Construction output in Great Britain: June 2020, new orders and Construction Output Price Indices, April to June 2020

Short-term measures of output by the construction industry, contracts awarded for new construction work in Great Britain and a summary of the Construction Output Price Indices (OPIs) in the UK for Quarter 2 (April to June) 2020.

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Cyswllt:
Email John Allcoat

Dyddiad y datganiad:
12 August 2020

Cyhoeddiad nesaf:
11 September 2020

1. Main points

  • Monthly construction output grew by a record 23.5% in June 2020, substantially higher than the previous record monthly growth of 7.6% in May 2020; despite this strong monthly growth, construction output in June 2020 remains comparatively low at 24.8% below the February 2020 level, which was before the full impact of the coronavirus (COVID-19) pandemic.

  • Quarterly construction output fell by a record 35.0% in Quarter 2 (Apr to June) 2020 compared with Quarter 1 (Jan to Mar) 2020; this was driven by record falls of 35.2% in new work and 34.7% in repair and maintenance.

  • The decrease in new work (35.2%) in Quarter 2 2020 was because of record quarterly falls in almost every new work sector; the largest contributor was private new housing, which fell by 51.2% in Quarter 2 2020 compared with Quarter 1 2020.

  • The decrease in repair and maintenance (34.7%) in Quarter 2 2020 was because of record falls in all repair and maintenance sectors; the largest contributor was private housing repair and maintenance, which fell by 46.5% in Quarter 2 2020 compared with Quarter 1 2020.

  • New orders decreased by a record 51.1% in Quarter 2 2020 compared with Quarter 1 2020; this decrease was because of record falls in both all other work and new housing, which declined by 51.9% and 49.0% respectively.

  • The value of New orders in Quarter 2 2020 was £6,173 million; this is the lowest level of new orders since records began in Quarter 1 1964.

  • Today’s release sees the publication of Construction Output Price Indices data as part of the quarterly Construction output in Great Britain bulletin for the first time; the annual rate of construction output price growth was flat (0.0%) in June 2020, which was the lowest rate of growth since records began in 2015.

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2. Construction output in June 2020

Monthly construction output increased by 23.5% in June 2020 compared with May 2020, rising to £10,140 million, though output remains at a substantially lower level compared with the all work construction output series prior to March 2020. This is shown by total construction output in June 2020 being 24.8% (£3,343 million) lower in June 2020 compared with February 2020, which was before the full impact of the coronavirus (COVID-19) pandemic. Apart from April and May 2020, the level of all work construction output was last lower in January 2013.

Construction output fell by a record 35.0% in Quarter 2 (Apr to June) 2020 compared with Quarter 1 (Jan to Mar) 2020. This record decline in quarterly growth follows declines in Quarter 4 (Oct to Dec) 2019 and Quarter 1 2020, of 1.0% and 1.7% respectively. As shown in Figure 1 and Table 1 the fall in Quarter 2 2020 is by far the largest decline in quarterly growth since quarterly records began in Quarter 1 1997 and nearly five times larger than the previous record quarterly fall in Quarter 3 2009.

The profile of construction output growth within Quarter 2 2020 is also noteworthy. April 2020 saw a record decline in monthly growth, falling by 40.2%, as large parts of the industry closed because of the coronavirus. May 2020 saw a then record monthly growth of 7.6%, as there was widespread growth across most sectors as they rebounded from a substantially lower level of output in April 2020. In June 2020, there was monthly growth across all sectors, with only infrastructure, public other new work and private industrial growth not being record monthly growths.

Figure 2 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, compared with the more volatile monthly series.

Table 2 shows the change in output for the types of construction work between February 2020 and June 2020, showing that all types of work have seen a significant fall in the level of output since the start of 2020. All types of work have yet to recover to their February 2020 pre-pandemic level.

Impact of the coronavirus in June 2020

We have worked closely with respondents to the Monthly Business Survey (MBS) for construction and allied trades and have used additional data sources to inform the estimates in this publication. We have also used qualitative information sourced from construction industry respondents to the Business Impact of Coronavirus Survey (BICS) to quality assure responses we received for June 2020.

Anecdotal evidence from responders to both BICS and the MBS suggests a continued increase in activity in the construction sector, though not equally across all construction sectors and all UK regions. Social distancing measures meant where businesses were working on premises and sites, the capacity and level of output were not at the same levels of work experienced prior to the coronavirus pandemic.

For further information, we have released a public statement on COVID-19 and the production of statistics.

