Output in the construction industry: January 2016 and new orders Quarter 4 2015

Construction output at current price and chained volume measures seasonally adjusted by public and private sector.

Nid hwn yw'r datganiad diweddaraf. Gweld y datganiad diweddaraf

Email Melanie Richard

Dyddiad y datganiad:
11 March 2016

Cyhoeddiad nesaf:
15 April 2016

1. Main points

In January 2016, output in the construction industry decreased by 0.2% compared with December 2015. All new work decreased by 0.8% while all repair and maintenance increased by 0.8%.

Within all new work, there were decreases in public new housing (-10.6%) and infrastructure (-8.6%) which were offset by increases in private commercial (4.7%), public other new work (1.6%), private industrial (0.7%) and private new housing (0.6%). Within the repair and maintenance (R and M) category, housing repair and maintenance increased by 3.0% while there was a decrease of 1.5% in non-housing repair and maintenance.

Compared with January 2015, output in the construction industry decreased by 0.8%. There were decreases in both all new work and repair and maintenance of 0.4% and 1.4% respectively.

New orders for the construction industry in Quarter 4 (Oct to Dec) 2015 were estimated to have decreased by 0.5% compared with Quarter 3 (July to Sept) 2015 and increased by 1.4% compared with Quarter 4 (Oct to Dec) 2014.

The second estimate of gross domestic product (GDP) for Quarter 4 (Oct to Dec) 2015 published on 25 February 2016 included an estimate of construction which showed a decrease in output of 0.4% in Quarter 4 (Oct to Dec) 2015. This estimate has been revised upwards by 0.7 percentage points to an increase of 0.3% in this release. This has no impact on GDP to 1 decimal place. More information on revisions are included in the Background notes section of this bulletin.

Nôl i'r tabl cynnwys

2. About this release

Output is defined as the amount charged by construction companies to customers for the value of work (produced during the reporting period) excluding VAT and payments to sub-contractors.

Construction output estimates are a short-term indicator of construction output by private sector and public corporations within Great Britain. Output estimates are produced and published at current prices (including inflationary price effects) and at chained volume estimates (with inflationary effects removed) both seasonally adjusted and non-seasonally adjusted.

Chained volume measures are also described as volume. Construction output is used in the compilation of the output approach to measuring gross domestic product (GDP).

Detailed estimates along with a longer run of time series data are available to download in the Output in the Construction Industry, January 2016 datasets. In these tables, users will find chained volume estimates back to Quarter 1 (Jan to Mar) 1997 and monthly estimates back to January 2010. Current price non-seasonally adjusted data are available back to Quarter 1 (Jan to Mar) 1955. More information on these statistics can be found in the “definitions and explanations” section in the background notes.

The data published in this release cover construction estimates for Great Britain. Construction output estimates for Northern Ireland can be obtained from the Central Survey Unit.

National Statistics status

On 11 December 2014, the UK Statistics Authority announced its decision to suspend designation of Construction Price and Cost Indices due to concerns about the quality of these deflators. As a result the UK Statistics Authority announced its decision to suspend the Output and New Orders as National Statistics in respect of the Code of Practice for Official 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. Since this point we have worked towards creating an interim solution to measure output prices and replace the statistical models that had been used in the production of chained volume measures (CVMs) for output in the construction industry since Quarter 3 (July to Sept) 2014 and to provide an ongoing source of data from Quarter 1 (Jan to Mar) 2014 onwards. This interim solution was included in the data published in June 2015 for all periods from January 2014 onwards.

Nôl i'r tabl cynnwys

3. Output in the Construction Industry, January 2016

All work

In January 2016 all work:

  • decreased by 0.2% compared with December 2015
  • decreased by 0.8% compared with January 2015
  • in the 3 months (November 2015, December 2015, January 2016) compared with the previous 3 months (August 2015, September 2015, October 2015) construction output increased by 1.1%

Figure 1 shows seasonally adjusted chained volume measures of all construction work. It shows that since the start of the monthly series in January 2010 the performance of the construction industry has been volatile. The time series can be split into several distinct periods. The first period covers January 2010 to January 2011 and saw an increase in output in the early part of the time series which fell sharply into 2011. From February 2011 output increased initially then showed a gradual decrease to December 2012. Between January 2013 and January 2015 output increased gradually suggesting an underlying pattern of growth, and in more recent periods output has been more volatile with months of growth and contraction, with growth of 2.1% in December 2015 followed by a fall of 0.2% into January 2016.

