Construction output in Great Britain: December 2020, new orders and Construction Output Price Indices, October to December 2020: December 2020

• Construction output fell by 2.9% in the month-on-month all work series in December 2020, because of falls in both new work (3.8%) and repair and maintenance (1.5%); this is the first decline in monthly growth since April 2020 when it fell by a record 40.7%.

• Following this monthly fall (2.9%) and upward revisions to February 2020 monthly growth, the December 2020 level of output is 3.5% below the pre-coronavirus February 2020 level.

• Quarterly construction output grew by 4.6% in Quarter 4 (Oct to Dec) 2020 compared with Quarter 3 (July to Sept) 2020; this was driven by quarterly growth in both new work (4.0%) and repair and maintenance (5.5%).

• The increase in new work (4.0%) in Quarter 4 2020 was because of quarterly growth in all new work sectors, apart from private commercial, which decreased by 1.6%.

• The increase in repair and maintenance (5.5%) in Quarter 4 2020 was because of growth in all repair and maintenance sectors; the largest contributor was non-housing repair and maintenance, which grew by 5.5%.

• All work fell by 12.5% in 2020 compared with 2019; this was the largest decline in annual growth since 2009 where output fell 13.2%.

• New orders decreased by 8.8% (£962 million) in Quarter 4 2020 compared with Quarter 3 2020, following the record quarterly growth of 71.8% in Quarter 3 2020.

Monthly construction output decreased by 2.9% in December 2020 compared with November 2020, falling to £13,516 million. This was the first monthly decline in growth since the record fall of 40.7% in April 2020 and took the level of construction output to the lowest level since August 2020 when it was £13,181 million.

Figure 1 shows the monthly and quarterly indexed chained volume measure, seasonally adjusted series. The quarterly series provides a smoother and more comprehensive view of trends within the construction industry, compared with the more volatile monthly series.

In contrast to the monthly growth, construction output grew by 4.6% in Quarter 4 (Oct to Dec) 2020 compared with Quarter 3 (July to Sept) 2020, following the record quarterly decline of 32.7% in Quarter 2 (Apr to June) 2020 and record quarterly growth of 40.7% in Quarter 3 2020. The growth in Quarter 4 2020 was driven by the monthly growth in October and November 2020, which grew 1.3% and 1.7% respectively and offset the 2.9% fall in December 2020.

As shown in Figure 2, apart from Quarter 3 2020, the growth in Quarter 4 2020 is the largest since Quarter 2 2010, when output grew by 4.9%. The quarterly growth in Quarter 4 2020 is the fourth-largest overall since quarterly records began in 1997.

Table 1 shows the change in output for the types of construction work between February 2020 and December 2020. All work construction output in December 2020 was below its pre-coronavirus level, at 3.5% (£492 million) below the February 2020 level. While output had recovered in the November 2020 release to above its pre-coronavirus level, the combination of the monthly fall in December 2020 and upward revisions to February 2020 (see 'Revisions to construction output data' in Section 11 for further information) saw the level of output fall back below.

Despite the monthly decline in December 2020, all repair and maintenance sectors remain above the February 2020 pre-coronavirus level, while only infrastructure was above this level for new work. All other types of work in December 2020 were below their pre-coronavirus levels, with public new housing the furthest below its February 2020 level at 22.3%.

2020 pandemic compared with 2008 to 2009 recession

Figure 3 compares the profile of the fall and subsequent recovery in output, between the 2008 to 2009 recession and recent months following the impact of the coronavirus (COVID-19). It shows the number of quarters before output reached its pre-recession or pre-coronavirus level for all work, total repair and maintenance, and total new work.

While the peak-to-trough fall in output for the 2020 pandemic was substantially larger, it is noticeable how much quicker the industry has recovered than after the 2008 to 2009 recession. This reflects the imposition of public health restrictions in response to the pandemic, as well as how quickly output has recovered for the construction industry in recent months, which has been less impacted by voluntary and involuntary restrictions in place for late 2020 than other parts of the economy.

Furthermore, the recovery has been driven in recent months by the bounce-back in repair and maintenance output, which has taken only three quarters to recover above its pre-coronavirus level. In comparison, in 2008 to 2009, it was new work that recovered sooner than repair and maintenance, though this took 29 quarters to reach its pre-recession level of output.