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3. Detailed growth rates

Table 3 illustrates the weakness in the industry since the coronavirus (COVID-19) pandemic, with every type of work, apart from infrastructure, seeing a record decrease in the three months to June 2020. In comparison, most types of work saw record growth in the month-on-month series in June 2020.

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 3. All new work accounts for approximately two-thirds of all work, while repair and maintenance accounts for approximately one-third of all work.

There was growth in both new work, and repair and maintenance in June 2020. New work saw a comparatively stronger rebound in May 2020 than repair and maintenance, with both seeing a large increase in the level of output in June 2020. However, both remain at a low level when compared with periods prior to March 2020, which was before the full impact of the coronavirus.

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4. Quarter-on-quarter construction output growth in Quarter 2 2020

Construction output fell by a record 35.0% (£13,990 million) in Quarter 2 (Apr to June) 2020 compared with Quarter 1 (Jan to Mar) 2020 following decreases in all sectors, as shown in Figure 4.

There were record declines in quarterly growth in every construction sector in Quarter 2 2020 since quarterly records began in 1997. The largest single contributor to the decline in all work output in Quarter 2 2020 was private new housing, which fell 51.2% (£4,420 million).

New work fell by a record 35.2% (£9,333 million) in Quarter 2 2020, driven by record falls in every new work sector. The largest contributors to the decline in new work output in Quarter 2 2020 were private new housing and private commercial new work, which fell 51.2% (£4,420 million) and 33.4% (£2,310 million) respectively.

Repair and maintenance saw a quarterly record fall of 34.7% (£4,656 million) in Quarter 2 2020, driven by record falls in every repair and maintenance sector. The largest contributor to the fall in repair and maintenance was private housing repair and maintenance, which decreased 46.5% (£2,209 million). Repair and maintenance has continued to perform poorly in recent months having not seen growth in the three-month on three-month series for 13 consecutive months (since May 2019).

Figure 5 shows the significant contribution from total housing to the decline in growth of all work, compared with all other construction sectors combined, in Quarter 2 2020. From the anecdotal evidence received from survey respondents, housebuilders began to return to construction sites in parts of the UK in the second half of Quarter 2 2020, though because of social distancing measures they were not operating at full capacity. Furthermore, work done was largely around the completion of projects already in progress rather than starting work on new projects.

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5. Month-on-month construction output growth in June 2020

Construction output grew by a record 23.5% (£1,929 million) in June 2020 compared with May 2020, because of large increases in all construction sectors, as shown in Figure 6. Most sectors saw record increases in June 2020 since monthly records began in 2010, with only infrastructure, public other new work, and private industrial not showing record growth rates.

This is the second consecutive month of record growth in all work, following growth of 7.6% (£582 million) in May 2020, though the level of output remains 24.8% (£3,343 million) lower in June 2020 compared with the pre-coronavirus (COVID-19) pandemic level in February 2020.

New work grew by a record 22.2% (£1,224 million) in June 2020 compared with May 2020, with repair and maintenance growing by a record 26.0% (£706 million), both substantially larger than their previous records.

The record 22.2% (£1,224 million) growth in new work in June 2020 was driven by increases in all new work sectors, with the largest contribution coming from a record 42.3% (£545 million) growth in private new housing. Despite the record growth in private new housing in May and June 2020, the level of new work output remains relatively low compared with periods prior to February 2020 as shown in Figure 7. These declines were driven by a mixture of adverse weather and flooding in February 2020 and the coronavirus in March and April 2020.

Infrastructure in June 2020 is the only sector to have nearly recovered to its pre-pandemic level, at 3.7% (£69 million) below the February 2020 level. The decline in April 2020 in this sector was relatively less sharp than other sectors, and likely to have been because of larger sites remaining partially open as social distancing measures were implemented more easily.

The record 26.0% (£706 million) growth in repair and maintenance in June 2020 was because of record increases in every repair and maintenance sector, with private housing repair and maintenance growing by 44.0% (£328 million) and non-housing repair and maintenance growing by 18.7% (£308 million). The level of repair and maintenance output, most notably in housing, remains relatively low compared with periods prior to February 2020 as shown in Figure 8.

Repair and maintenance saw a comparatively weaker bounce than new work in May 2020 despite experiencing similar falls in March and April 2020. This has reversed in June 2020, with stronger percentage growth in repair and maintenance than in new work, as shown in Figure 9.

Business Impact of Coronavirus (COVID-19) Survey (BICS)

The Business Impact of Coronavirus (COVID-19) Survey (BICS) shows evidence of increasing construction industry activity in June 2020. Qualitative information sourced from this survey was used to quality assure responses we received for the Monthly Business Survey for construction and allied trades (MBS) for June 2020.

