Construction output in Great Britain: August 2021

• Monthly construction output fell 0.2% in volume terms in August 2021 with the level of output now 1.5% below its pre-coronavirus (COVID-19) pandemic (February 2020) level; new work remained flat this month (0.0%) with repair and maintenance falling (0.6%) on the month; anecdotal evidence from businesses continued to suggest that product shortages caused by supply chain issues and subsequent price rises were the main reasons for the decline.

• The level of construction output in August 2021 was 1.5% (£214 million) below the February 2020 pre-pandemic level; new work was 3.7% (£348 million) below the February 2020 level, while repair and maintenance work was 2.7% (£135 million) above the February 2020 level.

• The recovery to date, since the start of the pandemic, is mixed at a sector level, shown with infrastructure 45.4% (£852 million) above and private commercial 26.3% (£656 million) below their respective February 2020 levels in August 2021.

• Alongside the monthly fall in August, construction output fell 1.2% in the three months to August 2021, the first three-monthly fall since July 2020, driven by a fall in repair and maintenance of 4.7%.

• In today’s release, the earliest period open to revision is January 2011, and is the first time the monthly path has been published that is consistent with the Quarter 2 2021 Quarterly National Accounts published on 30 September 2021.

Monthly construction output fell 0.2% in volume terms in August 2021 compared with July 2021, to £14,243 million, and follows the upwardly revised (by 0.6 percentage points) 1.0% monthly decline in July 2021.

In August 2021 anecdotal evidence received from survey returns to the Monthly Business Survey for Construction and Allied Trades suggested that the rising prices of raw materials such as steel, concrete, timber and glass, along with the difficulty in sourcing these materials for jobs was a contributing factor to the monthly fall. This has been a continued factor from anecdotal evidence obtained in previous months. Anecdotal evidence also suggested supply chain issues (see Section 4) were a factor, with many contributors stating that order books were healthy; however, availability of products was impacting on projects currently underway.

The 0.2% fall in construction output in August 2021 represents a fall of £30 million in monetary terms compared with July 2021.

Despite the relatively moderate monthly declines or increases, the extent to which price rises are having a downward impact in volume terms is noticeable. Table 3 shows the impact deflation is having by comparing monthly growth in value terms (the impact of price changes included) against monthly growth in volume terms (the impact of price changes removed) both on a seasonally adjusted basis.

These strong rates of growth in recent months are further illustrated in the implied deflator (Figure 6), which is the best indicator of price changes in the industry until the next construction output price indices release on 11 November 2021.

The latest building materials and components release from the Department for Business, Energy and Industrial Strategy (BEIS), released on 6 October 2021, further shows the monthly increase in building material costs in August 2021. Building materials for all work in August 2021 increased by 2.8% compared with July 2021 and 23.5% compared with August 2020. Specific construction materials with the greatest annual price increase in August 2021 compared with August 2020 were imported plywood (78.4%), fabricated structural steel (74.8%), and imported sawn or planed wood (74.0%).

Table 4 shows how businesses intra-UK supply chains had been impacted in August 2021 from the Business Insights and Conditions Survey (BICS).

In August, 36% of construction businesses had to change suppliers or were unable to source materials, goods or services needed from within the UK. The proportion was around one in five businesses (20%) across the majority of other industries. This suggests businesses in the construction industry were more affected by the shortage of goods, services and materials, which would further explain the reported increase in prices bought since May 2021.

Construction output fell 1.2% (£537 million) in the three months to August 2021, after revisions in this release; this is now the first three monthly fall since July 2020.

Estimates in this release are consistent with the GDP quarterly national accounts, UK: April to June 2021 publication on 30 September 2021 and will feed into the UK National Accounts, The Blue Book: 2021 publication, due to be released on 29 October 2021.

Revisions in this release have been incorporated back to January 2011 and have resulted from a variety of different methods and data changes. See Section 9 for further information.

The 2020 annual rate of construction output growth has been revised down to a fall of 15.0% from the previous estimate of a 14.5% fall. This is mainly coming from a downward revision to Quarter 2 (Apr to June) 2020 (revised down 1.9 percentage points (pp) to a decline of 35.6%) where the improvements to the Value Added Tax (VAT) turnover data are driving the revision. These improvements reflect the way in which we create a representative monthly path from the primarily quarterly VAT data source along with the way in which we estimate to the universe population. This now means the April 2020 trough is weaker than previously estimated and the subsequent recovery in Quarter 2 2020 is not as strong.