Figure 2 shows the 2 main components of all work. The chart shows that from January 2010 to December 2011 the path of all new work and all repair and maintenance follow a similar pattern. From early 2012 to late 2014, the underlying pattern of both components shows growth. Since mid-2014, the paths of all new work and repair and maintenance have moved in opposite directions with the level of all new work consistently higher than all repair and maintenance. In January 2016, there was a decrease in all new work of 0.8% while repair and maintenance increased by 0.8%.

Figure 3 looks at the main components of all new work. There was sustained growth in all new housing from early 2013 until early 2015 and after several months of contraction in early 2015 there was a return to growth in late 2015, however, January 2016 saw the first month-on-month fall since August 2015. Infrastructure is a quite volatile series with periods of growth and contraction throughout the time series. After growth in December 2015 of 10.6%, January 2016 saw a contraction of 8.6%. Other new work remained fairly flat in recent periods and after 2 months of contraction in November 2015 and December 2015 there was a return to growth in January 2016 of 3.5%.

Figure 4 looks at the components of total new housing. It shows that private new housing accounts for the overall trend in total housing, accounting for approximately 85% of all new housing (based on January 2016 data). Public new housing fell by 10.6% in January 2016 after an increase of 15.9% in December 2015, while private new housing showed growth for the 4th consecutive month, increasing by 0.6%.

Figure 5 looks at the 2 main components of all repair and maintenance. The level of both housing and non-housing repair and maintenance has been fairly consistent over the time series with non-housing the slightly more volatile series. In January 2016, all repair and maintenance increased by 0.8% with housing repair and maintenance the main contributor, increasing by 3.0%. This was offset by non-housing repair and maintenance which decreased by 1.5%.

Nôl i'r tabl cynnwys

4. Summary of growth rates for all work types

Table 1 provides a summary of growth rates across the different types of construction work in January 2016. Some main points from this table are as follows:

  • all work decreased in January 2016 compared with December 2015 due to a decrease in all new work
  • the month-on-month decrease in all new work was due to decreases in infrastructure and public new housing
  • the increase in repair and maintenance was due to an increase in private housing repair and maintenance
  • all new work and all repair and maintenance contributed to the year-on-year decrease in all work; there were decreases in all components apart from private new housing, public other new work, private commercial work, and private housing repair and maintenance

Nôl i'r tabl cynnwys

5. Contributions to growth

Figure 6 shows the contribution of each sector to output growth in the construction industry between January 2016 and December 2015.

In January 2016, 3 of the main construction sectors saw a decrease in output growth. The largest contribution to the fall came from infrastructure.

Nôl i'r tabl cynnwys

6. The quality of the estimate of Output in the Construction Industry

Output in the construction industry estimates are produced from the monthly business survey on the second Friday of the month, 2 months after the reporting month. Revised results, for previously published periods, are published in line with the national accounts revisions policy. More information about the data content for this release can be found in the background notes.

Revisions are an inevitable consequence of the trade-off between timeliness and accuracy. The response rate in January 2016 was 71.8% of questionnaires, accounting for 81.8% of registered turnover in the construction industry. Therefore the estimate is subject to revisions as more data become available.

The monthly output in the construction industry time series now spans 73 months, however, users should note that this is the minimum time span recommended by Eurostat for seasonal adjustment. While the seasonal pattern is generally established after 60 months in a monthly time series, there is still potential for increased revisions until the seasonal pattern has matured.

All estimates, by definition, are subject to statistical uncertainty and for many well-established statistics, we measure and publish the sampling error associated with the estimate, using this as an indicator of accuracy. For construction output we publish sample and non-sample errors in table 11 of the main reference tables. It should be noted that we are continually working on methodological changes to improve the accuracy of the construction output estimates, progress on these can be found on the ONS continuous improvement page on our website.

Nôl i'r tabl cynnwys

7. Construction estimates in gross domestic product

Construction estimates are a main component of the output approach to measuring GDP, along with the estimates of services, production and agriculture. As an aid to users, the short-term economic indicator releases that directly feed into GDP include an additional table of the GDP components. This table should help to inform users of the relationship between the individual components which comprise GDP output. The publication dates and the quarterly growths of the individual GDP components are shown below.

Each component of GDP has a weight within GDP based on its value in 2012. Construction has a weight of 59, which means that it is 59 parts of the 1,000 that make up total GDP.

To determine the effect each component has on GDP multiply the component growth by its weight in GDP.