BICS Wave 8 data, which relate to the period 15 June to 28 June 2020, show that construction industry respondents had the largest proportion of workforce returning from furlough leave, with 20.5%. This was higher than any other industry and well above the 8.1% average for all industries, as shown in Table 4.

BICS Wave 8 data also showed that, of businesses currently trading, 75.5% construction industry respondents’ workforce was “working remotely or at their normal place of work”, as shown in Table 5. Those working remotely in the industry are likely to be those that undertake office and administrative work, and are more likely to be able to work away from their normal place of work.

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6. New orders in the construction industry in Quarter 2 2020

Total construction new orders fell to £6,173 million in Quarter 2 (Apr to June) 2020, which was a decrease of 51.1% (£6,441 million) compared with Quarter 1 (Jan to Mar) 2020. This is the lowest level of new orders since quarterly records began in 1964 and 34.2% below the previous record for lowest new orders in Quarter 3 (July to Sept) 1980, as shown in Figure 10.

Figure 11 shows that both all other work and all new housing orders saw sharp declines in Quarter 2 2020 as the full impact of the coronavirus (COVID-19) was felt across the industry. Other work and new housing orders decreased by 51.9% (£4,651 million) and 49.0% (£1,789 million) respectively, both of which were record falls in quarterly growth.

This decline in new orders was because of record quarterly falls (Table 6) in all sectors except in infrastructure, public new housing and public other new work, where falls were not records. Public new housing decreased by 15.3% (£42 million) and public other new work decreased by 10.8% (£117 million).

Table 6 shows record decreases in Quarter 2 2020. Many of the previous record declines were during the 2008 and 2009 economic downturn, and in the case of infrastructure, because of specific large one-off new orders placed in a quarter. For example, in Quarter 3 (July to Sept) 1987 with the Channel Tunnel or Quarter 3 2017 with High Speed 2 (HS2).

The decrease in new orders in Quarter 2 2020 mainly came from weakness in April and May 2020. As shown in Table 7, towards the end of the quarter in June 2020, new orders started to increase as activity in the industry gradually restarted. However, the number and value of these new orders has decreased significantly compared with previous years. This is illustrated with around 1,100 new orders made in Quarter 2 2020 compared with the normal level of 2,000 to 2,500 new orders per quarter.

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7. Construction Output Price Indices in June 2020

Prices in the construction industry, as estimated by the Construction Output Price Index (OPI), rose 11.0% between October 2015 and June 2020 (Figure 12).

Peaks and troughs seen within the new work index between October 2015 and June 2020 are mostly because of movements within the earnings component of the OPI, which is sourced from the Average Weekly Earnings (AWE) index for construction.

All construction work

The annual and monthly rates of inflation for all construction were flat in June 2020 (Table 9), down from 0.4% and 0.2% respectively in May 2020. Annual growth for new work was negative 0.4% in June 2020, while annual growth for repair and maintenance was 0.7% in June 2020.

New work

The Construction OPI for new construction work fell 0.4% on the year to June 2020, down 0.5 percentage points from May 2020. This is the first time since January 2015 that the rate has been negative. All five sectors had negative growth in June 2020, with private industrial having the largest negative growth of 0.6%.

Repair and maintenance

The Construction OPI for all repair and maintenance rose 0.7% on the year to June 2020, which is down from 0.8% in May 2020. This is the lowest the rate has been since September 2015. Housing and non-housing repair and maintenance both showed an annual increase of 0.7% in June 2020.

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8. Construction in Great Britain data

Output in the construction industry: sub-national and sub-sector
Dataset | Released 12 August 2020
Quarterly non-seasonally adjusted sub-national and sub-sector data at current prices, Great Britain (suspended – see Section 10. Measuring the data for further information).

Construction output price indices
Dataset | Released 12 August 2020
Monthly Construction Output Price Indices (OPIs) from July 2014 to March 2020, UK.

New orders in the construction industry
Dataset | Released 12 August 2020
Quarterly new orders at current price and chained volume measures, seasonally adjusted by public and private sector. Quarterly non-seasonally adjusted type of work and regional data.

Construction statistics annual tables
Dataset | Released 17 October 2019
The construction industry in Great Britain, including value of output and type of work, new orders by sector, number of firms and total employment.

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9. Glossary

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 this year) 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.

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10. Measuring the data

Construction output data collection

Our monthly Construction Output Survey measures output from the construction industry in Great Britain. The survey samples 8,000 businesses, with all businesses employing over 100 people, or with an annual turnover of more than £60 million, receiving an online questionnaire every month. 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).

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.

