Construction output in Great Britain: January 2019 and new orders October to December 2018

• Following the announcement by the UK Statistics Authority on 7 March 2019, Construction Output Price Indices, Great Britain construction output statistics and Construction new orders are now re-designated as National Statistics.

• Construction output decreased by 0.6% in the three-month on three-month all work series in January 2019; this decrease was driven by a fall of 2.3% in the all repair and maintenance series, which was offset by an increase of 0.3% in the all new work series.

• The fall in the three-month on three-month all repair and maintenance series was driven primarily by non-housing repair and maintenance, which fell by 3.2%, and private housing repair and maintenance, which fell by 2.3%.

• The all work series grew by 2.8% in January 2019 in the month-on-month series, reversing the 2.8% decline seen in December 2018.

• New orders fell by 1.9% in Quarter 4 (Oct to Dec) 2018 against the previous quarter, with all other work decreasing by 3.8%, more than offsetting the 2.3% growth in all new housing during the same period.

Following the announcement by the UK Statistics Authority on 7 March 2019, Construction Output Price Indices, Great Britain construction output statistics and Construction new orders have been re-designated as National Statistics, in accordance with the Statistics and Registration Service Act 2007 and signifying compliance with the Code of Practice for Statistics. This means the independent regulator has judged that these statistics provide the highest levels of “trustworthiness, quality and value”.

The Office for National Statistics (ONS) took responsibility for the publication of the Construction Price and Cost Indices from the Department for Business, Innovation and Skills (BIS) on 1 April 2015, following the de-designation of National Statistics status in December 2014, and since then a development programme has been ongoing.

Through extensive consultation with users through the Construction Statistics Steering Group (CSSG) and the Consultative Committee on Construction Industry Statistics (CCCIS), the Construction Output Price Indices, Construction output and New orders statistics have undergone significant development work. This has resulted in improvements to many aspects of the suite of statistics. More information on these improvements can be found in Section 11 of this release.

Commenting on the improvements achieved as part of the development programme in his letter to Jonathan Athow (Deputy National Statistician, ONS), Ed Humpherson (Director General for Regulation, UK Statistics Authority) said:

“Since de-designation in December 2014 and our assessment, we are pleased that the ONS has improved many aspects of this suite of statistics. The ONS has improved their accessibility and transparency by publishing detail on the strengths and limitations of these data and publishing all industry data in one location on its website.

“Guided by requests from stakeholders and in collaboration with industry experts, the ONS has enhanced its analysis and supporting commentary of developments in the construction industry and within the wider context of short-term economic indicators.”

The ONS will continue to work closely with our stakeholders through the CSSG and CCCIS, as we aim to deliver further improvements to how we produce statistics on the construction industry going forward.

It should be noted that the subnational and subsector breakdowns were excluded from consideration for re-designation, although they will continue to be published as a separate dataset (more information can be found in Section 7).

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 changes in price). 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 (GDP).

Further information on output is gained from VAT turnover data, which is used to replace survey data for small- and medium-sized businesses. However, due to the delay in companies making VAT returns, these data are only taken on after a lag period. Currently, VAT turnover data are only used for the period Quarter 1 (Jan to Mar) 2016 to Quarter 2 (Apr to June) 2018. VAT turnover for Quarter 3 (July to Sept) 2018 will be incorporated for the first time when the GDP quarterly national accounts, UK: October to December 2018 are published on 29 March 2019.

Furthermore, 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 the Construction output: subnational and sub-sectoral output dataset.

Summary information can be found in the Construction output quality and methodology information.

Compared with the previous Construction output in Great Britain: December 2018 publication released on 11 February 2019, this publication does not contain revisions to the back series. Additional changes within this release are further described as part of Section 7 of this publication.

We use methods to impute data for businesses that have not yet returned their Office for National Statistics (ONS) survey, along with a further adjustment to address any bias in early survey responses for construction output. Full details of these methods, and other recent improvements, can be found in Improvements to construction statistics: Addressing the bias in early estimates of construction output, June 2018 published on 4 June 2018.