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 4. All new work accounts for approximately two-thirds of all work, while repair and maintenance accounts for approximately one-third of all work.

Despite the monthly fall in output in December 2020 in both new work, and repair and maintenance, the level of repair and maintenance output remains above the February 2020 level at 4.9%. In comparison, new work output remains 8.0% below its February 2020 level.

Total construction output decreased by 12.5% in 2020 compared with 2019. This is the first annual fall in output since 2012 when it fell by 7.2%, and the largest since 2009 when it fell by a record 13.2%, as shown in Figure 5. While 2009 was the largest fall in percentage terms since annual records began in 1997, the fall in the level of output in 2020 was larger at £21,493 million in comparison with £19,673 million in 2009.

The annual fall in 2020 was because of decreases in both new work, and repair and maintenance, which fell by 15.2% and 7.5% respectively, both of which were also the largest falls since 2009.

Figure 6 shows the components of new work growth, showing that private new housing was the largest contributor to the 15.2% decrease in 2020 followed by private commercial new work. Public new housing, while a comparatively smaller series, fell by a record 28.7%, which was the largest in this series back to 1998.

Figure 7 shows the components of repair and maintenance, where private housing repair and maintenance was the largest contributor to the 7.5% decrease in 2020. Public housing repair and maintenance, while a comparatively smaller series, fell by a record 11.8% – the largest annual fall on record.

Construction output fell by 2.9% (£410 million) in December 2020 compared with November 2020 because of month-on-month falls in every sector. Following this fall, the level of output in December 2020 was 3.5% (£492 million) below the February 2020 level. This is the first monthly decrease following seven consecutive months of growth in all work, since the record monthly decline of 40.7% in April 2020.

While anecdotal evidence from businesses to the Monthly Business Survey for construction and allied trades suggested the industry remained broadly open unlike during the first lockdown in April and May, all types of work saw a fall in December 2020, with businesses continuing to adhere to social distancing measures along with a higher than usual number of site shutdowns as part of the Christmas period. This may partially explain the increase in the number of businesses responding with a zero return, that is, no work undertaken in December 2020, as illustrated in Figure 15 in the Measuring the data section.

New work fell by 3.8% (£332 million) in December 2020 compared with November 2020, because of decreases in all new work sectors, the largest contributors to which were private commercial new work, which fell by 6.0% (£124 million) and private new housing, which fell by 3.0% (£91 million).

Figure 9 shows the level of construction output in new work sectors since February 2020. Infrastructure output was the first to recover above pre-coronavirus February 2020 in August 2020, staying around this level since then. Private new housing is the only sector that at some point recovered above its February 2020 level, though fell below this level again in December 2020. All other new work sectors have remained broadly flat for several periods and are yet to recover to their pre-coronavirus level.

Repair and maintenance fell by 1.5% (£78 million) in December 2020 because of decreases in all repair and maintenance sectors. The largest contributor to this decline was non-housing repair and maintenance, which fell by 2.0% (£53 million). Despite this, all repair and maintenance sectors in December 2020 remain above their February 2020 level of output, as shown in Figure 10.

Figure 11 shows how the fortnightly construction net balance turnover estimates from the Business Impact of Coronavirus (COVID-19) Survey (BICS), broadly reflect the published construction output all work estimates. Both suggest broadly flat growth in construction output since August 2020.

Figure 11: Fortnightly turnover estimates from BICS broadly reflect the monthly construction output estimates since August 2020

Construction net turnover balances of businesses currently trading against all work construction output monthly estimates, UK, 1 February 2020 to 24 January 2021

Download the data here

Notes

1. Construction output estimates are for Great Britain, whereas Business Impact of Coronavirus (COVID-19) Survey (BICS) estimates are for the UK construction sector.
2. Final unweighted results, Wave 1 to Wave 6, and final weighted results, Wave 7 to Wave 23, of the Office for National Statistics (ONS) Business Impact of Coronavirus (COVID-19) Survey (BICS).
3. Weighted net balances have been calculated from Wave 7 onwards only. The sample redesign in Wave 7 improves our coverage for the small sized businesses, allowing for weighted results to be truly reflective of all businesses.
4. Net balances have been calculated by subtracting the weighted by turnover number of construction businesses who have reported a decrease in turnover from the weighted by turnover number of construction businesses with an increase in turnover, all divided by the total weighted number of construction businesses currently trading for that wave then scaled up using a scaling factor.