An example using Quarter 2 (Apr to June) 2015 data: Construction growth = 1.4 Weight in GDP = 0.059 (59/1000) Effect on GDP = 1.4 * 0.059 = 0.08 or 0.1 to 1 decimal place (dp) Revisions to components and the effect on GDP can be calculated using the same process. As a general rule there are no revisions to GDP when the component revisions are:

Index of Production (IoP) = between 0.3 and -0.3 Construction = between 0.9 and -0.9 Index of Services (IoS) = 0.0 (all values above or below 0.0 effect GDP due to the high weight of IoS in GDP)


IoP = 0.148*0.4 = 0.0592 or 0.1 to 1 dp Construction = 0.059*0.9 = 0.0531 or 0.1 to 1 dp IoS = 0.786*0.1 = 0.0786 or 0.1 to 1 dp

Table 2 shows the latest monthly and revised quarterly output figures that fed into the second estimate of GDP for Quarter 4 (Oct to Dec) 2015 published on 25 February 2016.

The second estimate of GDP published on 25 February 2016 contained an estimate for quarterly construction of a decrease of 0.4%. This estimate has been revised within this release based upon updated survey responses and is now estimated to be an increase of 0.3%. This upward revision of 0.7 percentage points does not revise the growth rate of GDP to 1 decimal place, all other things being equal.

Nôl i'r tabl cynnwys

8. New Orders for Construction – Quarter 4 (Oct to Dec) 2015

It is estimated that the seasonally adjusted volume of all new orders decreased by 0.5% between Quarter 3 (July to Sept) 2015 and Quarter 4 (Oct to Dec) 2015, to £12.5 billion. There were decreases in the volume of new orders for infrastructure, private industrial and public other new work while all other work types showed increases.

The volume of new orders in new housing increased by 11.1% between Quarter 3 (July to Sept) 2015 and Quarter 4 (Oct to Dec) 2015, with both public and private new housing reporting increases of 46.5% and 7.9% respectively. It should be noted that the weight of public new housing is small at only 11% of total new housing.

The volume of new orders in infrastructure decreased by 27.8% in Quarter 4 (Oct to Dec) 2015 compared with Quarter 3 (July to Sept) 2015, to a level of £2.2 billion, the lowest level since Quarter 4 (Oct to Dec) 2014.

The volume of all new orders in Quarter 4 (Oct to Dec) 2015 increased by 1.4% compared with the same period a year ago. There were increases in all work types except public other new work and private industrial work.

The volume of new orders in 2015 increased by 2.8% compared with 2014. The largest increase was reported by infrastructure (50.3%) which at £10.9 billion is at its highest level since records began in 1980. Also reporting increases were private industrial (24.7%) and all other work (6.1%). These were offset by decreases in public other new work, new housing and private commercial work which decreased by 22.7%, 4.7% and 3.7% respectively.

Users should note that there is a time lag between how long an order turns into output (if at all) and therefore an assumption that improved new orders data will result in an improved output picture is a difficult assumption to make.

Further, users should note 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.

Nôl i'r tabl cynnwys

9. Economic context

Construction output fell by 0.2% between December 2015 and January 2016, following a contraction in output of -0.6% and growth of 2.1% in November 2015 and December 2015 respectively. The main contributions to the decline in output in January 2016 came from a contraction in infrastructure, new housing activity in the public sector and non-housing repair and maintenance, which were partly offset by growth in output from private commercial activity and private housing repair and maintenance. Compared to December 2015, infrastructure output fell by 8.6% on the month, while public new housing activity and non housing-repair and maintenance declined by 10.6% and 1.5% respectively. This contrasted with growth in private commercial activity and private repair and maintenance of 4.7% and 5.2% respectively. In broad terms, the elements that pulled down on growth in January were in the public sector, while those that provided the impetus to growth were in the private sector.

Comparing the figures for January 2016 with January 2015, output fell by 0.8%, while the rate of construction output growth for the 2015 calendar year as a whole was 3.4%. Although growth for 2015 as whole was more positive that it has been in recent years, and is above the pre-downturn annual average, it is nevertheless lower than the strong growth of 7.5% observed in 2014.

The recent weakness of construction output has come alongside a moderation of price pressure in the housing market. The ONS House Price Index indicates UK house prices increased by 6.7% in the year to December 2015, down from 7.7% in the year to November 2015. This is consistent with the Nationwide report that indicates that UK house prices increased by 4.4% in the year to January 2016, down from 4.5% in the year to December 2015.However, Halifax reported that prices in the three months to January 2016 were 9.7% higher than in the same three months a year earlier, up from 9.5% in December 2015. This easing in house price growth has coincided with a 2.8% decline in residential property transactions between December 2015 and January 2016 according to HM Revenue and Customs data.

