Construction output in Great Britain: October 2019 and new orders July to September 2019

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

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Cyswllt:
Email John Allcoat

Dyddiad y datganiad:
10 December 2019

Cyhoeddiad nesaf:
13 January 2020

1. Main points

  • Construction output decreased by 0.3% in the three months to October 2019, compared with the previous three-month period; this was driven by a fall of 1.4% in repair and maintenance, with a smaller positive contribution from 0.3% growth in new work.

  • In repair and maintenance, the fall in the three months to October 2019 was largely because of the 3.6% decline in private housing repair and maintenance, with public housing repair and maintenance also falling 0.8%.

  • Construction output decreased by 2.3% in the month-on-month all work series in October 2019; this is the largest monthly fall since January 2018 when it fell by 2.6%; this was largely because of a 3.1% fall in new work, with repair and maintenance also decreasing by 0.6%.

  • New orders grew by 0.3% in Quarter 3 (July to Sept) 2019, this follows a fall of 14.5% in Quarter 2 (Apr to June) 2019; the rise in Quarter 3 2019 was driven by an 8.2% increase in new housing but offset by a 3.5% fall in all other work.

  • Today’s release sees the announcement to bring forward the quarterly new orders publication date by one month when we next release this dataset in February 2020; for further information please see Section 6.

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2. Things you need to know about this release

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 policymaking. Construction output is an important economic indicator and is also 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 1 2019.

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 Construction output in Great Britain: September 2019 publication released on 11 November 2019, today’s publication contains no revisions. This is in line with the National Accounts revisions policy.

Further to this release, the Quarterly national accounts, due to be published on 20 December 2019, will contain revised construction data from January 2018 to September 2019. These revised data will also include VAT data for the first time in Quarter 2 (Apr to Jun) 2019.

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3. Construction output in October 2019

In the monthly series, construction output decreased by 2.3% in October 2019 to £13,322 million. This is the largest fall in monthly growth since January 2018 when it fell 2.6%, and is the lowest level since April 2018 when output was £13,180 million.

Construction output decline in October 2019 may have been affected by adverse weather; we received some anecdotal information from a number of survey respondents regarding the effect of this on their businesses, although it is difficult to quantify the exact impact on the industry.

Over the longer-term, since the start of 2017 the industry has experienced a slight upward trend in growth in the all work series, but this is still markedly slower growth in comparison with the period prior to 2017.

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.

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.

There was a month-on-month decline in all work of 2.3% in October 2019, driven predominantly by a 3.1% fall in new work and a 0.6% fall in repair and maintenance. For new work, there were decreases in most sectors in October 2019, with the largest negative contributions coming from private new housing and infrastructure, which fell by 4.7% and 6.3% respectively.

This is the largest monthly fall in growth in infrastructure since the 6.6% decline in February 2018. It should also be noted infrastructure had a monthly increase of 6.2% in September 2019 so todays fall reverses this increase.

There were smaller negative contributions from public other and private industrial new work, which fell 2.6% and 7.1% respectively. Public housing and private commercial were the only sectors within new work to see increases, growing by 4.1% and 0.5% respectively.

In repair and maintenance, non-housing repair and maintenance grew 1.5% but this was not enough to offset falls in public and private housing of 3.2% and 1.2%, meaning total repair and maintenance fell 0.6% in October 2019 compared with September 2019.

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 decreased by £114 million in the three months to October 2019 compared with the previous three months.

New work rose by £79 million in October 2019; notable increases in new work were private commercial and private industrial which increased by £113 million and £76 million respectively. There was a small rise in public new housing, which was outweighed by a decrease in private new housing meaning total new housing fell by £84 million – the largest decline since June 2018 when it fell £113 million.

Repair and maintenance fell by £193 million in October 2019 compared with September 2019, which is the sixth consecutive decline in this series. The significant contributor to this fall was private housing repair and maintenance, which also declined for the sixth consecutive period falling by £181 million, with public housing repair and maintenance falling by £16 million. In comparison, non-housing repair and maintenance rose £3 million.

