Construction output in Great Britain: Nov 2016

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

Nid hwn yw'r datganiad diweddaraf. Gweld y datganiad diweddaraf

12 January 2017 08:41

A small error occurred in Figure 1: Rolling 3 month on 3 month and monthly all work, November 2016, due to a processing error. We have corrected this error. You can see all previous versions of this data on the previous versions page. We apologise for any inconvenience.

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Email Kate Davies

Dyddiad y datganiad:
11 January 2017

Cyhoeddiad nesaf:
10 February 2017

1. Main points

  • In November 2016, construction output fell by 0.2% compared with October 2016, largely due to a contraction in non-housing repair and maintenance.
  • The underlying pattern as suggested by the 3 month on 3 month movement shows a slight contraction of 0.1%.
  • Repair and maintenance provides the largest downwards pressure to construction output, falling both on the month and year.
  • New work in November 2016 increased, with new housing output continuing to grow.
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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 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 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 November 2016 release contains revisions for October 2016 only. 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

This revisions period is consistent with the National Accounts revisions policy.

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 Quality and Methodology Information report.

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3. Construction output in November 2016 shows a small contraction

In November 2016, construction output decreased by 0.2% when compared with October 2016 and follows a month-on-month fall of 0.6% in October 2016. The monthly time series shows how volatile construction output can be, therefore the rolling 3 month on 3 month time series is also shown and provides a picture of the underlying trend within the construction industry.

The 3 month on 3 month rolling time series shows that construction output contracted by 0.1% following a similar pattern for recent months in that construction output is relatively flat.

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4. Contributions to growth

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. The chart shows that through to mid-2014, new work, and repair and maintenance followed a similar pattern but that since reaching a level peak in August 2014, repair and maintenance has slowly contracted. Over the same period, new work has continued to increase, largely down to a rise in new housing work, however, the contraction in repair and maintenance provides a downwards drag to new work.

This longer-term trend is again seen in the monthly growth rates for November 2016, where new work increased by 0.3% and repair and maintenance contracted by 1.1%. When compared with November 2015, new work increased by 4.4% in November 2016 while repair and maintenance decreased by 3.6%.

It is worth noting that new work accounts for approximately two-thirds of all work, while repair and maintenance accounts for approximately one-third.

Figure 3 shows the contributions to growth for each of the main work types.

In November 2016, non-housing repair and maintenance provided the largest downward contribution to growth.

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5. Detailed growth rates

Table 1 provides a detailed description of the growth rates of each work type.

The greatest source of downwards pressure to the month-on-month growth rate for construction output came from non-housing repair and maintenance, followed by private commercial new work. Increased output in other work types was not sufficient to negate these falls month-on-month.

Compared with November 2015, new housing work provided the main contribution to the growth in all work.

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6. New housing continues to grow

Despite the overall fall in all work in November 2016, new housing continued to grow at an increasing overall rate of 1.2% in comparison with October 2016, representing the biggest increment since February 2016. This has resulted in housing output reaching an all time high of £2,639 million, as seen in Figure 4.

The increase in housing has occurred in part as a result of the notable rise in public housing, which recovered from negative growth in October 2016 to increase by 5.5%. There was an increase of 13.7% compared with the same period a year ago, the largest month-on-year growth rise since December 2014. This high level of growth comes in the shadow of the government committing to “drive up the housing supply” by providing £8.0 billion to deliver over 400,000 affordable housing starts by 2020.

In addition, private sector housing continued to grow at a steady month-on-month rate of 0.6% compared with October 2016. However, similar to public housing, the private sector has experienced large growth in relation to the same period last year, at a rate of 12.5% which has been broadly consistent throughout 2016. This may be in part due to historically low interest rates facilitating borrowing for construction firms, coupled with the loosening of private housing planning restrictions, both of which could have contributed to the continued boom in private housing both in November 2016 and throughout the year.

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8. What has changed in this publication?

This is the first Construction output bulletin released as part of the short-term indicators theme day. As such this bulletin now follows a more streamlined format and some tables such as response rates, previously found in the background notes, can now be found in the main datasets.

Short-term indicators economic commentary was published alongside this release, presenting new information on economic conditions in November 2016, with data available for output in production, construction and the trade balance.

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9. 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 document contains important information on:

  • the strengths and limitations of the data
  • the quality of the output: including the accuracy of the data and how it compares with related data
  • uses and users
  • how the output was created
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