Construction output in Great Britain: August 2017

• Construction output contracted by 0.8% in the three month on three month series in August 2017 but remains at relatively high levels.
• The three month on three month decline in output was due to decreases in both repair and maintenance, which fell 0.6% and all new work, which fell 0.9%.
• Construction output grew 0.6% month-on-month in August 2017, predominantly driven by a 1.7% rise in all new work.
• The month-on-month rise in all new work stemmed from growth in private housing, which grew 2.3% and infrastructure, which increased by 3.6%.
• Estimates in this bulletin are consistent with the Quarterly National Accounts: April to June 2017 publication released on 29 September 2017 and will feed into the annual national accounts Blue Book 2017 publication, due to be released on 31 October 2017.
• As a result of the improvements that have been implemented to construction output, revisions can be seen from Quarter 1 (Jan to Mar) 2010.

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 Value Added Tax (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.

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 then Department for 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.

The Quarterly National Accounts publication for April to June 2017 was released on 29 September 2017, which included improvements to Construction statistics. The Impact of improvements to construction statistics article explains and highlights the effect of these changes. The improvements affect the nominal data series, output price indices and seasonal adjustment, and have led to revisions back to January 2010.

As a result of the changes to the output price indices, although further improvements are still planned, we no longer consider these indices to be an interim method.

It is also worth nothing that the chained volume measures have been re-referenced to 2015. Our indices are therefore now presented in the 2015 equals 100 format.

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

Construction output fell 0.8% during the three month on three month period to August 2017. The rolling three month time series provides a more comprehensive picture of underlying trends in the industry, while the month-on-month series, shown in Figure 1, shows how volatile construction output can be.

Construction output fell for the fourth consecutive month in the three month on three month time series in August 2017. This fall has occurred despite a rise in the month-on-month time series, with construction output rising 0.6% after two consecutive months of decline. However, Figure 1 shows that despite these recent consecutive declines, construction output still remains at a relatively high level. Construction output peaked in January 2017, reaching a level that was 29% higher than the lowest point of the last five years, in January 2013. Despite the three month on three month series falling in August 2017, construction output remains 27.3% above this level.

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

Figure 2 shows that through to mid-2014, all new work, and repair and maintenance followed a similar pattern but since reaching a level peak in August 2014, repair and maintenance has remained relatively stable. Over the same period, all new work has continued to increase steadily, largely down to a rise in new housing work. Throughout the majority of 2017, both all new work, and repair and maintenance are continuing to show a similar trend.

All new work grew 1.7% month-on-month in August 2017, recovering from a contraction of 1.5% in July 2017. In contrast, repair and maintenance decreased month-on-month by 1.4% in August 2017, following broadly flat month-on-month growth in the previous three months. 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 three month on three month volume from the different sectors in terms of real value growth, taken from our seasonally adjusted chained volume measure series.

All work fell by £312 million in August 2017, the fourth consecutive three month on three month decline in construction output. This fall stems from a £220 million decrease in private commercial work, as well as a fall of £167 million from public other new work. Elsewhere, the strongest positive contributions to three month on three month output came from private housing, which increased by £140 million and private industrial work, which grew by £79 million.

Figure 4 shows the difference in month-on-month volume from the different sectors in terms of real value growth, taken from our seasonally adjusted chained volume measure series.

All work increased by £75 million in August 2017 compared with the previous month. As seen in Figure 4, the increase was mainly driven by rises in private housing and infrastructure, which grew by £61 million and £54 million respectively.

In contrast, non-housing repair and maintenance provided the most notable negative month-on-month contribution to all work in August 2017, decreasing by £48 million compared with July 2017. Elsewhere, total housing repair and maintenance fell for the third consecutive month, falling by £16 million in August 2017.

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

Total all work increased to £12,787 million in August 2017. This rise stems from an increase in all new work, which rose to £8,294 million, while total repair and maintenance fell to £4,493 million.

Construction output fell 0.8% on a three month on three month basis in August 2017. The most notable downward pressure on the three month on three month growth came from private commercial work, which fell 2.9% in August 2017. In addition, both public other new work and infrastructure fell for the fifth consecutive month on a three month on three month basis, falling by 6.3% and 1.4% respectively. Elsewhere, private housing applied the main upward pressure on output, increasing by 1.8%.

Compared with August 2016, construction output grew 3.5%. As in the three month rolling time series, housing growth was strong, with public housing up 14.9% and private housing up 7.5%. Month-on-year growth was seen across all types of work in August 2017, with the exception of public other new work, which experienced its fifth consecutive period of month-on-year contraction, decreasing by 7.4%.

The Impact of improvements to construction statistics article was released on 29 September 2017, alongside the Quarterly National Accounts publication for April to June 2017. This was the first release of the data that will be found in the annual national accounts Blue Book 2017 publication, due to be released on 31 October 2017. There are revisions back to January 2010, resulting from improvements to nominal data; the output price indices used to deflate the chained volume measure series; and seasonal adjustment.

Figure 5 shows the index volume series for all construction work. For comparative purposes, both series are indexed to 2013 equals 100; however, the published construction series has now been re-referenced to the base year of 2015.

The annual growth rate for 2016 has been revised from 2.4% to 3.8% and the leading contribution to this increase is infrastructure, which itself has been revised from negative 9.2% to negative 3.2%. The size band adjustments, detailed in the article, affected only infrastructure and saw negative revisions to 12 months in 2015 compared with six months in 2016, hence the increase of growth rate when comparing 2016 with 2015.

The processing of late returns has contributed to increases in 2016 and 2017, spread across all sectors, with the largest upward month-on-month revisions coming in November 2016, December 2016 and February 2017. These month-on-month growth rates are also affected by the changes in seasonal parameters.

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 19 September 2017 for July 2017, showed the seasonally adjusted production in the construction sector increased by 0.2% in the Euro area (EA19) and increased by 0.5% in the EU28 when compared with June 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 2015 equals 100 basis.

Outside the EU, the US Census Bureau release Value of construction put in place was published on 2 October 2017. This includes the total dollar value of construction work done in the US.

The latest Value Added Tax (VAT) turnover research article was published on 1 June 2017, which outlined our plans to use VAT turnover in the compilation of Quarterly National Accounts July to September 2017 and the Index of Services October 2017 bulletins, which are both due for publication on 22 December 2017. In November 2017 a further article will be published, which will review the methodological improvements and provide further detail on implementation plans.

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.

The Construction Quality and Methodology Information report 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