Construction output in Great Britain: Dec 2016 and Oct to Dec 2016

• In December 2016, construction output rose by 1.8% compared with November 2016, largely due to an increase in new work.
• Private commercial work was one of the main drivers behind construction growth, expanding by 5.2% in December.
• The underlying pattern as suggested by the 3 month on 3 month movement shows a slight expansion of 0.2% in output, revised up from 0.1% in the preliminary estimate of GDP.
• Compared with December 2015, construction output increased by 0.6%, the main contribution to this growth came from new housing work.
• Despite growing by 0.2% in December, in comparison to 2015, infrastructure continued its month on year decline, falling for the eleventh consecutive month.

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.

Construction output follows the national accounts revisions policy. However, in processing December 2016 data, we had cause for concern over the quarterly revisions back to Quarter 1 (Jan to Mar) 2016 and have taken the decision to revise Quarter 4 (Oct to Dec) 2016 only.

Over the course of the next month, we will investigate the reasons behind these revisions and will publish a revised series in due course.

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

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 for 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.

In December 2016, construction output increased by 1.8% when compared with November 2016 and builds on a slight month-on-month increase of the upwardly revised 0.4% in November 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 increased by 0.2%, contributing to overall year-on-year growth of 1.5% in 2016.

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 for new work is again seen in December 2016, where new work increased by 2.4% compared with November 2016 and by 2.0% compared with December 2015. Repair and maintenance does follow its long-term trend on the year, decreasing by 2.1%, however, compared with November 2016, repair and maintenance increased by 0.8%.

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 all work’s growth; highlighting that the strongest contribution comes from private commercial. The only sectors exhibiting negative growth were private industrial and public other new work.

All aspects of housing continued their growth as the push for an increase in the quality and quantity of housing continues to gather pace.

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

One of the most substantial downward pressures on construction output has previously come from infrastructure. Despite showing a slight month on month increase of 0.2% in December, infrastructure continued to fall month on year.

In contrast, new housing work provided the biggest boost to growth in all work. Both public and private have continued to rise at a sizeable rate, in comparison with both the previous month and previous year.

Output in the construction industry follows the Eurostat Short Term Statistics (STS) regulation for production in construction. 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 18 January 2017 for November 2016 showed the seasonally adjusted production in the construction sector increased by 0.4% in both the Euro area (EA19) and EU28 when compared with October 2016. It should be noted that an accurate comparison cannot be made as Eurostat data are calculated on a 2010 equals 100 basis, while Great Britain data are calculated on a 2013 equals 100 basis.

Outside of the EU, the US Census Bureau release Value of Construction Put in Place was published on 1 February 2017. This includes the total dollar value of construction work done in the US.

Other useful links

• Department for 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 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