Construction output in Great Britain: July 2021

• Construction output fell by 1.6% in volume terms in July 2021, with the level of output now below its pre-coronavirus (COVID-19) pandemic February 2020 level; new work, and repair and maintenance both contributed to the monthly decline in July 2021, with anecdotal evidence from businesses suggesting that price increases and product shortages caused by supply chain issues were the main reasons for the decline.

• The level of construction output in July 2021 was 1.8% (£257 million) below the February 2020 pre-pandemic level; while new work was 3.2% (£285 million) below the February 2020 level, repair and maintenance work was 0.6% (£27 million) above the February 2020 level.

• The recovery to date is mixed at a sector level, with infrastructure the best performing sector over the pandemic at 35.7% (£649 million) above its February 2020 level and private commercial the worst performing sector over the pandemic at 20.3% (£481 million) below their respective February 2020 levels in July 2021.

• Monthly construction output fell by 1.6% in volume terms in July 2021 because of declines in both new work (1.1%) and repair and maintenance (2.4%).

• The decline in monthly output in volume terms in July 2021 came mainly from private housing, which saw falls in both new work, and repair and maintenance of 7.5% and 6.2% respectively; this was driven by the impact of price increases likely caused by product shortages in the sector.

• Alongside the monthly fall, construction output fell by 0.6% in volume terms in the three months to July 2021, the first three-monthly fall since February 2021, driven by a fall in repair and maintenance of 2.9%.

• The decline in repair and maintenance (2.9%) in the three months to July 2021 was mainly because of a fall in private housing repair and maintenance, of 8.3%.

• New work saw an increase of 0.7% in the three months to July 2021; the largest contributors to this growth were infrastructure and to a lesser extent private industrial, which grew by 17.5% and 8.2% respectively.

Monthly construction output fell by 1.6% in July 2021 compared with June 2021, falling to £13,660 million, and follows the 1.3% monthly decline in June 2021. This is the fourth consecutive decline in monthly construction output.

In July 2021, anecdotal evidence received from survey returns to the Monthly Business Survey for Construction and Allied Trades suggested that the rising prices of raw materials such as steel, concrete, timber and glass was a contributing factor to the monthly fall in volume terms. Anecdotal evidence also suggested supply chain issues were a factor, with many contributors stating that while order books were healthy, the availability of certain construction products was impacting on projects currently under way.

With the 1.6% monthly fall in July 2021 in volume terms, the level of construction output is now 1.8% (£257 million) below its February 2020 pre-coronavirus (COVID-19) pandemic level (Table 1).

While repair and maintenance is 0.6% (£27 million) above the February 2020 level, new work has still yet to recover and is 3.2% (£285 million) below the pre-pandemic level.

The 1.6% fall in construction output in July 2021 represents a fall of £218 million in monetary terms compared with June 2021.

Private housing (both new work, and repair and maintenance) were the largest contributors to the monthly decline in July 2021, falling by 7.5% (£217 million) and 6.2% (£110 million) respectively.

The decrease in private housing output in volume terms is mainly coming from upward pressure on prices within the industry. This is backed up by the anecdotal evidence collected from businesses on the Monthly Business Survey for Construction and Allied Trades explaining that price increases are being caused by delays in the availability of certain construction products (most notably steel, concrete, timber and glass), because of supply chain shortages. However, it should be noted demand is still strong as shown by the recent new orders in the construction industry data, which saw quarterly total housing new orders increase by 2.9% in Quarter 2 (April to June) 2021.

These strong price increases in recent months are further illustrated in the implied deflator (Figure 6), which is the best indicator of price changes in the industry until the next construction output price indices release on 11 November 2021. The annual rate of growth for the total housing implied deflator is 5.7% in July 2021 and since monthly records began in January 2010, this has only been stronger in January 2014 (5.9%).

Figure 7 also shows how construction prices for goods, services and materials bought by the whole sector compare with normal expectations for this time of year from the Business Insights and Conditions Survey (BICS).

In the latest data, 50% of businesses are reporting price increases by more than normal expectations, which have grown steadily over recent months from 32% in early May 2021.

Looking specifically at the materials component, the latest Building Materials release from the Department for Business, Energy and Industrial Strategy (BEIS) released on 1 September further shows the monthly increase in building materials in July 2021. Building materials for all work in July 2021 increased by 4.5% compared with June 2021 and 20.1% compared with July 2020.

Infrastructure new work, private industrial new work and public housing repair and maintenance were the only three sectors that saw monthly growth in July 2021, of 3.7% (£87 million), 19.7% (£71 million) and 2.2% (£13 million) respectively.

While infrastructure new work continued to perform strongly over the pandemic period, private industrial new work, while a relatively small sector, also contributed significantly to the monthly growth in July 2021. Anecdotal evidence suggested projects relating to warehouses and distribution centres were the main reasons for this increase.

Construction output fell by 0.6% (£261 million) in volume terms in the three months to July 2021, the first three-monthly fall since February 2021. The decrease in three-month on three-month growth in July 2021 is partly a by-product of the weak January 2021 no longer being included in the base period.

New work grew by 0.7% (£196 million) in the three months to July 2021, the largest contributor to which was infrastructure new work, which grew by 17.5% (£1,053 million). Anecdotal evidence from businesses suggested the pipeline of infrastructure work (both private and public sector), which was healthy before the pandemic, has continued to perform strongly in recent months, illustrated by the latest new orders in the construction industry dataset where infrastructure new orders increased by 24.1% in Quarter 2 (Apr to Jun) 2021.

Repair and maintenance fell by 2.9% (£458 million) in the three months to July 2021. This decrease was mainly because of a fall in private housing repair and maintenance, which fell by 8.3% (£480 million).

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 2020) 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.

Quality and methodology

More quality and methodology information is available in:

• Construction output QMI
• Construction output price indices QMI

Sub-national and sub-sector output

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.

As a result of improvements implemented in our March 2021 dataset, an article addressing these developments including the impact of the changes has been published on 20 July 2021.

Revisions to construction output

In this release no revisions have been made to construction output data prior to July 2021.

Please note, in the next monthly release (Construction output in Great Britain: August 2021) due to be released on 13 October 2021, revisions will be seen to the series back to January 2011 as a consistent dataset with the GDP Quarterly national accounts: April to June 2021, due to be released on 30 September 2021, will be published.

Blue Book 2021

In Blue Book 2021 a new framework will be introduced to improve how we produce volume estimates of GDP for balanced years as part of the supply use process. This framework includes the implementation of double-deflated industry-level gross value added for the first time. This improvement will be reflected in the September quarterly national accounts and October monthly GDP estimates.

Articles published on 28 June 2021 and 8 September 2021 provide further indicative indicative impacts of this change to industry level gross value added volume. Estimates for the construction industry from this new approach will differ to those published in this Construction output release as they account for both the outputs produced and inputs consumed by the industry. There are also some coverage differences given the use of the Annual Business Survey in their compilation.

Construction statistics annual

The 2020 edition of the construction statistics annual, which will have data for the 2019 reference year, will be released on 19 October 2021.

Data quality

These estimates are widely used by private and public sector institutions to assist in informed decision-making and policymaking.

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

Comparability

While monthly data are available for 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.