Construction output grew by 4.6% (£1,800 million) in Quarter 4 (Oct to Dec) 2020 compared with Quarter 3 (July to Sept) 2020.

New work grew by 4.0% (£980 million) in Quarter 4 2020, largely driven by private new housing, which grew by 6.7% (£557 million). Private commercial new work was the only sector to see a decrease in Quarter 4 2020, falling by 1.6% (£98 million).

Repair and maintenance grew by 5.5% (£820 million) in Quarter 4 2020 because of growth in all repair and maintenance sectors and was largely driven by growth of 5.5% (£401 million) in non-housing repair and maintenance and 17.6% (£308 million) in public housing repair and maintenance.

Total construction new orders decreased by 8.8% (£962 million) in Quarter 4 (Oct to Dec) 2020 compared with Quarter 3 (July to Sept) 2020, following the record quarterly increase of 71.8% (£4,550 million) in Quarter 3 2020.

This was the second time the level of new work fell below £10 billion since Quarter 2 2012, with the other being in Quarter 2 (Apr to June) 2020. The fall in new orders (8.8%) was driven by a 15.0% (£1,162 million) decrease in all other work, despite a 6.4% (£200 million) increase in all new housing, which has now recovered above the pre-coronavirus Quarter 4 2019 level.

Anecdotal evidence suggested that pent-up demand resulted in the exceptionally strong growth in Quarter 3 2020, with continued uncertainty as a result of the pandemic contributing to the decline in new orders in Quarter 4 2020. The lack of very high value new orders placed in Quarter 4 is evident when compared with recent quarters, with fewer new orders placed above the value of £200 million than in the exceptionally weak Quarter 2 2020, and is the lowest in the last four years.

The fall in all other work (15.0%) orders was largely driven by a 26.4% (£871 million) fall in private commercial work, and a 17.9% (£410 million) fall in infrastructure work. Within infrastructure, all of the main contributors to recent growth in the sector (railways, roads and electricity) saw quarter-on-quarter falls in the current price, non-seasonally adjusted series in Quarter 4 2020.

Elsewhere in all other work, private industrial work increased by 24.3% (£244 million), which was driven by orders for factories, which had the highest number of new orders since Quarter 4 2005 in the current price, non-seasonally adjusted series. All new housing also increased as a result of growth across both the private and public sector.

Total new orders fell by 12.8% in the year-on-year series because of a 12.1% fall in all other work and 14.5% fall in all new housing, shown in Table 3. The only two sectors to see growth in this series are infrastructure and public new housing, which grew by 1.9% and 1.3% respectively. This is the third consecutive annual decline in total new orders and the weakest since 2018, where annual growth fell by 15.7% coming off 2017 where several high-value orders were placed for High Speed 2 (HS2).

Prices in the construction industry, as estimated by the Construction Output Price Index (OPI), rose by 1.4% between December 2019 and December 2020’, as shown in Figure 14.

Peaks and troughs seen within the new work index between January 2016 and December 2020 are mostly because of movements within the earnings component of the OPI, which is sourced from the Average Weekly Earnings (AWE) index for construction.

All construction work

The annual and monthly rates of inflation for all construction were 1.4% and 0.1% respectively in December 2020. Annual construction output prices have grown steadily since July 2020.

New work

The Construction OPI for new construction work grew by 1.5% on the year to December 2020. Prices rose for all new work sectors in the year to December 2020, the largest of which was housing, which rose by 1.8% in the 12 months to December 2020. This was the highest in the 12-month series since November 2019.

Repair and maintenance

The Construction OPI for all repair and maintenance grew by 0.9% on the year to December 2020. The annual growth of output prices for non-housing repair and maintenance was 1.0%, with housing repair and maintenance prices growing 0.9%.

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 this year) 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.

Feedback survey

In this publication we are releasing a short survey about the monthly construction output bulletin to gain feedback on its content. The survey should take less than five minutes to complete and we would be grateful for any feedback.

Construction output data collection

Our monthly Construction Output Survey measures output from the construction industry in Great Britain. The survey samples 8,000 businesses, with all businesses employing over 100 people, or with an annual turnover of more than £60 million, receiving an online questionnaire every month. The survey's results are used to produce non-seasonally and 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 changes in price).

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.

