Construction output in Great Britain: June 2019

• Construction output decreased by 1.3% in Quarter 2 (Apr to June) 2019 largely reversing the increase of 1.4% in Quarter 1 (Jan to Mar) 2019.

• The decrease was driven by a fall of 2.6% in repair and maintenance in Quarter 2 2019, which was due largely to the 6.0% decline in private housing repair and maintenance, with a smaller contribution from the 0.9% fall in non-housing repair and maintenance.

• In new work, the decrease of 0.5% in Quarter 2 2019 was driven by declines in public other new work and private new housing, with public other new work seeing its largest quarter-on-quarter decline since quarterly records began, with a fall of 10.9%.

• Construction output decreased by 0.7% in the month-on-month all work series in June 2019; this was due to a 2.0% decline in repair and maintenance along with flat growth (0.0%) in new work.

Please take the time to complete our survey on the new gross domestic product (GDP) publication model, which was introduced in July 2018.

Great Britain construction output statistics and construction new orders are designated as National Statistics, in accordance with the Statistics and Registration Service Act 2007 and signifying compliance with the Code of Practice for Statistics.

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 subcontractors.

The survey’s results are used to produce non-seasonally and 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 are 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 used for the period Quarter 1 (Jan to Mar) 2016 to Quarter 3 (July to Sept) 2018.

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 Construction output: subnational and sub-sector.

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

Compared with the previous Construction output in Great Britain: May 2019 publication released on 10 July 2019, April and May 2019 are open to revisions in today’s publication in line with the National Accounts Revisions Policy.

Blue Book 2019

Each year we produce an annual update to the UK National Accounts in the Blue Book and Pink Book and the associated releases. As already announced, the Blue Book and Pink Book 2019 consistent datasets will be published on 30 September 2019.

Details have already been provided on the scope in the article Latest developments and changes to be implemented in Blue Book and Pink Book 2019. Indicative impacts on headline gross domestic product (GDP) components for the years 1997 to 2016 were published on 27 June 2019 in the article Blue Book 2019 indicative impacts on GDP current price and chained volume measure estimates: 1997 to 2016.

This year, due to the very demanding set of changes being put through in the annual update, we are exceptionally not going to fully reconcile 2017 annual data, instead producing an indicative balance to allow further time for final quality assurance of the data.

Consequently, the reference year and last base year for all chained volume measure series will remain as 2016.

Construction output decreased by 1.3% in Quarter 2 (Apr to June) 2019, compared with the previous quarter, largely reversing the increase of 1.4% in Quarter 1 (Jan to Mar) 2019.

The fall in Quarter 2 2019 is reflective of the downward trend seen since the highs of January and February 2019. The fall seen this quarter brings the level of the quarterly series back to just slightly above that seen at the end of 2018.

In the monthly series construction output decreased by 0.7% in June 2019. This is the third monthly fall for the series in 2019 and continues the mixed profile of growth since the start of the year.

Figure 1 shows the monthly and quarterly indexed chained volume measure, seasonally adjusted series. The quarterly series provides a smoother and more comprehensive view of trends within the construction industry than the more volatile monthly series.

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.

There was a month-on-month decline in repair and maintenance in June 2019, while new work saw flat growth. For repair and maintenance, which decreased by 2.0%, there were declines in all types of work with the largest contribution coming from private housing repair and maintenance, which fell by 3.8%. This was accompanied by declines in both public housing, and non-housing repair and maintenance, which declined 3.4% and 0.4% respectively.

In new work, the flat (0.0%) growth rate was due to increases in private commercial new work and public new housing of 1.9% and 7.1% respectively, being counterbalanced by declines in private industrial new work and private new housing of 11.2% and 1.2% respectively. It is worth noting that the decline seen in the most recent month for private industrial new work follows growth of 12.3% in May 2019 and brings the series back to just below the levels seen in April 2019. Beyond these, public other new work saw an increase of 1.1%, whilst infrastructure fell by 0.6%.

Figure 3 shows the difference in the levels from the different construction sectors for Quarter 2 (Apr to June) 2019 compared with Quarter 1 (Jan to Mar) 2019, taken from our seasonally adjusted, chained volume measure series. Construction output decreased by £521 million in Quarter 2 2019 compared with Quarter 1 2019.