Figure 4 shows the difference in month-on-month levels from the different construction sectors, taken from our seasonally adjusted, chained volume measure series. Construction output fell by £309 million in October 2019, which is the largest fall in this series since January 2018 when it fell by £363 million.

New work fell £284 million in October 2019 compared with September 2019 – the joint largest decline since March 2018 when it also fell £284 million. The largest negative contributions within new work came from private housing, which fell £140 million, and infrastructure, which fell £125 million – the largest decline in the month-on-month series since February 2017, however this is a rebound to the £114 million increase seen in September 2019. The only sectors in new work to experience growth in the month-on-month series were public new housing and private commercial new work, which increased by £22 million and £11 million respectively.

Repair and maintenance also saw a decline in October 2019 in the month-on-month series, falling by £25 million. Private housing repair and maintenance fell by £52 million with public housing repair and maintenance falling £7 million. In comparison, non-housing repair and maintenance saw an increase of £34 million.

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4. Detailed growth rates

Month-on-month

Total all work fell to £13,322 million in October 2019, decreasing by 2.3% (£309 million) in October 2019 compared with September 2019. October 2019 now represents the lowest level of construction output since April 2018. This was largely driven by a 3.1% (£284 million) fall in new work, with repair and maintenance also falling by 0.6% (£25 million).

In new work, the drivers of the decline were private housing new work, which fell 4.7% (£140 million), and infrastructure, which fell 6.3% (£125 million). The only sectors to experience growth were public housing new work, which grew 4.1% (£22 million) and private commercial new work, which grew 0.5% (£11 million).

Within repair and maintenance work, private housing and public housing both declined in this series falling by 3.2% (£52 million) and 1.2% (£7 million) respectively, while non-housing repair and maintenance grew by 1.5% (£34 million).

Month-on-year

All work in the month-on-year series fell 2.1% (£287 million) in October 2019, which is the first fall since December 2018 when it fell 3.2%. New work fell 1.2% (£109 million) in this series because of falls in private housing, and private other new work, which fell 5.0% (£151 million) and 10.7% (£92 million) respectively. In comparison, public new housing grew by 16.9% (£81 million) continuing its trend of high growth rates throughout 2019, though this is a smaller and more volatile series.

Repair and maintenance in the month-on-year series fell by 3.8% (£178 million) in October 2019 because of declines in all sectors. Private housing repair and maintenance was the main driver of the decline falling by 8.5% (£147 million), with smaller contributions from non-housing repair and maintenance, and public housing repair and maintenance, which fell by 1.1% (£26 million) and 0.9% (£5 million) respectively. The decline in growth for private housing repair and maintenance is the largest since February 2013 where it decreased by 10.3%

Three-month on three-month

In the three-month on three-month total all work series in October 2019, output fell by 0.3% (£114 million) compared with the previous three months. This was driven by a decline of 1.4% (£193 million) in repair and maintenance offset partially by 0.3% (£79 million) growth in new work.

The largest positive contributions within new work came from private commercial new work and private industrial new work, which grew by 1.6% (£113 million) and 6.1% (£76 million) respectively. The largest negative contribution came from private housing, which fell 1.0% (£94 million).

The most substantial negative contribution within repair and maintenance was private housing, which fell by 3.6% (£181 million), with public housing repair and maintenance falling 0.8% (£16 million) and non-housing repair and maintenance growing by 0.1% (£3 million).

Three-month on three-month a year earlier

The three-month on three-month a year earlier all work series was flat (0.0%), with the growth of 2.1% (£562 million) in new work offset completely by the fall of 3.8% (£543 million) in repair and maintenance.

The largest positive contributions in new work came from infrastructure, which grew by 5.3% (£287 million), and private commercial new work, which grew 2.7% (£187 million) – the highest growth rate in this series since October 2017 when it grew by 3.4%. In comparison, public other new work declined for the sixth consecutive month falling by 5.9% (£149 million), with private housing falling by 0.4% (£40 million) – the first fall in this series since March 2013 when it fell 3.8%.