In contrast, Quarter 4 (Oct to Dec) 2020 saw an upward revision to quarterly growth of 2.3pp to a 5.0% increase. This is coming from VAT turnover data replacing MBS survey data for the first time.

For the monthly path of the construction output (Table 5) we see revisions of an unbiased nature and of varied magnitudes compared with previous monthly estimates released in Construction output in Great Britain: July 2021 release for the months in 2020. While some of these monthly revisions are larger than normal it is important to highlight the lower response rates over the pandemic period. While international best practice is used to impute for non-response, these revisions reflect the additional data content provided, which were not available at the time of the early estimates.

Most notably, May 2020 is revised down 4.2pp because of improvements in VAT turnover data processing. These improvements were implemented to treat the large number of zero returns that were provided in April and May 2020 as sites closed because of the official guidance on restrictions of movement in Great Britain. As a result improvements were made in the calendarisation processing, which converts primarily quarterly VAT data to a monthly path. As a result this has mainly led to a large upward revision (up 2.6pp) in June 2020. June 2021 also sees a larger than normal revision as it is revised up 1.7pp from 0.4% from negative 1.3%. This is because of late and revised survey data and, to a lesser extent, updated seasonal adjustment parameters.

Construction output estimates

Construction output estimates are monthly estimates of the amount of output chargeable to customers for building and civil engineering work done in the relevant period, excluding value-added tax (VAT) and payments to subcontractors.

Seasonally adjusted estimates

Seasonally adjusted estimates are derived by estimating and removing calendar effects (for example, leap years such as 2020) and seasonal effects (for example, decreased activity at Christmas because of site shutdowns) from the non-seasonally adjusted estimates.

Value estimates

The value estimates reflect the total value of work that businesses have completed over a reference month.

Volume estimates

The volume estimates are calculated by taking the value estimates and adjusting to remove the impact of price changes.

Quality and methodology

More quality and methodology information is available in:

• Construction output QMI
• Construction output price indices QMI

Sub-national and sub-sector output

Data on new orders supplied by Barbour ABI are used to model the breakdown of the overall output figures for Great Britain into the lower level and regional data seen in Tables 1 and 2 of Construction output: sub-national and sub-sector.

Reasons for revisions in this release

• Revisions in the nominal data; this includes revisions to both the survey data and value-added tax (VAT) turnover data. VAT turnover data revisions prior to Quarter 4 (Oct to Dec) 2020 reflect the improvements to both the calendarisation and estimation modules used in the processing of VAT turnover data.  For further information on the methods used to process VAT please see this link.

• This release is also the first monthly release in which, where selected, VAT turnover data have been used for Quarter 4 2020 and Quarter 1 (Jan to Mar) 2021 to replace survey data.

• Revisions because of the annual seasonal adjustment review: this has an impact on the quarterly and monthly path of construction output estimates.

• The reference year and last base year for all chained volume measure series has been updated to 2019=100 from 2018=100.

Blue Book 2021

In Blue Book 2021 a new framework will be introduced to improve how we produce volume estimates of gross domestic product (GDP) for balanced years as part of the supply use process. This framework includes the implementation of double-deflated industry-level gross value added (GVA) for the first time. This improvement was reflected in the September quarterly national accounts and October monthly GDP estimates for the first time.

As a result, volume estimates in the monthly GDP and construction outputs releases will differ for the period 1997 to 2019 because of the construction publication measuring the volume of construction work (output), while the GDP series measures GVA (that is, output minus intermediate consumption). Construction estimates will align, however, from January 2020 onwards on a growth basis. Articles published on 28 June 2021 and 8 September 2021 provide information and indicative impacts of this change to industry-level GVA volume.

Construction Statistics Annual

The 2020 edition of the construction statistics annual, which will have data for the 2019 reference year will be released on 19 October 2021.

Upcoming construction related articles

On 19 October 2021 we are publishing an article covering Productivity in the Construction industry over the time period 1997 to 2020.

On 20 October 2021 we are publishing an article looking at recent trends in construction materials over the pandemic period. These materials feed into the Construction Output Price Indices.

Consultation on the Code of Practice for Statistics – proposed change to 9.30am release practice

On behalf of the UK Statistics Authority, the Office for Statistics Regulation (OSR) is conducting a consultation on the Code of Practice for Statistics, proposing changes to the 9.30am release practice.

Please send comments by 21 December 2021 to: regulation@statistics.gov.uk.