New work fell by £143 million, with falls of £274 million and £177 million in public other new work and private new housing respectively being the main contributors to the decline. Indeed, the decline seen in public other new work (10.9%) is the largest quarter-on-quarter growth decline seen since quarterly records began in 1997. These came alongside smaller falls in infrastructure and private industrial new work of £37 million and £21 million respectively.

These were offset slightly by increases in public new housing and private commercial new work of £224 million and £143 million respectively, with public new housing seeing its strongest quarter-on-quarter growth rate since Quarter 1 2010.

Alongside the declines in new work, there were substantial falls in repair and maintenance output in Quarter 2 2019, with private housing repair and maintenance falling by £325 million. This represents the largest quarter-on-quarter decline seen in absolute terms since Quarter 4 (Oct to Dec) 2009. Non-housing repair and maintenance also declined in the quarter-on-quarter series, falling by £64 million. The only series that saw an increase in the repair and maintenance series in the quarter-on-quarter series was public housing repair and maintenance, which grew by £11 million.

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 fell by £98 million in June 2019.

In new work, there was an overall decline of only £1 million in June 2019 compared with May 2019. Because of rounding, this resulted in flat growth (0.0%) in new work in the month-on-month series. Declines in private industrial new work and private new housing of £49 million and £37 million respectively have been almost exactly offset by increases of £44 million and £43 million in public new housing and private commercial other new work respectively.

Repair and maintenance saw a fall of £95 million in June 2019. This month-on-month fall was reflected in all types of work for repair and maintenance: private housing repair and maintenance saw the greatest decline, falling £67 million, while public housing, and non-housing repair and maintenance saw decreases of £20 million and £9 million respectively.  

Total all work fell to £13,632 million in June 2019 compared with May 2019, declining by 0.7% (£98 million). This was driven by a 2.0% fall in repair and maintenance, with new work seeing flat (0.0%) growth.

Looking at repair and maintenance, we see declines across all types of work, led by a 3.8% (£67 million) fall in private housing repair and maintenance. When looking in detail at new work, the largest positive contributions to the month-on-month change in June 2019 came from public new housing and private commercial new work, which grew by 7.1% (£44 million) and 1.9% (£43 million) respectively. Along with other smaller growths seen in new work, this was enough to balance the declines seen in private industrial, which fell by 11.2% (£49 million) and private new housing, which decreased by 1.2% (£37 million).

When looking at the month-on-year total all work series in June 2019, there has been a decrease of 0.2%. This was driven by declines in private housing repair and maintenance of 9.0% with smaller contributions to the fall from private commercial new work and public other new work, which saw decreases of 3.4% and 6.1% respectively. Offsetting the declines were notable growths in public new housing and infrastructure, which grew by 30.9% and 9.4% respectively in the month-on-year series.

In the three-month on three-month total all work series in June 2019, output fell by 1.3% compared with the previous three months. This was driven by declines in both new work, and repair and maintenance, with the most substantial falls being seen in private housing repair and maintenance, and public other new work, which decreased by 6.0% and 10.9% respectively. This was the largest three-month on three-month decline since October 2012 for private housing repair and maintenance, while the fall in public other new work was the largest since monthly records began in January 2010.

These were not the only records set this month, as when we look at three-month on three-month growth we see an increase in public new housing of 13.2% in June 2019. This was the largest growth in the three-month on three-month series since the monthly records began. The other notable positive contribution to the three-month on three-month growth was seen in private commercial new work, which increased by 2.1%.

In the three-month on three-month a year earlier total all work series in June 2019, the growth of 1.4% was driven by new work, which grew by 2.9%, whilst repair and maintenance declined by 1.4% in the same period. The strongest drivers of growth were infrastructure and public new housing, which saw increases of 11.7% and 29.0% respectively. Both public and private housing repair and maintenance fell in the three-month on three-months a year earlier period, with private housing driving the decline decreasing by 5.9%.