There was no growth in any of the sectors within repair and maintenance in this series, with public housing repair and maintenance flat (0.0%), and non-housing repair and maintenance falling by 2.7% (£195 million). Private housing repair and maintenance fell by 6.7% (£347 million), which was the sixth consecutive decline in this series. This decline in growth is the largest since February 2013 for this series where there was a fall of 8.5%.

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5. New orders

Figure 5 shows the value of all new work, all other work and new housing work. Construction new orders have seen a general decline since Quarter 2 (Apr to June) 2016, with the exception of Quarter 4 (Oct to Dec) 2017 when several high value contracts relating to High Speed 2 (HS2) were awarded. The value of all new work increased by 0.3% in Quarter 3 (July to Sept) compared with Quarter 2 2019, driven by new housing work, which increased by 8.2%. This is the largest increase in new housing work since Quarter 1 (Jan to Mar) 2018 when it increased by 23.0%. All other new work declined for the second consecutive quarter falling by 3.5% in Quarter 3 2019.

Looking with a longer-term view, Figure 6 shows that new orders has not had positive growth in two consecutive quarters since Quarter 2 2015. Apart from Quarter 4 2017 when several high value contracts relating to HS2 were awarded, new orders has seen a general decline since Quarter 2 2016, with the value of new orders £3,195 million (22.7%) lower in the most recent quarter since then. Orders were lower across all sectors in Quarter 4 2019 compared with Quarter 2 2016, with the largest new orders fall in private commercial new work, which fell £1,515 million (35.7%) and the smallest in private industrial new work, which fell £116 million (11.6%). Similarly, new orders in the quarter on a quarter a year earlier series has not had two consecutive periods of growth since Quarter 3 2016.

Table 2 shows the detailed growth rates for the construction sectors. The 0.3% (£32 million) increase in new orders in Quarter 3 2019 was driven by increases in new housing, with private and public new housing increasing by 7.1% (£231 million) and 24.4% (£55 million). In comparison, all other work in the quarter-on-quarter series fell 3.5% (£255 million), with declines in infrastructure and public other new work falling by 7.4% (£178 million) and 10.2% (£142 million) respectively. These decreases were partially offset by increases in private commercial and private industrial, which increased by 1.6% (£42 million) and 2.7% (£23 million) respectively.

All new work declined by 6.8% (£788 million) in Quarter 3 2019 compared with Quarter 3 2018. All new housing increased by 9.4% (£326 million), with public housing increasing by 38.4% (£78 million) and private housing increasing by 7.6% (£247 million). Elsewhere, all other work fell by 13.6% (£1,114 million) with infrastructure the only sector to see growth increasing by 6.7% (£141 million) compared with a year earlier. Public other new work and private commercial new work were the largest contributors to the decrease in all other new work decreasing by 29.5% (£521 million) and 17.1% (£561 million) respectively.

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6. Changes in this release impacting new orders

Today’s release sees the announcement to bring forward the new orders in the construction industry publication date by one month. Table 3 summarises the future publication schedule. The benefits of this earlier publication date for new orders include:

  • an earlier view of this forward-looking indicator by one month

  • the quarterly estimates of new orders now being published at the same time as the quarterly estimates of construction output

  • allowing us to bring forward the publication of the Output in the construction industry: sub-national and sub-sector dataset by one month

As a result of this earlier publication date, we have also reviewed the revisions schedule for new orders in the construction industry. Currently, new orders data in current prices and on a non-seasonally adjusted basis are unrevised (Tables 4 to 6) after the first quarter they are published. Because of the change to the earlier publication date, new orders data in Table 4 to 6 will be published as a provisional estimate at the first time of release, which will then be finalised in the subsequent quarter.

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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 report (updated 9 August 2019) 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 1 2019.

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

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10. Construction statistics engagement and development

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 the 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 redesignation of Construction output, Construction Output Price Indices and New orders as National Statistics. A letter concerning the redesignation is available. Please note: this National Statistics redesignation 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:

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