Revisions to construction output data

Revisions in the release are a result of:

  • late responses to survey returns replacing imputations, or revisions to original returns
  • revisions to seasonal adjustment factors, which are re-estimated every month and reviewed annually
  • revisions to the input series for the Construction Output Price Indices

In this release there are revisions to construction output, first published within the Construction output in Great Britain: May 2020 release published on 14 July, to April and May 2020.

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.

Construction new orders data collection

New orders data are sourced from Barbour ABI who web scrape planning application data from all local authorities in England, Scotland and Wales; this method allows identification of planning applications as soon as they are published, while projects outside the planning application process are captured via investigations from Barbour's in-house team of researchers. These data are then validated firstly by Barbour ABI and supplied to the Office for National Statistics (ONS), who also further validate, process and quality assure the data before new orders in the construction industry estimates are published.

Revisions to new orders data

Revisions in the release to new orders are as a result of:

  • revisions to seasonal adjustment factors, which are re-estimated every quarter and reviewed annually
  • revisions to the input series for the Construction Output Price Indices
  • new orders data are also open for revision in the current price, non-seasonally adjusted data (Tables 4 to 6) for the previous quarter; because of a revaluation of a project in Quarter 1 (Jan to Mar) 2020, we have revised down new orders by £250 million in the private new housing series

Quality and methodology

More quality and methodology information on strengths, limitations, appropriate uses, and how the data were created is available in the Construction output QMI, New orders in construction QMI and Construction Output Price Indices QMI.

Value Added Tax (VAT) data

Alongside the Monthly Business Survey (MBS), further information on output is gained from VAT turnover data, which are used to replace survey data for small- and medium-sized businesses. However, because of 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 4 (Oct to Dec) 2019.

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

Coronavirus (COVID-19) impact on ONS construction output in June 2020

Temporary ceasing of Output in the construction industry: sub-national and sub-sector data

The coronavirus (COVID-19) pandemic presents a significant challenge to the UK, and the Office for National Statistics (ONS) is working to ensure that the UK has the vital information needed to respond to the impact of this pandemic on our economy and society. This means we will need to ensure that information is provided faster, using new data sources and changing how our surveys operate, to ensure we provide the information necessary as the situation unfolds.

The effects of the outbreak on ONS capacity and capability during this period means we have reviewed the existing construction statistics releases and will be temporarily suspending the Output in the construction industry: sub-national and sub-sector dataset. This is to protect the delivery and quality of our remaining outputs as well as ensuring we can respond to new demands as a direct result of the coronavirus. This is also partially a reflection of the limitations of the model used to apportion new orders data to produce sub-level output data.

Impact of online data collection on response rates

As highlighted in Section 2, the coronavirus pandemic has significantly impacted construction output in 2020. Official guidance on restrictions in movement for Great Britain, leading to the closure of work sites, also impacted response rates in recent periods.

Data for the Monthly Business Survey for construction and allied trades (MBS) have been collected via online questionnaire since April 2020. This has meant that respondents can log on from any location and submit their data at an appropriate time. The paper questionnaire was moved to an online data collection platform, with minimal changes made to the questionnaire design. The only notable change is the reclassification of housing associations as private housing, rather than public housing as previously on paper. For further information on this classification decision please see this statement for England and this article for Scotland, Wales and Northern Ireland.

Response rates were comparatively low in March 2020 and since then have improved when measured by both the turnover coverage of the industry and proportion of questionnaire forms returned. This illustrates the benefits of the move to electronic data collection, though response rates remain lower when compared with reference periods prior to March 2020.

For June 2020, because of the gross domestic product timetable, the data collection period for the MBS was shorter compared with that of April and May 2020, by around one week. As a result, response rates have fallen for June 2020 when compared with May 2020, though have still improved when compared with April 2020.

Table 11 shows the response rates to the MBS at time of publishing, for each reference period. While response rates are lower for the reference months in 2020 at the first time of publication, further responses have since been submitted and used in the compilation of these estimates in the June 2020 release.

Figure 13 shows the data content based on turnover response rate at the time of the first estimate of each quarter, since the move to monthly gross domestic product estimates in mid-2018. Normally, quarterly response rates at the time of the first quarterly estimate are around 85 to 90%, whereas in 2020 they have been around 10 percentage points lower.

To deal with non-response we impute for missing data using ratio imputation. This is a simple but effective method, used as a standard internationally. The method calculates the growth in the industry based on those businesses that did respond and applies it to the last known value for the non-responder. This means that if output notably reduces in an industry from one month to the next, the imputed values for non-respondents in that industry will also notably reduce when compared with the last known value.

