Construction output in Great Britain: June 2018

Short-term measures of output by the construction industry in Great Britain and contracts awarded for new construction work in the UK.

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Cyswllt:
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Dyddiad y datganiad:
10 August 2018

Cyhoeddiad nesaf:
10 September 2018

1. Main points

  • Construction output grew by 0.9% in Quarter 2 (Apr to June) 2018, recovering from a 0.8% fall in Quarter 1 (Jan to Mar) 2018.

  • The quarter-on-quarter increase in construction output in Quarter 2 2018 was driven by a 2.7% increase in repair and maintenance work, with all new work remaining flat.

  • Following four consecutive months of contraction in the month-on-month series at the start of 2018, construction output increased by 1.4% between May and June 2018; this follows an increase of 2.9% between April and May 2018.

  • The June 2018 month-on-month growth in construction output was driven predominantly by the continued growth in infrastructure new work, which increased by 9.2%.

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2. Things you need to know about this release

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).

Summary information can be found in the Construction output Quality and Methodology Information report.

Compared with the previous Construction output in Great Britain: May 2018 publication released on 10 July 2018, this June 2018 release contains revisions for April 2018 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

  • imputations being replaced by actual data

  • revisions to seasonal adjustment factors, which are re-estimated every month and reviewed annually

  • HM Revenue and Customs (HMRC) VAT returns replacing MBS data for small- and medium-sized businesses when VAT estimates become available each quarter

This June 2018 release represents the second monthly construction output release in which the new improved methodology for imputing data for businesses that have not yet returned their Office for National Statistics (ONS) survey responses and further adjustments to address the bias in early estimates of construction output has been used. Full details of these improvements can be found in Improvements to construction statistics: Addressing the bias in early estimates of construction output, June 2018.

As a result of the new publication approach for monthly gross domestic product (GDP), data content in the estimates of construction output is impacted in the first month of each quarter in which the new first estimate of quarterly GDP is published. Therefore, data for June 2018 are now sourced from a lower number of survey replies than previously used. However, the response rate for June 2018 is higher than the previous GDP publication approach where the previous preliminary estimate had included a forecast for the last month in a calendar quarter. The impact of this change has been mitigated by ensuring main contributors have responded, as well as the inclusion of the bias adjustment to account for the lower response. To see the impact of the new GDP publication approach on the response and turnover rates at the time of data finalisation in this publication, please see Table 14 of the accompanying Output in the construction industry dataset.

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3. Construction output in June 2018

Construction output increased by 0.9% in the three months to June 2018, following three consecutive periods of decline in this series. The 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.

Following a marked fall in the rolling three-month series at the beginning of 2018, construction output continued to recover in June 2018, returning to the levels seen at the end of 2017.

Following the month-on-month growth in June 2018, construction output has reached a record monthly level, surpassing the previous high seen in December 2017. As a result of the growth in June 2018, construction output has now reached a level that is 30.2% above the lowest point in the last five years, seen in July 2013.

There was anecdotal evidence from a number of businesses suggesting that the weather in June 2018 had a positive impact on construction output. However, it is difficult to determine if this is a result of the warm weather specifically helping to boost their value of work, a bounce back effect from a poorer start to the year due to the adverse colder weather effects in February and March (as detailed in previous Construction output in Great Britain releases), or in line with usual seasonal patterns that these particular businesses tend to observe. Therefore, the impact of the weather on both the aggregate monthly series and three-month on three-month series is difficult to quantify.

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4. 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 since the beginning of 2015, new work, and repair and maintenance have followed a broadly similar pattern. Both repair and maintenance, and new work have risen steadily, resulting in all work reaching a level peak in June 2018.

Following four consecutive months of contraction in the month-on-month series at the start of 2018, construction output has bounced back. Following growth of 2.9% in May 2018, construction output increased by 1.4% in June 2018. The month-on-month rise in construction output in June 2018 stemmed from an increase in new work, which increased by 1.9%. In addition, growth was also evident in repair and maintenance work – albeit to a lesser extent than new work – increasing by 0.5% in June 2018.

Figure 3 shows the difference in the three-month on three-month volume from the different construction sectors in terms of real volume growth, taken from our seasonally adjusted chained volume measure series.

Construction output increased by £364 million in the three months to June 2018. The most notable contribution to growth came from non-housing repair and maintenance – which recovered following a weak start to the year – increasing by £262 million in the three months to June 2018. In addition, public new housing experienced its strongest three-month on three-month growth since September 2010, increasing by £149 million in the three months to June 2018. Other notable increases came from housing repair and maintenance, and infrastructure, which increased by £111 million and £133 million respectively.