The housing market has been characterised by constrained supply in recent times. According to the Bank of England’s February inflation report, the supply of newly built houses has been constrained by a shortage in the supply of skilled labour and materials. While the latest RICS construction market survey has reported that shortages of building materials have eased, which should increase construction activity, labour and skill shortages still remain a constraint on activity.

Between Q4 (Oct to Dec) 2014 and Q4 (Oct to Dec) 2015, GDP growth outpaced construction output growth; GDP growth was 1.9% while construction output growth was 1.0%. While quarterly GDP growth remained broadly similar throughout 2015, varying between 0.4% and 0.6% growth, construction output growth has been more volatile, increasing by 1.9% in Q1 (Jan to Mar) 2015 and contracting by 1.6% in Q3 (July to Sept) 2015. Investment in dwellings increased by 3.7% in the fourth quarter of 2015 compared to the previous quarter, and this was largely driven by growth in investment in private sector dwellings, with a positive but much smaller contribution from public sector dwellings. This is consistent with the public-private make-up of activity in the construction industry and the measure of construction output, though there is likely to be something of a lag between construction output and the corresponding investment measurement of that activity.

Nôl i'r tabl cynnwys

10. International perspective

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 showed that construction output in the euro area (EA19) decreased by 0.6% in December 2015 and decreased by 0.1% in the EU28 compared with November 2015. The Great Britain estimate for December 2015 showed that construction output increased by 2.1%. It should be noted that an accurate comparison cannot be made as Eurostat data are calculated on a 2010 = 100 basis, while Great Britain data are calculated on a 2012 = 100 basis.

Outside of the EU, the US Census Bureau release Value of construction put in place published on 1 March 2016, showed provisional estimates of construction output in January 2016 increased by 1.5% compared with December 2015 and increased by 10.4% compared with January 2015.

International comparisons

International construction comparisons are compiled by Eurostat. The estimates produced in this bulletin are included in these comparisons. Further information can be found on the Eurostat web page.

Nôl i'r tabl cynnwys

.Background notes

  1. What’s new

    Coverage of Standard Business Survey population extended

    As described in Improving the Coverage of the Standard Business Survey Population published on 21 December 2015, the coverage of our Standard Business Survey population has been extended to include a population of solely PAYE-based businesses which has been implemented in the construction output January 2016 estimates.

    This was the first Construction release to contain the extended population of solely PAYE based businesses. We are carrying out additional quality assurance on the impact of this improvement which could result in revisions in the February 2016 estimates published on 15 April 2016. We expect changes to top level construction output to be negligible.

    Leap year adjustments

    A methodological note on leap year adjustments was published on 29 February 2016, explaining how leap years might affect ONS time series and the methods used to adjust for them as part of seasonal adjustment. The Economic Review March 2016 was published on 2 March 2016, providing further commentary on the economy, GDP and leap year effects.

    Construction consultation

    A consultation to find out more about how construction prices are used has been launched today. This consultation will provide ONS with better information on the types of price indices users require as well as the breakdown of categories and regions.

    The consultation can be found on the ONS consultation web page. For more information contact Kate Davies (kate.davies@ons.gov.uk).

  2. Revision policy

    Construction output conforms to the standard national accounts revision policy, which can be found on our website. In line with this, the construction output release for January 2016 contains revisions back to January 2015.

    New orders data has a revision period back to Quarter 2 (Apr to June) 2013 and is not covered by the national accounts revisions policy due to not directly feeding the national accounts.

    Figures for the most recent months are provisional and subject to revision in light of (a) late responses to the monthly business survey MBS (b) revisions to seasonal adjustment factors which are re-estimated every period and (c) improved treatment of outliers.

  3. Revisions

    One indication of the reliability of the key indicators can be obtained by monitoring the size of revisions. Analysis of the previously published quarterly seasonally adjusted chained volume measure series has shown that revisions to construction data are small. Generally these quarterly revisions are less than 1 percentage point when compared with the final revised period five quarters after initial publication. This indicates that the published estimates are a reliable snapshot of the output in the industry at the date of publication.

    The size and pattern of revisions for both output and new orders data which have occurred in the open period can be found in the new revision triangles on the construction web page. Please note that these indicators only report summary measures for revisions. The revised data may be subject to sampling or other sources of error. Details about this revisions material can be found on our revisions page.

    It should be noted that due to seasonal adjustment taking place on a short span of data points used to interpret the seasonal effects, there is potential for increased revisions until the seasonal pattern is established within the time series. The seasonal pattern is generally established after 60 months in a monthly time series.