All work grew by 2.8% in January 2019, reversing the sharp decline seen in December 2018. Despite this volatility in recent months, January 2019 continues the trend of steady growth broadly seen since 2017, with the January output being 1.8% higher in 2019 than the same month a year earlier.

The rolling 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.

The three-month on three-month series for all work saw a decline of 0.6% in January 2019. This is due largely to the weakness in December and October, with the growth seen in the monthly path still not being enough to recover from the declines then. January 2019 has the lowest growth recorded in the three-month on three-month series for all work since May 2018.

At type-of-work level, there were falls in non-housing, and private housing repair and maintenance, which fell by 3.2% and 2.3% respectively. The biggest factor offsetting this was public new housing, which grew by 5.0%, but due to the small size of this series this had a minimal impact on the top-level figures.

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. 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 2 shows that both repair and maintenance, and new work have seen increases in January 2019, with growths of 6.3% and 0.9% respectively in the monthly chained volume measure, seasonally adjusted series. This is the largest month-on-month increase in the repair and maintenance series since the monthly record began in January 2010 but follows a three-month period of repeated declines. Notably the large fall in the December 2018 month-on-month growth of 5.0% (the second-largest fall on record) has been offset by today’s record-high growth of 6.3%.

Despite the increase, the repair and maintenance series still sits at £32 million below the record-high level for the series in September 2018. The growth in repair and maintenance output has come mostly from non-housing repair and maintenance. This series grew by £217 million in January 2019, an increase of 9.6% in comparison with December 2018.

In the new work series, the growth of 0.9% was driven by growths in infrastructure and public other new work, which saw monthly growths of 5.9% and 9.0% respectively. As with repair and maintenance, the growth in infrastructure also follows from three months of continuous declines in the series, however, in this case these are much more minor declines, so with the strong growth seen this month, infrastructure has hit a new record-high level of £1,859 million. This growth was offset by falls of 6.0% and 5.6% in private commercial new work and public new housing respectively.

As can be seen from Figure 3, all work has fallen by £267 million in the three-month period to January 2019, in comparison with the previous three months.

This has been driven by a £338 million decline in repair and maintenance output. This was due to falls of £235 million in non-housing repair and maintenance, as well as a £123 million decline in private housing repair and maintenance. Public housing repair and maintenance was the only sector of the repair and maintenance series to show a growth, increasing by £20 million over the period.

All new work has seen comparatively more minor movements, with a growth of £71 million seen in Figure 3. This has been driven by growths in public new housing and infrastructure, which grew by £80 million and £41 million respectively. These served to counterbalance falls in private housing and private commercial new work of £77 million and £34 million respectively.

Figure 4 shows the difference in month-on-month levels from the different construction sectors, taken from our seasonally adjusted, chained volume measure series. Compared with the previous month, construction output increased by £371 million in January 2019.

In contrast with the three-month on three-month series, non-housing repair and maintenance recorded the largest month-on-month growth, with an increase of £217 million in January 2019.

Beyond non-housing repair and maintenance, public other new work and infrastructure saw increases of £75 million and £104 million respectively, representing the two largest month-on-month increases in new work. Strong growths were also seen in private housing repair and maintenance, and private housing new work, which grew by £56 million and £62 million respectively. Both series recovered somewhat from sharp month-on-month declines in December 2018, but remain below the levels seen prior to this point.

Only two series saw falls month-on-month: public new housing saw a £33 million decline against December 2018, whilst private commercial new work fell by £145 million. In the case of public housing new work, this monthly fall was due to strong December growth, which saw a 10.9% growth month-on-month. Private commercial reached its lowest level in the seasonally adjusted, chained volume measure series since March 2016, continuing the general trend seen in 2018, which only saw three periods of growth in the month-on-month series.

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

After significant falls in December 2018, most series saw month-on-month increases in January 2019. Total all work grew month-on-month by 2.8% (£371 million). When looking at longer-term trends, all work fell by 0.6% in the three-month on three-month series, as the recovery seen this month has not been enough to entirely offset the weakness of October and December at the end of 2018. This is also seen when comparing the most recent three-months on three-months a year earlier, which sees only 0.4% growth. In contrast, growth of 1.8% is seen when comparing January 2019 with January 2018.