As indicated in the construction output in Great Britain for the February 2018 and March 2018 publications, the adverse weather in these months potentially contributed to the three-month on three-month growth in June 2018, although it is difficult to quantify the exact impact on the industry.

In contrast, only two sectors provided downward pressure on output in the three months to June 2018. Following notable three-month on three-month growth at the start of the year, new private housing work contracted, falling by £214 million in June 2018. Public other new work also continued to fall – which is examined in more detail in Section 5 of this publication – decreasing by £205 million in the three months to June 2018.

Figure 4 shows the difference in month-on-month volume from the different sectors in terms of real volume growth, taken from our seasonally adjusted chained volume measure series. Compared with the previous month, construction output increased by £194 million in June 2018.

The most notable increase came from infrastructure new work, which grew at its fastest rate since December 2015, increasing by £153 million in June 2018. As was also the case in the three-month on three-month series shown in Figure 3, public housing also experienced notable growth, increasing by £57 million in June 2018.

Elsewhere, the only notable downward pressures on month-on-month growth came from private commercial work and public other new work, which fell by £23 million and £30 million respectively in June 2018.

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5. Sector spotlight: Public other new work continues to fall

Public other new work is comprised of publicly-funded construction work undertaken in sub-sectors such as health, offices, schools, colleges and universities. At its level peak in October 2010, public other new work contributed 12.8% of all construction work.

As can be seen in Figure 5, which shows public other new work from January 2010 to June 2018, public other new work reached a level peak in December 2010. Following this record high, the value of public other new work fell markedly throughout 2011 and 2012, before stabilising from 2013 onwards. However, since the beginning of 2017, public other new work began to fall again.

In contrast to all work – which reached a record high in June 2018 – public other new work continued its recent decline, falling by 8.4% in the three months to June 2018. This three-month on three-month fall represents the 15th consecutive fall in this series, with the most notable declines seen since the start of 2017 in the sub-sectors of health, schools and colleges, as seen in Table 5 of the accompanying Output in the construction industry dataset.

As a result of its continued fall, public other new work is now 17% lower than it was in June 2017 and now only represents 5.3% of total construction work in June 2018.

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6. Detailed growth rates

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 increased to £13,881 million in June 2018. This increase stems from a rise in both all new work, and total repair and maintenance, which grew to £9,047 million and £4,834 million respectively.

In comparison with June 2017, construction output grew by 2.2%. This month-on-year increase occurred as a result of a 3.1% increase in repair and maintenance, and a 1.8% increase in all new work. The notable increase in repair and maintenance work stemmed from a marked rise in non-housing repair and maintenance, which increased by 5.2% compared with the same period in 2017. The increase in all new work stemmed from an increase in infrastructure new work, which grew 12.4%, more than offsetting the continued falls in public other new work and private commercial new work.

Following two consecutive falls in the three-month on year series, construction output recovered in June 2018, increasing by 0.8%. The increases in private housing new work (5.5%), infrastructure new work (5.4%) and non-housing repair and maintenance (4.3%) in June 2018 more than outweighed the three-month on year falls in private commercial and public non housing new work.

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7. Revisions

This June 2018 release contains revisions from April 2018 onwards. Month-on-month growth in April 2018 has been revised down 0.1 percentage points, from flat growth to negative 0.1%, due to the receipt of new data. Meanwhile, no revision has been made to top-level construction output in May 2018, despite this period being open for revision. This release represents the second monthly construction output release in which the improved imputation methodology has been used. Whilst little or no revisions can be seen in top-level construction output estimates, some revisions can be seen at the type of work level.

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10. Quality and methodology

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 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 4 (Oct to Dec) 2017.

Further information on the use of VAT turnover and its impact can be found in the following articles:

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11. Construction statistics development

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.

In September 2017, we released the impact of improvements to construction statistics article, which explains and highlights the impact of improvements made to construction statistics, affecting the nominal data series, output price indices and seasonal adjustment. As a result of these improvements, the output price indices are no longer considered to be an interim method.

In addition to the improvements made in September 2017, we have since announced two further methodological improvements to construction output estimates, which have since been implemented. These improvements are detailed in the two articles:

The overall impact of the improvements to construction statistics that were included in Quarterly national accounts: April to June 2018 are outlined in the article released on 29 June 2018.

The Office for Statistics Regulation is currently in the process of re-assessing the National Statistic status for construction statistics: Output, New orders and Price indices.

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