Construction output in Great Britain: November 2018

• The three-month on three-month series for all work was up 2.1% for November 2018; this was driven by all new work, which increased by 3.4%, but was offset slightly by a decline in all repair and maintenance, which fell by 0.4%.

• The increase in the all new work three-month on three-month series was driven primarily by private new housing and infrastructure which increased by 4.9% and 6.5% respectively.

• Construction output recorded an all-time level high in November 2018 in the chained volume measure seasonally adjusted series; the month-on-month series grew by 0.6%, resulting in the total value of construction output exceeding £14 billion for the first time since monthly records began in 2010.

• This was driven primarily by strong growth in private new housing, private commercial new work, and public housing repair and maintenance, which increased by 3.1%, 2.3%, and 5.8% respectively.

• The main factors acting to depress growth were a steep decline in public other new work, down 5.8%, as well as a drop in infrastructure, which decreased by 2.5%.

• Estimates in this release are consistent with the GDP quarterly national accounts, UK: July to September 2018 publication released on 21 December 2018.

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 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 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).

Summary information can be found in the Construction output Quality and Methodology Information report.

Compared with the previous Construction output in Great Britain: October 2018 and new orders July to September 2018 publication, released on 10 December 2018, this publication includes revisions to construction output from January 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 or VAT turnover data 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) VAT returns replacing Monthly Business Survey (MBS) data for small- and medium-sized businesses when VAT estimates become available each quarter; in this release this impacts Quarter 2 (Apr to June) 2018 for the first time

• revisions to the input series for the output price indices

For this publication, revisions are being made to ensure consistency with the GDP quarterly national accounts, UK: July to September 2018 publication released on 21 December 2018. This makes the monthly series published here for the first time consistent with the quarterly series published in the quarterly national accounts.

We use methods to impute data for businesses that have not yet returned their Office for National Statistics (ONS) survey, along with a further adjustment to address any bias in early survey responses for construction output. Full details of these methods, and other recent improvements, can be found in Improvements to construction statistics: Addressing the bias in early estimates of construction output, June 2018, published on 4 June 2018.

Since the start of 2016, the overall trend of construction output has been of growth, with a period of decline recorded in the early months of 2018. Since April 2018, output has shown an upward trend with five out of the latest seven months experiencing growth in the monthly series. The rolling three-month time series provides a more comprehensive picture of the underlying trends within the industry, compared with the more volatile monthly series, which is also shown in Figure 1.

In the monthly series, for November 2018 there has been a 0.6% growth compared with October 2018. This has resulted in a record high in the level of the chained volume measure, seasonally adjusted all work series. This has also led to the total value of construction output in Great Britain exceeding £14 billion for the first time in the monthly series since the monthly records began in 2010. The new high of £14.042 billion represents a 28.7% growth over the last five years. This corresponded with a new high in the rolling three-month series, which grew 2.1% relative to the corresponding rolling three-month series to October 2018.

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.

Figure 2 shows that in the latest month, repair and maintenance has recovered mildly from the decline last month, growing 0.2% in the chained volume measure, seasonally adjusted series. This was driven by growth in public housing repair and maintenance, which increased 5.8% month-on-month.

Looking at new work, despite monthly growth slowing slightly compared with September and October 2018, new work increased by 0.8% in November 2018, well above the recent levels of growth seen in repair and maintenance. The growth in new work was driven primarily by a 3.1% increase in private housing new work, alongside a 2.3% growth in private commercial new work. This has been slightly offset by a 5.8% decline in public other new work.

Although repair and maintenance, and new work are both growing, the faster growth in new work has increased the divergence seen between repair and maintenance, and new work seen in recent months, as illustrated in Figure 2.

Figure 3 shows the difference in the levels of output from the different construction sectors for September to November 2018, as compared with June to August 2018, taken from our seasonally adjusted, chained volume measure series.

Construction output increased by £857 million in the most recent three-month period compared with June to August 2018. This growth was driven by increases in all new work, particularly private housing, which grew by £451 million, and infrastructure, which grew by £332 million. Other notable growths were seen in non-housing repair and maintenance, which increased by £230 million, and new public housing, which increased by £107 million.

Although overall growth was strong, the impact of this was offset by a fall of £260 million in private housing repair and maintenance, the largest fall of any subsector in this three-month on three-month period.

Figure 4 shows the difference in month-on-month levels of output from the different construction sectors, taken from our seasonally adjusted, chained volume measure series. Compared with the previous month, construction output increased by £85 million in November 2018.

The most notable increases came from private new housing and private commercial new work, which increased by £99 million and £54 million respectively in November 2018. However, these were offset by falls in public other new work, and infrastructure, which fell by £49 million and £46 million respectively.

Table 1 provides a detailed description of the growth rates of each work type, alongside the seasonally adjusted, chained volume measure level of output.

Total all work increased to £14,042 million in November 2018. In comparison with October 2018, construction output grew by 0.6%. The largest positive contributions to the month-on-month change in November 2018 came from private new housing and private commercial new work, which increased by 3.1% (£99 million) and 2.3% (£54 million) respectively. These more than offset the notable declines of 5.8% (£49 million) in public other new work and 2.5% (£46 million) in infrastructure.

