Construction output in Great Britain: June 2017

• Construction output fell 3 month on 3 month by 1.3%, after growth of 1.1% in the first 3 months of 2017.
• This 3 month on 3 month contraction in output has been driven by falls in both all new work, and repair and maintenance, which fell 1.3% and 1.4% respectively.
• Month-on-month construction output also fell in June 2017, contracting for the third consecutive month, decreasing by 0.1% compared with the previous month; however, construction output still grew 0.9% compared with June 2016.
• The month-on-month decline of 0.1% in June 2017 was driven by a 1.1% fall in all repair and maintenance; however, this was offset by a 5.1% increase in private housing, which reached its highest level on record.
• The estimate for construction growth in Quarter 2 (April to June) 2017 has been revised from negative 0.9% in the preliminary estimate of gross domestic product (GDP) to negative 1.3%, which has no impact on quarterly GDP growth to 1 decimal place.

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.

This June 2017 release contains revisions for April 2017 onwards. This means that we have incorporated additional data since this period.

Revisions can be made for a variety of reasons, the most common include:

• late responses to surveys and administrative sources, or changes to original returns
• forecasts being replaced by actual data
• revisions to seasonal adjustment factors, which are re-estimated every month and reviewed annually

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. We are currently working to improve the deflation of construction statistics.

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

Construction output fell both month-on-month and 3 month on 3 month, by 0.1% and 1.3% respectively. 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.

The monthly construction series has now decreased for the third consecutive month. However, Figure 1 shows that output remains at a historically high level. In addition, the month-on-month growth rate for May 2017 has been revised upwards by 0.8 percentage points, from negative 1.2% to negative 0.4%, from the previous construction output publication due to the receipt of new data.

In the preliminary gross domestic product (GDP) estimate for April to June 2017, the Quarter 2 (April to June) growth rate for construction output was estimated to be negative 0.9%. This has been revised down by 0.4 percentage points, to negative 1.3%.

Construction output can be broken down by different types of work; these are categorised into new work, and repair and maintenance as shown in Figure 2.

Figure 2 shows that through to mid-2014, 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, new work has continued to increase steadily, largely down to a rise in new housing work.

All new work grew 0.3% in June 2017, recovering from a 0.4% fall in the previous month. In contrast, repair and maintenance fell for the fourth consecutive month in June 2017, declining by 1.1% compared with May 2017. 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.

When compared with May 2017, all work endured a net fall of £16 million in June 2017. This decline was driven broadly by falls in all but two of the construction sectors. Repair and maintenance provided one of the most notable downward pressures on construction output, with both housing and non-housing repair and maintenance falling in June 2017. Elsewhere, private commercial work also contracted by £41 million in comparison with May 2017. Other notable downward pressures on construction output came from public housing and public other new work, which decreased by £30 million and £29 million respectively.

In contrast, both private housing and private industrial work experienced month-on-month growth in June 2017. The majority of the declines in the other construction sectors were offset by the large rise in private housing, which grew at its fastest rate since December 2015; resulting in a real value increase of £118 million. The relatively smaller private industrial sector grew by 7.3%, resulting in an increase of £19 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.

Table 1 shows both the growth rate for each work type in terms of 3 month on 3 month, month-on-year and month-on-month, as well as the volume of work broken down by sector.

Total all work decreased to a value of £11,507 million in June 2017. Despite this fall, new housing has remained strong, reaching its highest level on record in June 2017. The increase in new housing was driven by a rise in private housing, to £2,432 million. Elsewhere, private commercial work did decrease, but remains at a relatively high level at £2,215 million.

Construction output dropped 1.3% on a 3 month on 3 month basis in June 2017, the biggest fall since September 2012. In June, the 3 month on 3 month series is equal to Quarter 2 (April to June) 2017. The decrease in June 2017 was driven by decreases in both all new work, and repair and maintenance, which fell 1.3% and 1.4% respectively.

Despite enduring both month-on-month and 3 month on 3 month falls, construction output remains at a high level, with 0.9% month-on-year growth. This 0.9% increase has been driven by a 2.5% increase in new work, which stems from a 9.4% month-on-year increase in new private housing. Despite the rise in new work, repair and maintenance has declined when compared with the same period a year ago, falling by 2.1%.

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 19 July 2017 for May 2017, showed the seasonally adjusted production in the construction sector decreased by 0.7% in the Euro area (EA19) and decreased by 1.1% in the EU28 when compared with April 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 August 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 Sept) 2017 and the Index of Services: Oct 2017 bulletins, which are both due for publication on 22 December 2017.

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