Looking at the components of all work, repair and maintenance sees strong growth in both the month-on-month and month-on-year series (6.3% and 3.3% respectively), while new work sees a more subdued performance with a month-on-month growth of 0.9%. The month-on-year series shows a trend of steady growth across all the top-level indicators, with new work, and repair and maintenance seeing growths of 1.1% and 3.3% respectively. However, when looking at individual series, far more extreme values are apparent, with public new housing growing by 21.4% and private commercial other new work falling by 9.6% relative to January 2018.

As seen in Figure 5, the value of total construction new orders has remained broadly stable from 2013 to 2017, with the noticeable exception of the spike in Quarter 3 (July to Sept) 2017. This was caused by the awarding of several high-value contracts awarded for the construction of High Speed 2 (HS2). Following Quarter 3 2017, the series has decreased, with current levels remaining below those generally seen in the past five years.

The all new work series saw a decline in Quarter 4 (Oct to Dec) 2018 after a slight recovery in the previous quarter, falling by 1.9% relative to Quarter 3 2018. This decline was driven by all other work, which fell by 3.8%, more than offsetting the 2.3% growth in all new housing during the same period. All new housing had previously seen two consecutive quarters of decline, after reaching its highest level for over 10 years in Quarter 1 (Jan to Mar) 2018.

The fall in all new work has been driven by the decrease in public other new work, which fell by 9.4% in Quarter 4 2018. Other new work excluding infrastructure also drove down all new work as private industrial and private commercial new orders fell by 6.3% and 3.9% respectively. In contrast, the growth in all new housing was due to private new housing growing by 3.2%, offsetting public new housing, which saw a fall of 11.3% in the same period. Infrastructure new orders saw 2.4% growth quarter-on quarter (Table 2).

It should be noted that for the second consecutive quarter, a separate, large order for a wind farm dominates the new orders placed within infrastructure. This is further illustrated in the electricity series published within Table 5 of the new orders dataset, which has quarter on the previous year’s quarter growth of 113.6% (an increase of £1,210 million).

When looking at Quarter 4 2018 compared with the same period one year earlier, most types of work are significantly down. The only categories bucking this trend are public other new work and private industrial other new work, which grew by 5.7% and 29.5% respectively. The growth in private industrial new work reflects a particularly weak Quarter 4 2017 relative to the rest of the private industrial new work series. The declines seen in other categories reflect the general trend of declines seen since the peak of Quarter 3 2017.

When comparing Quarter 1 2018 to Quarter 4 2018 with the same period a year earlier, all components of the new orders series apart from private new housing and public other new work are lower in the most recent period. The decline of 15.8% in all new work was driven largely by a 46.8% decline in infrastructure (following on from HS2), as well as a decline in public new housing of 27.3%. All other work overall is down by 21.7% between the periods, with the HS2 orders again being a major factor, but the fall of 11.6% in private commercial other new work was also a significant driver of the decline.

As part of the development work to continually improve methods and ways to disseminate data, we have taken on board user feedback and moved the reference year for our constant price volume series to a 2016 equals 100 basis. This has led to revisions in the back series in the New orders dataset in Tables 1 to 3. This re-referencing forms part of our commitment to the Government Statistical Services’s (GSS’s) Better Statistics, Better Decisions (PDF, 1.39MB) strategy and allow our outputs to respond to the needs of our users.

This release sees several changes to the format of the construction output and new orders data in the publication. These are detailed in this section.

As indicated in the last few publications, the tables that were formerly Table 5 and Table 6 of the main construction output dataset are now published as a separate dataset Output in the construction industry: subnational and sub-sectoral data. Please note that these estimates do not carry National Statistics status, as outlined in the letter from the UK Statistics Authority.

In addition, improvements have been identified to the processing of the data underpinning the model in this dataset, leading to revisions in the back series. These have improved the accuracy of the weights used by our model. These new processing methods form part of our continual improvements to improve the model to produce subnational and sub-sectoral estimates.

