people or with an annual turnover of more than £60 million receiving a questionnaire by post every month.

1. The Construction Output Quality and Methodology Information document contains important information on:

   • the strengths and limitations of the data and how it compares with related data
   • uses and users
   • how the output was created
   • the quality of the output including the accuracy of the data

2. The New Orders Quality and Methodology Information document provides similar information for the new orders data.