Construction output in Great Britain: May 2019

• Construction output growth was flat (0.0%) in the three-month on three-month all work series in May 2019; this was because of a fall in repair and maintenance of 0.5% being offset by a 0.3% increase in new work.

• In new work, the increase in the three-month on three-month series in May 2019 was driven by growth in private commercial new work and public new housing, which saw growths of 2.2% and 8.4% respectively.

• In repair and maintenance, the decrease in the three-month on three-month series in May 2019 was because of declines in both private and public housing repair and maintenance, which decreased by 2.5% and 3.2% respectively.

• Construction output increased by 0.6% in the month-on-month all work series in May 2019; driven by increases in both new work and repair and maintenance which grew by 0.4% and 1.2% respectively.

• Estimates in this release are consistent with the GDP quarterly national accounts, UK: January to March 2019 publication released on 28 June 2019.

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, 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 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 publication, Construction output in Great Britain: April 2019 and new orders January to March 2019 released on 10 June 2019, this takes on the changes made in GDP quarterly national accounts, UK: January to March 2019 released on 29 June 2019. This makes the monthly series published here for the first time consistent with the quarterly series published in the quarterly national accounts. Furthermore, April 2019 is open to revisions in today’s publication in line with the National Accounts Revisions Policy.

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, because of 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.

While the last six months have seen volatility in the monthly series for construction output all work, the quarterly path shows a general trend of slow, sustained growth since Quarter 2 (Apr to June) 2017. That said, the growth seen since Quarter 2 2017 is markedly slower than the growth seen prior to that period, as is visible in Figure 1.

Construction output growth increased by 0.6% in the month-on-month series in May 2019. This month-on-month increase follows two successive declines in the monthly series for March 2019 and April 2019. This increase was driven by growth in both new work and repair and maintenance which grew by 0.4% and 1.2% respectively.

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.

Construction output growth was flat (0.0%) in the most recent three-month period in May 2019, as compared with the three months prior. This reflects a weakness in March and April 2019, which saw declines of 1.5% and 0.5% respectively, followed by relatively slow growth of 0.6% in the most recent month. It should be noted that the previous three months (December 2018 to February 2019), on which the three-month on three-month growth of 0.0% is based, includes a dip in output in December 2018, which recorded the lowest monthly output seen at any point within the last 12 months, and the sharpest monthly fall in the series since March 2016.

The flat top-level growth in the three-month on three-month all work series in May 2019 was also reflective of a mixed pattern of rises and falls across the construction sector. Repair and maintenance saw a slight decline of 0.5%, while new work grew by 0.3%. In repair and maintenance, the declines seen are driven by housing repair and maintenance, with private and public housing repair and maintenance being down by 2.5% and 3.2% respectively. This was slightly offset by a 1.7% growth in non-housing repair and maintenance.

The growth in new work was driven by public housing and private commercial new work, which grew by 8.4% and 2.2%, with a smaller contribution from a 1.3% increase in infrastructure new work. These were primarily offset by the decline in public other new work, which fell by 9.0% and was the largest contributor to declines of any new work sector by a significant margin.

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.

May 2019 saw month-on-month growth in both repair and maintenance and new work. For repair and maintenance which increased by 1.2%, we see the reverse picture of that seen in the three-month on three-month series: growth was driven by increases in private and public housing repair and maintenance of 2.9% and 3.8% respectively, while non-housing repair and maintenance fell by 0.7%. Despite this increase, repair and maintenance output levels are still £114 million below the monthly record high for the series seen in February 2019.

In new work, the growth of 0.4% was because of increases in private housing, private industrial, and infrastructure new work, which grew by 1.8%, 10.2%, and 1.7% respectively. The sharp growth in private industrial new work followed three consecutive months of declines from February 2019 to April 2019 and recovers the series to the level seen in January 2019. The largest negative contributor by a sizeable margin was the 3.2% decline in private commercial new work, which had a far greater impact than the 2.0% and 0.1% falls in public other new work and public new housing.

Figure 3 shows the difference in the three-month on three-month levels from the different construction sectors, taken from our seasonally adjusted, chained volume measure series. Construction output increased by £3 million in the period March 2019 to May 2019 in comparison with December 2018 to February 2019. Because of rounding, this resulted in flat growth (0.0%) in construction output for May 2019 in the three-month on three-month series.

New work grew by £75 million, driven by increases in private commercial new work and public new housing of £152 million and £141 million respectively. These were accompanied by a smaller £72 million growth in infrastructure. These were largely offset by public other new work, which fell by £229 million period-on-period, the largest decline of any one sector in this series for this period. Smaller declines were also seen in private industrial and private housing new work, which decreased by £37 million and £23 million respectively.

