Construction output in Great Britain: September 2018

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

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Cyswllt:
Email Ceri Lewis

Dyddiad y datganiad:
9 November 2018

Cyhoeddiad nesaf:
10 December 2018

1. Main points

  • Construction output continued to recover following a relatively weak start to the year, increasing by 2.1% in Quarter 3 (July to Sept) 2018; this follows a fall of 1.6% in Quarter 1 (Jan to Mar) 2018 and an increase of 0.8% in Quarter 2 (Apr to June) 2018.

  • Quarter 3 (July to Sept) 2018 was driven by all new work which increased by 2.8%, and repair and maintenance which increased by 1.0%.

  • Construction output increased by 1.7% between August and September 2018, this was driven by an increase in all new work which increased by 2.8%; this was partly offset by a fall of 0.3% in repair and maintenance.

  • The level of the all work series for September 2018 reached £13,995 million – a record high since the monthly records began in January 2010.

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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 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 policymaking. 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: August 2018 publication released on 10 October 2018, this release contains revisions in the back series of construction output estimates for July 2018 and August 2018.

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.

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3. Construction output in September 2018

Construction output increased by 2.1% in the three months to September 2018, as the industry continues to recover following a weak start to the year. 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.

Following a marked fall in the rolling three-month series at the beginning of 2018, construction output continued to recover in the three-month series to September 2018. Today’s release has also meant the September 2018 data in the all work chained volume measure, seasonally adjusted series has reached a record high since the monthly records began in January 2010. This new record high is 28.4% above this lowest point in the last 5 years, September 2013.

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4. 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.

Figure 2 shows that since the beginning of 2015, all new work, and repair and maintenance have followed a broadly similar pattern. Both repair and maintenance and all new work have risen steadily.

Following three consecutive months of contraction in the all new work month-on-month series at the start of 2018, construction output has bounced back in the second and third calendar quarters of 2018. This is further illustrated in today’s release with the month-on-month construction output series increasing by 1.7% in September 2018. This stemmed from an increase in the all new work series which increased by 2.8%. This was partially offset by a fall of 0.3% in the repair and maintenance series.

Figure 3 shows the difference in the growth from the different construction sectors for Quarter 3 (July to Sept) 2018 in comparison with Quarter 2 (Apr to June) 2018, taken from our seasonally adjusted chained volume measure series.

Construction output increased by £872 million in Quarter 3 2018 compared with Quarter 2 2018. The most notable contribution to growth came from private housing new work, which increased by £507 million between Quarter 2 2018 and Quarter 3 2018. In addition, other notable calendar quarter growth came from non-housing repair and maintenance and infrastructure, increasing by £230 million and £191 million respectively.

In contrast, downward pressure on construction output in Quarter 3 2018 compared with Quarter 2 2018 came from private commercial new work, private housing repair and maintenance and private industrial new work, which had falls in the three-month on three-month series. These series decreased by £162 million, £124 million and £60 million respectively.

Figure 4 shows the difference in month-on-month growth from the different construction sectors, taken from our seasonally adjusted chained volume measure series. Compared with the previous month, construction output increased by £233 million in September 2018.

The most notable increases came from infrastructure and public housing new work, which increased by £125 million and £81 million respectively in September 2018. These increases more than offset the notable decreases in the month-on-month growth in private housing repair and maintenance and private industrial new work, which decreased by £45 million and £23 million respectively.

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5. Detailed growth rates

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 a record high level of £13,995 million in September 2018. This increase stems from strong growth in all new work which increased to £9,207 million. This was partially offset by a fall in repair and maintenance, which fell to £4,788 million.

In comparison with September 2017, construction output grew 3.0%. This month-on-year increase occurred primarily because of a 3.4% increase in all new work along with growth of 2.4% in repair and maintenance. The most notable contributions to month-on-year growth came from private housing new work and infrastructure which grew by 9.9% and 10.7% respectively. In contrast, compared with the same period in 2017, the public other and private commercial new work sectors continued their month-on-year declines falling by 10.2% and 3.7% respectively. As illustrated in Figure 5, this represents the 18th consecutive fall in the month-on-year series for public other new work and the 10th consecutive fall in the series for private commercial new work.

Following increases in June, July and August 2018, construction output continued to grow for September 2018 by 2.0% in the three-month on year series. The 9.6% and 6.2% three-month on year growth in private housing new work and non-housing repair and maintenance for September 2018 more than outweighed the 11.3% and 5.3% falls in public other and private commercial new work respectively.

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6. Sector spotlight: Focus on the repair and maintenance sector

Repair and maintenance includes any work aimed at repairing something which is broken or requires maintaining to an existing standard. Specific examples of this type of activity include redecoration, conversions and extensions to existing properties. Currently, based on today’s September 2018 publication, repair and maintenance equates to 34.2% of the construction industry and this percentage has remained relatively stable since the monthly records began in January 2010.

Within the all repair and maintenance series this can be further split into housing repair and maintenance and non-housing repair and maintenance. The current share of these sub-components of repair and maintenance are broadly equal, with the current split based on September 2018 data being 48.8% and 51.2% in favour of non-housing repair and maintenance.

Throughout 2016 and 2017, the sub-components of repair and maintenance broadly followed the all repair and maintenance series as illustrated in Figure 6. However, since the start of 2018 the sub-components of the repair and maintenance series have started to display different characteristics in comparison with the all repair and maintenance series. Like most of the other construction output types of work, the all repair and maintenance series saw a decline in output from January 2018 to April 2018 of 1.6%, likely to be affected by the adverse weather conditions at the start of the year. The all repair and maintenance series then experienced strong growth of 5.1% in the month-on-month series for May 2018 (the second highest since the monthly records began in January 2010, with the highest growth in the series being 5.3% in April 2016). Since May 2018 the all repair and maintenance series has continued to stay broadly flat, however the composition of this flat all repair and maintenance series, has consisted of a falling total housing repair and maintenance series and a rising non-housing repair and maintenance series with latest month-on-month growth for September 2018 of negative 2.3% and positive 1.6% respectively.

Looking at 2018, the percentage change for the chained volume measure, seasonally adjusted data for September 2018 in comparison with January 2018 for the all repair and maintenance series is 2.6%. This, however, is made up of strong growth in the non-housing repair and maintenance chained volume seasonally adjusted series of 7.0%, whereas the housing repair and maintenance series has fallen by 1.8% over the same period. These data can be found in Table 2a in the accompanying Output in the construction industry dataset. The non-housing repair and maintenance series incorporates repair and maintenance of infrastructure, public other work, which includes schools and hospitals, and private other work, which includes offices, shops and entertainment venues.

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7. Revisions

This September 2018 release contains revisions from July 2018 onwards. Month-on-month growth in July 2018 has been revised down 0.3 percentage points, from positive 0.5% to positive 0.2%. In contrast, August 2018 has been revised up 0.4 percentage points from negative 0.7% to negative 0.3%. These revisions are within our standard expected range and are due to the receipt of new survey data and changes in the seasonal adjustment factors.

This release represents the fifth monthly construction output release in which the improved imputation methodology has been used. While minimal revisions can be seen in top-level construction output estimates, some larger revisions can be seen at the type of work level.

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10. 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 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 (Jan to Mar) 2018.

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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11. Construction statistics engagement and development

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:

The overall impact of the improvements to construction statistics that were included in Quarterly national accounts: Jan to Mar 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.

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 December 2014.

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