Revisions to construction output data

Revisions in the release are a result of:

• late responses to survey returns replacing imputations, or revisions to original returns

• revisions to seasonal adjustment factors, which are re-estimated every month and reviewed annually

• revisions to the input series for the Construction Output Price Indices

In this release there are revisions to construction output back to January 2020, first published within the Construction output in Great Britain: November 2020 release published on 15 January 2021. The largest revisions can be seen in February and June 2020 and this is mainly coming from revisions to the seasonal adjustment factors.

For further information on the revisions profile please see the output in the construction industry revisions triangles published on a one-month and three-month growth basis.

Construction new orders data collection

New orders data are sourced from Barbour ABI who web scrape planning application data from all local authorities in England, Scotland and Wales; this method allows identification of planning applications as soon as they are published, while projects outside the planning application process are captured via investigations from Barbour's in-house team of researchers. These data are then validated firstly by Barbour ABI and supplied to the Office for National Statistics (ONS), who also further validate, process and quality assure the data before new orders in the construction industry estimates are published.

Revisions to new orders data

Revisions in the release to new orders are as a result of:

• revisions to seasonal adjustment factors, which are re-estimated every quarter and reviewed annually

• revisions to the input series for the Construction Output Price Indices

• new orders data are also open for revision in the current price, non-seasonally adjusted data (Tables 4 to 6) for the previous quarter; there are no revisions to the current price Quarter 3 2020 data in this release

Quality and methodology

More quality and methodology information on strengths, limitations, appropriate uses, and how the data were created is available in the Construction output QMI and New orders in construction QMI.

Value Added Tax (VAT) data

Alongside the Monthly Business Survey (MBS), further information on output is gained from VAT turnover data, which are used to replace survey data for small- and medium-sized businesses. However, because of the delay in companies making VAT returns, these data are only taken on after a lag period. Currently, VAT turnover data are used for the period Quarter 2 (Apr to June) 2016 to Quarter 2 (Apr to June) 2020.

Further information on the use of VAT turnover in construction output estimates and its impact can be found in the following articles:

• VAT turnover implementation into national accounts

• VAT turnover data in National Accounts: background and methodology

• Quality assurance of administrative data (QAAD) report for VAT turnover data

Coronavirus impact on ONS construction output in December 2020

Temporary ceasing of Output in the construction industry: sub-national and sub-sector data

The coronavirus (COVID-19) pandemic presents a significant challenge to the UK, and the Office for National Statistics (ONS) is working to ensure that the UK has the vital information needed to respond to the impact of this pandemic on our economy and society. This means we will need to ensure that information is provided faster, using new data sources and changing how our surveys operate, to ensure we provide the information necessary as the situation unfolds.

The effects of the outbreak on ONS capacity and capability during this period means we have reviewed the existing construction statistics releases and will be temporarily suspending the Output in the construction industry: sub-national and sub-sector dataset. This is to protect the delivery and quality of our remaining outputs as well as ensuring we can respond to new demands as a direct result of the coronavirus. This is also partially a reflection of the limitations of the model used to apportion new orders data to produce sub-level output data.

Impact of online data collection on response rates

Data for the Monthly Business Survey for construction and allied trades (MBS) moved to an online data collection platform for April 2020 onwards, allowing respondents to log on from any location and submit their data at an appropriate time.

Response rates at first response were comparatively low in March 2020 and since then have improved when measured by both the turnover coverage of the industry and proportion of questionnaire forms returned. Table 5 shows the response rates to the MBS at time of publishing, for each reference period. While response rates are lower for the reference months in 2020 at the first time of publication, further responses have since been submitted and will be used subject to the National Accounts Revisions Policy.

Response rates fell for the second consecutive month in December 2020 to 68.7% by turnover response and 54.7% by questionnaire response, both of which are the lowest since June 2020. For December 2020, because of the gross domestic product timetable, the data collection period for the MBS was shorter compared with that of October and November 2020, by around one week, and as a result response rates at first estimate are lower. However, when compared with June and September 2020, where the data collection period was similar to December 2020, response rates at the first estimate are comparable.

To deal with non-response we impute for missing data using ratio imputation. This is a simple but effective method, used as a standard internationally. The method calculates the growth in the industry based on those businesses that did respond and applies it to the last known value for the non-responder. This means that if output notably reduces in an industry from one month to the next, the imputed values for non-respondents in that industry will also notably reduce when compared with the last known value.