Looking further back in the three-month on three-month a year earlier series, we see that the growths and declines seen since the start of 2018 are more moderate compared with the stronger growths and declines seen in the back series. Since January 2018, the three-month on three-month a year earlier, all work growth has been within a range of positive 3.5% to negative 1.0%. This compares with a maximum growth of positive 9.7% in May 2014 and a largest decline in growth of 9.6% seen in August 2012 when we look at the series as a whole. More detail along with the breakdown of contributions to three-month on three-month a year earlier growth at sector level can be observed in Figure 5.

A reason for the subdued three-month on three-month a year earlier growth rates in the latest 18 months becomes apparent upon breaking down the trends by type of work and the more mixed profile of recent growth.

Continued weakened performance in other new work (excluding infrastructure), which has experienced 19 consecutive monthly falls, has come alongside subdued growth in the total repair and maintenance sector compared with previous periods before January 2018. This is in combination with the growths in new housing that are smaller than those seen throughout periods such as 2014 and 2016. When taken in combination, these lead to the top-level all work growth being sedated due to this split.

In contrast, the one sector to experience stronger growth in the three-month on three-month a year earlier series in the most recent periods is infrastructure. This is shown with infrastructure growth in May 2018 in the three-month on three-month a year earlier series recording its highest growth since December 2015.

This June 2019 release contains revisions for April and May 2019 in line with National Accounts Revisions Policy. As can be seen in Table 2 the revisions to the all work, chained volume measure, seasonally adjusted data are minimal for both months.

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

• late responses to surveys replacing imputations, or revisions to original returns

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

• HM Revenue and Customs (HMRC) Value Added Tax (VAT) returns replacing Monthly Business Survey (MBS) data for small- and medium-sized businesses when VAT estimates become available each quarter (although for this release, no additional VAT data are available compared with the previous publication)

• revisions to the input series for the construction output price indices

For further information on the revisions profile please see the output in the construction industry revisions triangles published on a one-month and three-month growth basis.

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 17 July 2019 for May 2019, showed the seasonally adjusted production in construction (PDF, 564KB) fell by 0.8% in both the Euro area (EA-19) and the EU-28 when compared with April 2019.

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 (PDF, 289KB) for June 2019 was published on 1 August 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.

Construction output data used within this release is also used in the compilation of the GDP monthly estimate. Whilst monthly data are available in the output in the construction industry back to January 2010 it should be also noted that a longer time series can be obtained in the monthly gross domestic product datasets. Within this publication a monthly, all work chained volume measure, seasonally adjusted series can be obtained back to January 1997 in index form to four decimal places. This can be found in the following datasets; Monthly GDP and main sectors to four decimal places and Monthly gross domestic product: time series. Monthly data from the construction survey are only available from January 2010, therefore the data prior to this period are derived using statistical methods from the available quarterly data and should therefore be treated with some caution.

• 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 9 August 2019) 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 3 (July to Sept) 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

• Quality assurance of administrative data (QAAD) report for Value Added Tax turnover data

As part of the ongoing Office for National Statistics (ONS) Construction Statistics Development Programme, we have worked closely with the Construction Statistics Steering Group. This group provides 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. These improvements have led to the re-designation of Construction output, Construction Output Price Indices and New orders as National Statistics. A letter concerning the re-designation is available. Please note: this National Statistics re-designation did not include the Output in the construction industry: subnational and sub-sector dataset.

We have also published a series of methodological articles to help communicate recent improvements:

• Construction output quality and methodology information (published 9 August 2019)

• New orders in construction quality and methodology information (published 9 August 2019)

• Conceptual and methodological differences between private housing construction output and gross fixed capital formation private sector dwellings (published 31 May 2019)

• Construction statistics development: improving the understanding of new orders in the construction industry and the gap between output and new orders (published 30 October 2018)

• Impact of improvements to construction statistics: June 2018 – implemented as part of Blue Book 2018 (published 29 June 2018)

• Improvements to construction statistics: Addressing the bias in early estimates of construction output, June 2018 (published 4 June 2018)

• Construction development: improvements to regional and sub-sector level estimates, June 2018 (published 4 June 2018)

• Construction development: Impact of improvements to construction statistics: September 2017 (published 29 September 2017)