In contrast to new work, repair and maintenance output fell by £72 million in the three-month period to May 2019, with both private and public housing repair and maintenance having fallen by £134 million and £57 million respectively. Non-housing repair and maintenance saw a £120 million growth, despite a decline in the month-on-month series in May 2019. This is because of the relative strength of the series in March and April 2019 compared to the weakness of December 2018.

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 grew by £88 million in May 2019.

In new work, there was an overall increase of £34 million in May 2019 compared with April 2019. As with the three-month on three-month series there is a pattern of one large decline set against several more moderate increases. In the case of the month-on-month series it was private commercial new work which saw a £76 million decline. Smaller decreases were seen in public other new work, which fell by £16 million, while public housing new work was almost flat, declining by £1 million. The growth in new work was driven by private new housing which increased by £55 million, with smaller growths also occurring in private industrial new work and infrastructure, which grew by £39 million and £31 million respectively.

Repair and maintenance saw an increase of £54 million in May 2019. This month-on-month growth was driven by increases of £50 million and £22 million in private and public housing repair and maintenance. In contrast non-housing repair and maintenance decreased, seeing a £17 million decline in May 2019.

Total all work grew to £13,780 million in May 2019 in comparison with April 2019, increasing by 0.6%. The largest positive contributions to the month-on-month change in May 2019 came from private new housing and private housing repair and maintenance, which grew by 1.8% (£55 million) and 2.9% (£50 million) respectively. There was also a notable growth of 10.2% (£39 million) in private industrial new work, which was the largest month-on-month growth rate since June 2017. These, and smaller growths seen in other sectors, were somewhat mitigated by a decline of 3.2% (£76 million) in private commercial new work, as well as falls of 0.7% (£17 million) and 2.0% (£16 million) in non-housing repair and maintenance and public other new work.

When looking at the month-on-year series, there has been a growth of 1.7%. This was driven by increases in infrastructure and private new housing of 13.6% and a 6.6%, with a more minor contribution to growth from a 25.8% increase in public new housing. Although a number of series saw declines, most notable contributions came from private commercial new work and private housing repair and maintenance which both fell by 6.8%.

Private commercial new work has now seen its 18th consecutive decline since November 2017, while infrastructure has consistently grown for 18 consecutive periods in the month-on-year series over the same duration. Both series contrast with the all new work series, which has seen a more mixed profile of growth. Figure 5 shows the month-on year growths for these three series in the last two years:

In the three-month on three-month series in May 2019, output growth was flat (0.0%) compared to the three-months prior. The most notable contributions were from public other new work, which fell by 9.0% (the largest decline in that series since May 2012), and private commercial new work, which grew by 2.2% (its largest growth since May 2017). Public new housing also saw growth, increasing by 8.4% in the three-month on three-month series.

In the three-month on year series the growth of 2.9% in the all work series was primarily because of a 4.0% increase in new work, with a comparatively minor growth of 0.9% seen in repair and maintenance in the same period. The growth seen in new work was led by infrastructure new work, which increased by 14.6%, with smaller contributions from private and public new housing and non-housing repair and maintenance, which grew by 5.0%, 25.6% and 4.3% respectively.

This is the first monthly release to incorporate the revisions made in the GDP quarterly national accounts, UK: January to March 2019 release, published on 28 June 2019. As a result, revisions have been made back to January 2019, resulting in changes to nominal data by incorporating the latest data. Because of these changes in the nominal data, this has also impacted on the seasonally adjusted estimates.

In addition to the revisions to construction output first published within GDP quarterly national accounts, UK: January to March 2019 on 28 June 2019, this publication also includes revisions to the April 2019 construction output estimates first published in Construction output in Great Britain: April 2019 and new orders January to March 2019 on 10 June 2019. Again, these revisions are because of late and revised survey returns.

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 (PDF, 564KB) published by Eurostat on 19 Jun 2019 for April 2019, showed a seasonally adjusted decrease of 0.8% in the Euro area (EA-19) and decrease of 0.6% in the EU-28 when compared with March 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, 216KB) for May 2019 was published on 1 Jul 2019. This includes the total dollar value of construction work done in the US.

Our publication, Construction statistics: Number 19, 2018 edition, published on 22 August 2018, contains analysis on the construction sector in 2017, and 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. While monthly data are available for output in the construction industry back to January 2010, 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 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.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 16 November 2018) 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 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:

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

• Construction output quality and methodology information (published 16 November 2018)

• New orders in construction quality and methodology information (published 30 October 2018)

• 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)