Further information on the imputation methods for non-response is available.

While international best practice is used to impute for non-response, with the lower response rates highlighted in Table 5, it is important to note that the revisions to the months in 2020 may be larger than the revisions profile prior to 2020, as actual data and revised data replace the larger than normal number of imputations for non-response at the time of the first monthly estimate.

Zero return responses to the MBS

A zero return refers to when a survey respondent reports figures of zero across all types of work, meaning the total value of work done is zero for that reference month. Figure 15 shows zero returns as a proportion of all returns at the time of the first estimate for a reference month. This is broken down by size of business as per registered turnover on the IDBR (Inter-Departmental Business Register).

Prior to March 2020 there was a stable element of approximately 7% to 10% of businesses reporting zero returns present, followed by a sharp increase in April 2020. Since April 2020, the proportion of zero returns declined until November 2020 when it increased to 11.4%, and 11.8% in December 2020. This is the highest proportion of zero returns since August 2020 when it was 12.2%.

It is worth noting small-sized (less than £1 million registered annual turnover) and medium-sized (£1 million to £10 million registered annual turnover) businesses make up the majority of these zero returns. This is the case both during and before the period affected by lockdown.

Coronavirus impact on the December 2020 seasonal adjustment

The monthly chained volume measures are seasonally adjusted using a seasonal adjustment software tool (X-13-ARIMA-SEATS). The monthly series individual type of work series is then aggregated to form the quarterly seasonally adjusted chained volume measure series.

The seasonal adjustment parameters for output in the construction industry are reviewed annually. However, because of the volatility of these statistics, time series analysis experts are regularly asked to review the seasonal adjustment when required. This approach has been adopted for the latest months and has resulted in changes to seasonal adjustment specification files to ensure the seasonal adjustment parameters are appropriate.

End of EU exit transition period

The transition period ended on 31 December 2020. The UK statistical system will continue to collect and produce our wide range of economic and social statistics about the UK. We are committed to continued alignment with international standards, enabling comparability both over time and internationally and we will work with users of statistics to make sure they have the data they need to support the decisions they have to make.

Additionally, the Withdrawal Agreement outlines a need for UK gross national income (a fundamental component of the national accounts, which includes gross domestic product (GDP)) statistics to remain in line with those of other EU countries until EU budget contributions are finalised for the years in which we were a member, and making budget contributions during the transition period. To ensure this comparability during this period, the national accounts will continue to be produced according to European System of Accounts (ESA) 2010 definitions and standards.

As the shape of the UK's future statistical relationship with the EU becomes clearer over the coming period, the ONS is making preparations to assume responsibilities that as part of our membership of the EU, and during the transition period, were delegated to the statistical office of the EU, Eurostat. This includes responsibilities relating to international comparability of economic statistics, deciding what international statistical guidance to apply in the UK context and to provide further scrutiny of our statistics and sector classification decisions.

In applying international statistical standards and best practice to UK economic statistics, we will draw on the technical advice of experts in the UK and internationally, and our work will be underpinned by the UK's well-established and robust framework for independent official statistics, set out in the Statistics and Registration Service Act 2007. Further information on our proposals will be made available in early 2021.

Data quality

These estimates are widely used by private and public sector institutions, particularly by the Bank of England and HM Treasury, to assist in informed decision-making and policymaking. Construction output is an important economic indicator and is also therefore used in the compilation of the output measure of gross domestic product (GDP).

Further information on Uncertainty and how we measure it for our surveys is available.

National Statistics status

Great Britain construction output statistics and construction new orders are designated as National Statistics, in accordance with the Statistics and Registration Service Act 2007 and signifying compliance with the Code of Practice for Statistics.

Comparability

Headline volume estimates of construction output are assessed against international guidelines such as Eurostat's handbook on price and volume measures in national accounts.

Construction output data used within this release are also used in the compilation of the GDP monthly estimate. While monthly data are available in the output in the construction industry back to January 2010, a longer time series back to 1997 can be obtained in the monthly GDP datasets. Monthly data prior to 2010 are derived using statistical methods from the available quarterly construction output data and should therefore be treated with some caution.

Within this publication, a monthly, all work chained volume measure, seasonally adjusted series can be obtained back to January 1997 in index form to four decimal places. This can be found in the following datasets: Monthly GDP and main sectors to four decimal places and Monthly gross domestic product: time series.