Due to the splitting of Construction output: subnational and sub-sectoral output into its own dataset, a number of tables have had their placement in the dataset changed. Please note that this is a purely aesthetic change to numbering and does not represent a change to the underlying data. The changes are outlined in Table 3.

Table 3: Changes to structure of construction output datasets

As indicated in Construction output in Great Britain: October 2018 and new orders July to September 2018, the reference year for indexed series in the New orders dataset is now 2016 equals 100. This change brings it into line with the main output dataset, which uses 2016 equals 100. This change will impact the index numbers (Table 1) and the constant price series we publish (Tables 2 and 3), as within the previous publication these tables are presented on a 2005 equals 100 basis. This will not affect our growth rate series (Tables 8 and 9) or our current price data (Tables 4 to 6) in the New orders dataset.

Output in the construction industry follows the Eurostat Short Term Statistics (STS) regulation for production in construction. Headline volume estimates of construction output are assessed against Eurostat’s handbook on price and volume measures in National Accounts. 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 February 2019 for December 2018, showed the seasonally adjusted production in construction (PDF, 569KB) decreased by 0.4% in the Euro area (EA-19) and was down by 0.9% in the EU-28 when compared with November 2018.

It should be noted that an accurate comparison cannot be made, as Eurostat data are calculated on a 2015 equals 100 basis, while Great Britain data are calculated on a 2016 equals 100 basis.

Outside the EU, the US Census Bureau release Monthly construction spending report (PDF, 294KB) for December 2018 was published on 4 March 2019. This includes the total dollar value of construction work done in the US.

The Construction statistics: Number 19, 2018 edition was published on 22 August 2018. This publication contains analysis on the construction sector in 2017, as well as information on sources and outputs in the industry.

• Ministry of Housing, 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 (updated 16 November 2018) contains important information on:

• the strengths and limitations of the data and how it compares with related data

• uses and users of the data

• how the output was created

• the quality of the output including the accuracy of the data

Value Added Tax (VAT) turnover has been used to estimate the output of small- and medium-sized 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) 2018.

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 article

• VAT turnover data in national accounts: background and methodology

Following the announcement by the UK Statistics Authority on 7 March 2019, Construction Output Price Indices, Great Britain construction output statistics and Construction new orders have been re-designated as National Statistics in accordance with the Statistics and Registration Service Act 2007 and signifying compliance with the Code of Practice for Statistics. This means the independent regulator has judged that these statistics provide the highest levels of “trustworthiness, quality and value”.

As part of the ongoing Office for National Statistics (ONS) construction statistics development programme to regain the National Statistics status, we have worked closely with the Construction Statistics Steering Group (CSSG) and the Consultative Committee on Construction Industry Statistics (CCCIS). These groups provide a forum for the ONS to engage with main users of construction statistics on the development of ONS-published construction statistics, including other government departments, industry experts and academics, to identify areas for improvement.

We have recently published a series of methodological articles to help communicate these recent improvements. These articles are detailed in this section.

Construction development: Impact of improvements to construction statistics, published on 29 September 2017. This article details improvements to the output price indices, including the incorporation of a mark-up for profit margin, a revised methodology for the labour series, new weights and data sources, and a full review of the methodology used. For further information, please see the Construction output price indices Quality and Methodology Information report.

Improvements to construction statistics: addressing the bias in early estimates of construction output, published on 4 June 2018. This article addresses the upward bias in early construction output survey data, which was achieved by improving imputation methodology to impute data for businesses that have not yet returned their survey responses, along with a further adjustment to address additional potential bias in early estimates. For further information on the impact of these methodological changes, please see Impact of the improvements to construction statistics, published on 29 June 2018.

Construction development: improvements to regional and subsector level estimates, published on 4 June 2018. This article highlights improvements made to the model used to estimate subnational and subsector level output estimates, by improving the assumptions used using project-level data sourced from Barbour ABI. This results in subnational and subsector level data that are more reflective of what is happening within the economy.

Construction statistics development: improving the understanding of new orders in the construction industry and the gap between output and new orders, published on 30 October 2018, provides analysis to improve the understanding of the uses of and coherence between ONS construction output and new orders data. For more information, please see the New orders in construction Quality and Methodology Information report.