Construction output in Great Britain: July 2017 and new orders April to June 2017

• Construction output contracted by 1.2% in the 3 month on 3 month series in July 2017 but remains at relatively high levels.
• The 3 month on 3 month decline in output was due to decreases in both repair and maintenance, which fell 1.8% and all new work, which fell by 1.0%.
• Construction output also fell month-on-month, falling by 0.9% in July 2017, predominantly driven by a 1.4% fall in all new work.
• Both the month-on-month and 3 month on 3 month series fell for the fourth consecutive month in July 2017.
• New orders fell 7.8% in Quarter 2 (Apr to June) 2017 compared with the previous quarter, dropping to its lowest level since Quarter 1 (Jan to Mar) 2014.
• The decrease in new orders in Quarter 2 2017 has stemmed from falls in both all new housing, which fell 4.9% and all other work, which fell by 9.0%.

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.

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 forthcoming Quarterly National Accounts publication for April to June 2017, to be released on 29 September, will include improvements to Construction statistics, which affect the entire monthly time series, back to January 2010. This will incorporate a seasonal adjustment review, nominal data revisions and improvements to the Construction Price Indices. An article will be released, also on 29 September, detailing these improvements and the subsequent revisions to Construction data.

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

New orders in construction measures the value of new orders of main contractors by type of work and region within Great Britain. Since April 2013, data has been supplied directly from Barbour ABI with a sample size of all local authorities in England, Scotland and Wales plus 10,000 contractors per annum. It should be noted 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.

Summary information can be found in the New Orders Quality and Methodology information.

Construction output fell 1.2% during the 3 month on 3 month period to July 2017. The monthly time series shows how volatile construction output can be. Therefore the rolling 3 month time series is also shown in Figure 1, providing a more comprehensive picture of the underlying trends within the construction industry.

Both the month-on-month and 3 month on 3 month time series fell for the fourth consecutive month in July 2017. However, Figure 1 shows that despite these recent consecutive declines, construction output still remains at a relatively high level. Construction output peaked in January 2017, reaching a level that was 24.9% higher than the lowest point of the last 5 years, January 2013. Despite falling in July 2017, construction output remains 21.0% above this level.

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 through to mid-2014, all new work, and repair and maintenance followed a similar pattern but since reaching a level peak in August 2014, repair and maintenance has contracted slowly. Over the same period, all new work has continued to increase steadily, largely down to a rise in new housing work.

All new work fell 1.4% month-on-month in July 2017, following growth of 0.3% in June 2017. In contrast, repair and maintenance increased month-on-month by 0.1% in July 2017 following four consecutive month-on-month declines. 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 month-on-month volume from the different sectors in terms of real value growth, taken from our seasonally adjusted chained volume measure series.

All work showed a net fall of £105 million in July 2017 compared with June 2017. As seen in Figure 3, the decline was broadly driven by falls in private housing and infrastructure. Following strong growth in June 2017, private housing fell by £95 million, representing the main downward pressure on construction output. Infrastructure continued to fall, dropping for the third consecutive month, by £38 million.

In contrast, public housing provided the most notable positive month-on-month contribution to all work in July 2017, increasing by £18 million compared with June 2017. Elsewhere, both private commercial work and non-housing repair and maintenance recovered from falls in June 2017, with private commercial work growing by £7 million and non-housing repair and maintenance expanding by £6 million.

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 decreased to £11,402 million in July 2017. This fall stems from a decrease in all new work which fell to £7,411 million, while total repair and maintenance increased slightly to £3,961 million.

Construction output fell 1.2% on a 3 month on 3 month basis in July 2017. The most notable downward pressure on the 3 month on 3 month growth came from public other new work, which fell 6.6% in July 2017. In addition, private commercial dropped 2.8%, alongside non-housing repair and maintenance, which decreased by 3.1%. In contrast, despite falling month-on-month in July 2017, housing continued to grow in the 3 month on 3 month series, with both public and private housing increasing 4.1% and 1.2% respectively.

Compared with July 2016, construction output fell 0.4%, representing only the second month of negative growth in this series since March 2016. As in the 3 month rolling time series, housing growth was strong, with public housing up 13.6% and private housing up 3.4%. However, the month-on-year contraction in output has stemmed from falls in public other new work, and non-housing repair and maintenance, which fell 11.1% and 4.2% respectively.

As seen in Figure 4, new orders can be split into two types of work, all new housing and all other work.

As seen in Figure 4, all new housing has been relatively flat since 2013 and is showing a recovery from the downturn in 2009. On the other hand, all other work suffered a much greater slowdown in Quarter 1 (Jan to Mar) 2009 and had a further period of decline following a 2-quarter upturn. Since Quarter 2 (Apr to June) 2014, all other work has remained broadly flat.

All new work has fallen markedly in Quarter 2 2017, dropping to its lowest level since Quarter 1 2014; at £11,781 million. The decrease has been driven by a decrease in both all new housing and all other work. All new housing fell for the fourth consecutive quarter in Quarter 2 2017, falling to £3,631 million. All other work showed a sharper decrease, coming after small growth in the previous quarter, falling to its lowest level since Quarter 4 (Oct to Dec) 2013; at £8,150.

Table 2 provides a detailed description of the growth rates of each work type, alongside the seasonally adjusted volume level of new orders.

New orders fell 7.8% quarter-on-quarter in Quarter 2 2017, to a value of £11,781 million. This represents both the biggest percentage fall and lowest value since Quarter 1 2014.

The most notable downward pressures on quarter-on-quarter growth came from private commercial work, which fell 15.6% and all new housing, which fell 4.9%. In addition, infrastructure fell for the third consecutive quarter, decreasing 16.2%. Elsewhere, only public other new work and private industrial new work exhibited positive quarterly growth, which increased 11.6% and 8.2% respectively.

New orders also fell quarter-on-year, decreasing by 12.6% compared with Quarter 2 2016. All sectors, bar private industrial, fell in comparison with the same period in the previous year. However, it must be noted that Quarter 2 2016 was a record high for new orders. More worthwhile comparisons can be drawn from the most recent 4 quarters on a year earlier series, where all new work is down 1.0%, driven by a 4.2% fall in all other work.

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 published by Eurostat on 18 August 2017 for June 2017, showed the seasonally adjusted production in the construction sector decreased by 0.5% in the Euro area (EA19) and decreased by 0.2% in the EU28 when compared with May 2017. It should be noted that an accurate comparison cannot be made, as Eurostat data are calculated on a 2010 equals 100 basis, while Great Britain data are calculated on a 2013 equals 100 basis.

Outside the EU, the US Census Bureau release Value of construction put in place was published on 1 September 2017. This includes the total dollar value of construction work done in the US.

VAT turnover implementation into National Accounts: June Update was published on 1 June 2017. This update explains that the first use of VAT in the national accounts will be in the Quarterly National Accounts (July to September) 2017 and the Index of Services: October 2017 bulletins, which are both due for publication on 22 December 2017.

The annual construction statistics: number 18, 2017 edition is set to be published on 2 October 2017, which contains a wide range of statistics that are currently available on the construction industry, alongside detailed economic analysis of the industry.

Other useful links

• Department for 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 document 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

The New Orders Quality and Methodology Information document provides similar information for the new orders data.