When looking at the month-on-year series, the growth of 3.0% is due primarily to a 9.5% increase in private new housing work. All month-on-year series saw increases, with the exceptions being private housing repair and maintenance, public other new work, and private commercial new work. Private housing repair and maintenance saw its largest month-on-year decrease of 8.2% since December 2012. Public other new work decreased by 4.5% and private commercial new work decreased by 1.8%, continuing their recent periods of decline. This represents the 12th consecutive fall in the series for private commercial new work, and would represent the 20th consecutive fall in the month-on-year series for public other new work, were it not for the 1.5% increase seen in October 2018.

In the three-month on three-month series, the 2.1% growth is driven by the strength of September and November 2018, as October 2018 showed flat growth. This growth is driven largely by increases of 4.9% in private new housing, as well as a 6.5% increase in infrastructure spending, when compared with the three-month period from June to August 2018.

This is the first monthly release to incorporate the revisions made in the GDP quarterly national accounts, UK: July to September 2018 release, published on 21 December 2018. As a result, revisions have been made back to January 2017, resulting from improvements to nominal data by incorporating the latest survey and Value Added Tax (VAT) turnover data. As a result of these changes in the nominal data, this has also impacted on the seasonally adjusted estimates.

This monthly release is also the first time in which VAT turnover data for Quarter 2 (Apr to June) 2018 have been used to replace survey returns in the monthly data for that period. We have now used VAT data for approximately 84,000 businesses to replace 2,400 survey returns in the monthly construction output sample. For a list of those industries selected to use VAT turnover within construction, please see the VAT industry selection matrix.

The revisions to the calendar quarter growth, all work, chained volume measure, seasonally adjusted series, along with an indication of the main causes of the quarterly revisions, are outlined in Table 2. This compares the previous monthly release Construction output in Great Britain: October 2018 and new orders July to September 2018 (published on 10 December 2018) with today’s publication (11 January 2019).

Revisions to all calendar quarters for the all work, chained volume measure, seasonally adjusted series have been within a range of plus or minus 0.3 percentage points. This range of revision is comparable with previous revisions, which were seen the last time the revisions period was open back to January 2017 in Construction output in Great Britain: August 2018, published on 10 October 2018. Within this release, these revisions are explained in Section 6 and detailed in Table 2.

Quarter 2 2018 has been revised down 0.3 percentage points due to revisions in the nominal data caused by both survey and VAT data. The latest calendar quarter (Quarter 3 (July to Sept) 2018) is revised up by 0.2 percentage points due to the receipt of late and revised survey returns. It should be noted that the inclusion of weaker Quarter 2 2018 data has also contributed to this upward revision for Quarter 3 2018.

All revisions to the month-on-month growth in the all work, chained volume measure, seasonally adjusted series are within a range of negative 0.4 percentage points to positive 0.2 percentage points.

In addition to the revisions to construction output first published within GDP quarterly national accounts, UK: July to September 2018 on 21 December 2018, this publication also includes revisions to the October 2018 construction output estimates first published in Construction output in Great Britain: October 2018 and new orders July to September 2018 on 10 December 2018. October 2018 is revised up by 0.2 percentage points at the all work level for the month-on-month chained volume measure, seasonally adjusted series. At the type of work level revisions can be seen, with these varying in direction and magnitude by each type of work.

Furthermore, new data have become available with which to improve the weights used for the low level type of work and regional datasets published in tables 5 and 6 of the output in construction industry dataset. As a part of opening up for revisions back to Quarter 1 (Jan to Mar) 2017 in the main dataset, we have also taken the opportunity to update and revise our weights for the same period, leading to the minor changes to the data seen in these tables as compared with values in the previous release.

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 19 December 2018 for October 2018, showed the seasonally adjusted production in construction (PDF, 563.7KB) decreased by 1.6% in the Euro area (EA19) and 1.2% in the EU28 when compared with September 2018.

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 Value of construction put in place (PDF, 207KB), which was published on 3 December 2018. This includes the total dollar value of construction work done in the US. This remains the most recent publication, as due to a currently ongoing government shutdown, the Census Bureau are not currently updating their website.

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.

• 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 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 2 (Apr to June) 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

The Office for Statistics Regulation is currently in the process of re-assessing the National Statistic status for construction statistics: Output, New orders and Price indices.

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.

We have recently published a series of methodological articles to help communicate recent improvements.

The Construction statistics development: improving the understanding of new orders in the construction industry and the gap between output and new orders article was published on 30 October 2018. This explains and analyses the possible causes of differences in our construction output data and new orders data. An updated New orders in construction Quality and Methodology Information report was also published on the same day.

In addition to the October 2018 article, we also previously introduced methodological improvements to construction output estimates, detailed in two articles published on 4 June 2018:

• Improvements to addressing the bias in early estimates of construction output, which were incorporated for the first time in the Quarterly national accounts: January to March 2018 on 29 June 2018

• Improvements to regional and sub-sector level estimates using new orders data supplied by Barbour ABI, which were incorporated for the first time in the Construction output in Great Britain: April 2018 publication

The overall impact of the improvements to construction statistics that were included in Quarterly national accounts: January to March 2018 are outlined in the article released on 29 June 2018.

In September 2017, we released a summary article which outlined the impact of improvements to construction statistics article, which explains and highlights the impact of improvements made to construction statistics, affecting the nominal data series, output price indices and seasonal adjustment. As a result of these improvements, the output price indices are no longer considered to be an interim method.

As previously indicated in Section 7 of the last publication, as part of the work to improve dissemination of our data of the low-level type of work and regional data currently published in Tables 5 and 6, this will be published separately from the main dataset in a new, separate format from 12 March 2019.

These improvements are driven by the UK Statistics Authority 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 in November 2014.