Construction output in Great Britain: December 2017

Short-term measures of output by the construction industry in Great Britain and contracts awarded for new construction work in the UK.

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Dyddiad y datganiad:
9 February 2018

Cyhoeddiad nesaf:
9 March 2018

1. Main points

  • Construction output continued its recent decline in the three-months to December 2017, contracting for the eighth consecutive period in the three-month on three-month series, falling by 0.7%.

  • This fall of 0.7% for Quarter 4 (Oct to Dec) 2017 is the third consecutive quarter of decline, representing the most sustained fall in quarterly construction output since Quarter 3 (July to Sept) 2012.

  • Despite falling in both the three-month on three-month and quarter-on-quarter time series, construction output grew in the month-on-month series, increasing by 1.6% in December 2017.

  • The estimate for construction growth in Quarter 4 2017 has been revised up 0.3 percentage points to negative 0.7% from negative 1% in the preliminary estimate of gross domestic product (GDP), which has no impact on quarterly GDP growth to one decimal place.

  • Despite experiencing three consecutive quarterly declines, construction output in Great Britain grew by 5.1% in 2017 due to strong growth at the end of 2016 and in Quarter 1 (Jan to Mar) 2017.

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2. Things you need to know about this release

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.

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

This December 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 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 impact of improvements to construction statistics article explains and highlights the impact of recent improvements to construction statistics, affecting the nominal data series, output price indices and seasonal adjustment. As a result, the output price indices are no longer considered to be an interim method.

The Office for Statistics Regulation is currently in the process of re-assessing the National Statistic status for construction statistics: Output, New orders and Price Indices.

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3. Construction output in December 2017

Construction output fell 0.7% during the three-month on three-month period to December 2017, representing both the eighth consecutive three-month on three-month fall and the third consecutive quarter-on-quarter decline in output. The three-month time series provides a more comprehensive picture of the underlying trends within the industry, compared with the more volatile monthly series, which is also shown in Figure 1.

Construction output grew sharply month-on-month, increasing by 1.6% in December 2017 and remains at a relatively high level. Construction output peaked in March 2017, reaching a level that was 31% higher than the lowest point of the last five years, January 2013. Following the month-on-month increase in December 2017, construction output is now 30% above this level.

Despite experiencing three consecutive quarterly declines, construction output in Great Britain grew by 5.1% in 2017 due to strong growth at the end of 2016 and in Quarter 1 (Jan to Mar) 2017.

In the preliminary gross domestic product (GDP) estimate for October to December 2017 the Quarter 4 (Oct to Dec) growth rate for construction output was estimated to be negative 1%. This has been revised up by 0.3 percentage points, to negative 0.7%, which has no impact on quarterly GDP growth to one decimal place.

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4. Contributions to growth

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 since the beginning of 2015, new work, and repair and maintenance have followed a broadly similar pattern. Both repair and maintenance, and new work have risen steadily, resulting in all work reaching a level peak in March 2017.

The 1.6% month-on-month rise in construction output in December 2017 occurred as a result of a 4% increase in all new work, the largest increase in this series since December 2015. In contrast, total repair and maintenance fell sharply in both the month-on-month and three-month on three-month series, contracting by 2.9% and 2% respectively. 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.

Construction output fell by £283 million in the three-month on three-month time series in October to December 2017 compared with July to September 2017. This decrease stems from falls across all but two sectors. The most notable decline came from private commercial work, which continued the decline seen in this series since June 2017, falling by £324 million.

In contrast, private housing continued to make a notable positive contribution to growth. The £403 million increase in private housing work, which represents the fifth consecutive month of growth in this series, has led to the value of private housing work reaching its highest level on record.

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

Construction output experienced a sharp increase in December 2017, increasing by £201 million compared with the previous month. This increase has been driven primarily by a marked rise in infrastructure, which increased by £169 million after a broadly negative 2017. Despite being a volatile series, this increase in infrastructure is the largest since December 2015. In addition, as seen in the three-month on three-month series seen in Figure 3, private housing also continued to expand, increasing by £81 million compared with November 2017.

The largest negative contribution to construction output came from total housing repair and maintenance, which endured its largest fall since August 2012, decreasing by £116 million.

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5. Detailed growth rates

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 £13,058 million in December 2017. This rise stems from an increase in total all new work, which grew to its highest level on record; £8,593 million. Elsewhere, total repair and maintenance fell, decreasing to £4,465 million.

Compared with the same period in 2016, construction output fell by 0.2%. This month-on-year fall was driven predominantly by a 3.2% fall in total repair and maintenance, which occurred as a result of falls in all forms of repair and maintenance. In contrast, all new work continued to grow month-on-year, with increases in new private housing and infrastructure more than offsetting declines in private commercial and public other new work.

Positive growth is also evident in the three-months on year time series, with construction output continuing to increase by 0.9%, representing the weakest three-months on year growth since June 2013. This increase stemmed from growth in all new work, which continued to grow, increasing by 1.4%. Elsewhere, as in the month-on-year series, total repair and maintenance fell as a result of decreases in public housing repair and maintenance and non-housing repair and maintenance.

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7. Quality and methodology

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

Since the publication for November 2017, VAT turnover has been used to estimate the output of small businesses. In this release VAT turnover has been used for selected industries previously covered by the Monthly Business Survey from Quarter 1 (Jan to Mar) 2016 to Quarter 2 (Apr to June) 2017. Further information on the use of VAT turnover and its impact, can be found in the VAT turnover implementation into national accounts article.

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