    Please note that a monthly seasonally adjusted chained volume series is not available pre-2010. This is due to monthly data not being available for this period. These data are a requirement for creating previous year’s prices from which chain linked volume measures are created.

  4. Use of the data

    Output in the construction industry estimates are widely used both internally and externally and have been identified by legal requirement and user engagement surveys.

    The main users of data from the output of the construction industry dataset are: - UK national accounts - Eurostat, the statistical office of the European Union, in order to comply with statutory legislation on short-term business statistics (STS). Short-term business statistics provide information on the economic development of four major domains: industry, construction, retail trade and other services - Industry analysts requiring estimates of the construction industry output of Great Britain - Trade associations making UK and international comparisons and to forecast trends in the construction industry - Other government departments including; the Department for Business, Innovation and Skills (BIS), HM Treasury (HMT), Department for Communities and Local Government (DCLG) and the Office for Budgetary Responsibility (OBR)

    As well as being a main indicator of the performance of construction companies, the results of the survey also contribute to the estimate of the gross domestic product of the UK, contributing approximately 5.9% of GDP.

    More information on the uses made of short-term economic statistics is available.

  5. Methods

    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.

    Estimates are based on output data collected through the monthly Construction Output Survey. Response rates at the time of publication are included for the current month, and the 3 months prior. The response rates for those historical periods are updated to reflect the current level of response, incorporating data from late returns. There are 2 response rates included, with 1 percentage for the amount of turnover returned, and the other percentage for the amount of questionnaire forms.

    Since the 1950s, New Orders in Construction data had been collected from a sample survey of businesses; originally monthly and then quarterly. There were some known quality issues with the survey data as:

    • the coverage of the survey was unknown
    • new orders allocated to regions were not always accurately recorded

    The new orders data are now supplied under contract by Barbour ABI. Barbour ABI provide us with improved coverage and regional splits of new orders in construction data.

  6. Quality

    The latest quality and methodology report for the output of the construction industry estimates and quality and methodology report for new orders in the construction industry estimates can be found on our website.

  7. Relevant links

    Modelling Construction Statistics Deflators

    Impact of quarterly employment question on monthly survey response

    Government Statistical Service (GSS) uncertainty guidance

    Annual Construction publication Construction Statistics, No. 15, 2014 Edition

    Analysis of the construction industry

    UK Statistics Authority assessment

    Disclosure control policy

    Types of Construction work

    National Accounts and related statistics work plan

  8. Further information

    Releases on construction output and employment prior to the transfer to ONS can be found on the BIS website.

  9. User engagement

    The user engagement section contains results of the survey held in April 2011 regarding users' satisfaction and use of the new orders and construction output surveys.

    We published a summary of initial responses to the Short-term Indicators National Accounts Survey on 9 February 2015.

  10. General information

    Interpreting the data

    When making comparisons it is recommended that users focus on chained volume measures or constant price (volume), seasonally adjusted estimates as these show underlying movements rather than seasonal movements.

    Construction output estimates are subject to revision because of:

    • late responses to the construction output survey
    • revisions to seasonally adjusted factors which are re-estimated every quarter
    • annual updating of the inter-departmental business register (IDBR) that forms the basis of the sampling for the construction output survey; this occurs in April and can have an effect on the results published in May

    Definitions and explanations

    Definitions of terminology found within the main statistical bulletin are available.

  11. Code of Practice for Official Statistics

    National Statistics are produced to high professional standards which are set out in the Code of Practice for Official Statistics. They undergo regular quality assurance reviews to ensure that they meet customer needs and are produced free from any political interference.

  12. Publication policy

    Details of the policy governing the release of new data are available from the Media Relations Office.

  13. Accessing data

    The Output in the Construction Industry statistical bulletin and relevant time series datasets are available to download free from the Office for National Statistics website at 9.30am on the day of publication.

  14. Further information and user feedback

    As a user of our statistics, we would welcome feedback on this release, in particular on the content, format and structure. For further information about this release, or to send feedback on our publications, please contact us using the following information.

  15. Declaration

    Details of the policy governing the release of new data are available by visiting www.statisticsauthority.gov.uk/assessment/code-of-practice/index.html or from the Media Relations Office email: media.relations@ons.gov.uk

    These National Statistics are produced to high professional standards and released according to the arrangements approved by the UK Statistics Authority.

Nôl i'r tabl cynnwys

Manylion cyswllt ar gyfer y Bwletin ystadegol

Melanie Richard
Ffôn: +44 (0)1633 456344