Further information on the imputation methods for non-response is available.

While international best practice is used to impute for non-response, with the lower response rates highlighted in Table 11, it is important to note that the revisions to the months in 2020 may be larger than the revisions profile prior to 2020, as actual data and revised data replace the larger than normal number of imputations for non-response at the time of the first monthly estimate.

Zero return responses to the Monthly Business Survey for construction and allied trades (MBS)

A zero return refers to when a survey respondent reports figures of zero across all types of work, meaning the total value of work done is zero for that reference month. Figure 14 shows zero returns as a proportion of all returns at the time of the first estimate for a reference month. This is broken down by size of business as per registered turnover on the IDBR (Inter-Departmental Business Register).

Prior to March 2020, we had a stable element of approximately 7% to 10% reporting zero returns. This partially increased in March 2020, but significantly increased into April 2020 as sites were closed because of restrictions on movement in Great Britain. We saw partial decline in zero returns in May 2020 and this continued into June 2020, though still remains higher than in periods prior to April 2020.

It is worth noting small-sized (less than £1 million registered annual turnover) and medium-sized (£1 million to £10 million registered annual turnover) make up the majority of these zero returns. This is the case both during and before the pandemic-impacted period.

Impact on seasonal adjustment of June 2020

The monthly chained volume measures are seasonally adjusted using a seasonal adjustment software tool (X-13-ARIMA-SEATS). The monthly series individual type of work series is then aggregated to form the quarterly seasonally adjusted chained volume measure series.

The seasonal adjustment parameters for output in the construction industry are reviewed annually. However, because of the volatility of these statistics, time series analysis experts are regularly asked to review the seasonal adjustment when required. This approach has been adopted for the latest months and has resulted in changes to seasonal adjustment specification files to ensure the seasonal adjustment parameters are appropriate. All types of work were treated as an additive outlier in these specification files for April to June 2020, apart from infrastructure in June 2020.

Coronavirus impact on the June 2020 bias adjustment

Typically, an adjustment to address any bias in survey responses for construction output is applied to the early construction output monthly estimates. See Improvements to construction statistics: addressing the bias in early estimates of construction output, June 2018 published on 4 June 2018. The bias adjustment methodology is based on historical data. As the response rates for June 2020 are lower in comparison with months prior to February 2020 (Table 11) and no comparable historical data are available at the time of the first estimate for a reference month, no bias adjustment has been applied for June 2020.

Links to additional ONS sources of coronavirus information

Our latest data and analysis on the impact of COVID-19 on the UK economy and population is also now available on a new webpage. This will be the hub for all special virus-related publications, drawing on all available data. A Coronavirus (COVID-19) roundup is also updated as and when data become available.

Recent releases which help describe the ONS response to how the coronavirus might be seen in our estimates:

The Office for National Statistics (ONS) has released a public statement on the coronavirus and the production of statistics and any specific queries can be directed to the Media Relations Office.

Exiting the EU

As the UK leaves the EU, it is important that our statistics continue to be of high quality and are internationally comparable. During the transition period, those UK statistics that align with EU practice and rules will continue to do so in the same way as before 31 January 2020.

After the transition period, we will continue to produce our national accounts statistics in line with the UK Statistics Authority’s Code of Practice for Statistics and in accordance with internationally agreed statistical guidance and standards.

The Withdrawal Agreement outlines a need for UK gross national income (a fundamental component of the national accounts, which includes gross domestic product (GDP)) statistics to remain in line with those of other EU countries until the EU budgets are finalised for the years in which we were a member. To ensure comparability during this cycle, the national accounts will continue to be produced according to European System of Accounts (ESA) 2010 definitions and standards.

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11. Strengths and limitations

Data quality

These estimates are widely used by private and public sector institutions, particularly by the Bank of England and HM Treasury, to assist in informed decision-making and policymaking. 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 Uncertainty and how we measure it for our surveys is available.

National Statistics status

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.

Comparability

Output in the construction industry follows the Eurostat short-term business 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.

Eurostat has also developed short-term business statistics (STS) indicators on the impact of the coronavirus (COVID-19) pandemic in Impact of Covid-19 crisis on construction.

Construction output data used within this release are also used in the compilation of the GDP monthly estimate. While monthly data are available in the 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.

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.

Construction statistics recent engagement and development work

Further information on construction statistics development can be found in:

Further articles on other construction statistics development work and analysis are available.

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Manylion cyswllt ar gyfer y Bwletin ystadegol

John Allcoat
construction.statistics@ons.gov.uk
Ffôn: +44 (0)1633 456344