Construction output in Great Britain: May 2017

• Construction output fell in May 2017 by 1.2%, in both the month-on-month and 3 month on 3 month time series.

• The 3 month on 3 month decrease represents the largest 3 month on 3 month fall in output since September 2012, driven by falls in both repair and maintenance, and all new work.

• The main downward pressure on month-on-month growth came from all new work, most notably from infrastructure, which fell 4.0% following strong growth in April 2017.

• Construction output also fell month-on-year, falling by 0.3% in May 2017, the first consecutive month-on-year decrease in output since May 2013.

• Construction output for April 2017 has been revised up 0.5 percentage points from negative 1.6% to negative 1.1%.

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 May 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 Department of 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 developing a long-term solution for the deflation of construction statistics.

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

In May 2017, construction output fell 1.2% in both the month-on-month and 3 month on 3 month time series, both of which fell for the second consecutive period. 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.

Although construction output has fallen in May 2017, the growth rate for April 2017 has been revised up to -1.1%, having previously been at a level of -1.6%. These revisions have occurred as a result of late data and information received from survey respondents, causing upward revisions, in particular in infrastructure and private housing repair and maintenance.

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 fell for the second consecutive month, dropping 1.4%, while repair and maintenance fell for the third consecutive month, falling 0.7% in 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 chained volume measure series.

When compared with April 2017, the most notable downward pressure on construction output came from infrastructure, which fell by 4.0%, equating to a real value fall of £61 million. However, this came after particularly strong growth in infrastructure in April 2017, where it grew 7.4%.

The other notable downward pressure on construction output came from private commercial work, and non-housing repair and maintenance. Private commercial work shrank at a rate of 1.6%, resulting in a fall of £37 million in comparison with the previous month. Non-housing repair and maintenance fell for the third consecutive month, at a rate of 1.3%, causing output to decrease by £24 million.

In contrast, the only sector to provide upward pressure on construction output was public housing. The 6.1% increase in May 2017 equates to an increase of £24 million in real volume terms. However, it must be noted that this increase in public housing comes after a 5.4% decrease in April 2017.

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 £11,428 million in May 2017. Despite this fall, new housing remained strong. Private housing remained relatively flat, while public housing reached its highest level since April 2015, increasing to £410 million. Elsewhere, private commercial work did decrease, but remains at a relatively high level at £2,265 million.

Construction output dropped 1.2% on a 3 month on 3 month basis in May 2017. There was last a larger drop in September 2012 although construction output also contracted by 1.2% in October 2015. The decrease in May 2017 was driven mainly by a decrease in total all new work, which fell 1.3%. This fall was driven mainly by infrastructure and private new housing, which dropped 1.3% and 1.8% respectively.

With regards to month-on-same month a year ago growth, construction output also fell, decreasing 0.3%. This follows a fall in output of 0.1% in April 2017, representing the first consecutive decreases in month-on-same month a year ago growth since May 2013. This has been driven by a fall in repair and maintenance work, with all new work remaining stable. Both public housing repair and maintenance and non-housing repair and maintenance dropped significantly compared with the same month in the previous year, however this was somewhat offset by a rise in private housing repair and maintenance.

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 June 2017 for April 2017, showed the seasonally adjusted production in the construction sector increased by 0.3% in the Euro area (EA19) and remained stable in the EU28 when compared with March 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 3 July 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

On 15 June 2017, the National Statistician announced that pre-release access to Office for National Statistics publications would stop with effect from 1 July 2017. This is therefore the first Construction statistics release where ministers and other officials did not receive access to the information prior to publication.

Two additions have also been made to the construction output tables, in the form of Tables 3c and 3d. Table 3c shows the 3 month on 3 month construction output growth rates, while Table 3d shows the 3-month on year growth rates.