Construction output in Great Britain: December 2018

• The all work series decreased by 0.3% in Quarter 4 (Oct to Dec) 2018, following an increase of 2.1% in Quarter 3 (July to Sept) 2018; this decrease was driven by repair and maintenance output, which was down by 2.8%.

• The decrease in repair and maintenance was caused by drops in private housing and non-housing repair and maintenance output of 4.0% and 2.9% respectively.

• These falls were offset somewhat by a 1.1% increase in all new work, driven by increases of 1.9% in infrastructure and 1.4% in private commercial new work.

• The monthly series saw a sharper decline, with the all work series in December 2018 decreasing by 2.8% below the level seen in November 2018; this is the largest month-on-month fall in growth for all work since June 2012, when the series dropped by 4.3%.

• When compared with 2017, the level of all work in 2018 saw a 0.7% increase; this was the lowest annual growth since 2012, which saw a 6.9% decrease in annual output.

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).

Further information on output is gained from VAT turnover data, which is used to replace survey data for small- and medium-sized businesses. However, due to the delay in companies making VAT returns, this data is only taken on after a lag period. Currently, VAT turnover data is only used for the period Quarter 1 (Jan to Mar) 2016 to Quarter 2 (Apr to June) 2018. Data on new orders supplied by Barbour ABI is used to model the breakdown of the overall output figures for Great Britain into the lower level and regional data seen in Tables 5 and 6 of the dataset.

Summary information can be found in the Construction output quality and methodology information report.

Compared with the previous Construction output in Great Britain: November 2018 publication released on 11 January 2019, this publication contains revisions to the back series for the entirety of 2018, as we now have a full year of data available.

Revisions can be made for a variety of reasons, the most common include:

• late responses to surveys 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; please note: the period the VAT estimates are taken on from is the same as last publication.

• revisions to the input series for the output price indices

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.

Construction output decreased by 0.3% in Quarter 4 (Oct to Dec) 2018. This follows a relatively strong period of growth in Quarter 3 (July to Sept) 2018 of 2.1%. The decrease in Quarter 4 2018 was driven by a 2.8% drop in repair and maintenance, which outweighed a 1.1% increase in new work between Quarter 3 and Quarter 4. The biggest contributors to the fall were private housing and non-housing repair and maintenance, which fell by 4.0% and 2.9% respectively in the most recent period.

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 continued strength since June 2018, the rolling three-month on three-month series remains at a relatively high level compared with the earlier half of the year, despite the slight fall in the three months to December 2018. The current level is below the value seen in September 2018, but is higher than any point prior to then.

A large decrease in December 2018 can be seen in the all work, seasonally adjusted chained volume measure, where it has decreased by 2.8% relative to November 2018. This is the largest month-on-month fall in growth for all work since June 2012, when the series dropped by 4.3%. This fall in output means the monthly series finishes the year £339 million lower than the same time last year. Despite this fall, April 2018 remains the lowest point for the year of 2018, with the December value being £250 million higher than this period.

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 both repair and maintenance and new work have seen notable declines in December 2018, decreasing by 5.0% and 1.6% respectively in the monthly chained volume measure, seasonally adjusted series. This is the third consecutive monthly decline seen in the repair and maintenance series and puts the series at its lowest output value since November 2016. All subcategories of the repair and maintenance series have seen declines month-on-month, however the fall is primarily driven by a 5.9% decrease in non-housing repair and maintenance.

In the new work series, a decline of 6.8% in private new housing had a greater impact on the overall performance of the series, to the extent that even a 10.9% increase in the smaller public new housing series was not enough to offset it. In contrast to the trend of declines in December were public other new work and private industrial new work, which increased by 4.5% and 3.7% respectively.

Figure 3 shows the difference in the growth from the different construction sectors for Quarter 4 (Oct to Dec) 2018 in comparison with Quarter 3 (July to Sept) 2018, taken from the seasonally adjusted chained volume measure series. Construction output fell by £109 million in Quarter 4 2018 relative to Quarter 3 2018.

The most notable contributions to this decline came from private housing and non-housing repair and maintenance, which fell by £219 million and £214 million respectively. Despite being offset slightly by a £33 million increase in public housing repair and maintenance, this lead to a total decline of £400 million in repair and maintenance. This was the largest three-month on three-month fall seen since October 2012.

In contrast, new work is almost universally up quarter on quarter, with only private industrial new work showing a decline of £22 million. The overall growth is primarily driven by private commercial new work and infrastructure, which grew against their Quarter 3 2018 values by £101 million and £97 million respectively.

Figure 4 shows the difference in month-on-month growth from the different construction sectors, taken from the seasonally adjusted chained volume measure series. Construction output fell by £388 million in December 2018 relative to November 2018. This was the largest month-on-month fall since June 2012.

When looking at all work, there is a clear split between its components. The biggest decline is seen in private housing new work, which fell by £219 million. Against that, public housing new work increased by a comparatively small £57 million. Other new work saw a slight increase overall, with growth in public other new work of 4.5% and private industrial new work of 3.7% being enough to offset falls in private commercial new work and new infrastructure of 1.2% and 0.4% respectively.

Looking in greater detail at repair and maintenance, the fall seen was primarily due to the £140 million decline in non-housing repair and maintenance, with this being 59% of the overall £240 million drop seen in the total repair and maintenance series.

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 fell for December 2018 by 2.8% (£388 million) against the previous month. When looking at the month-on-month, month-on-year, and three-month-on-three-month series, we see declines across the board. The only series that saw an increase for all work is the three-month-on-year series.

Similar drops are seen in new work and repair and maintenance, with most measures showing falls. However certain types of work series have performed relatively well, such as new public housing, which sees significant gains in all measures. This has a relatively small impact on the total work series, due to the low relative value of public housing output. Interesting to note is infrastructure, which has performed somewhat poorly in the month-on-month series (down 0.4%), but saw significant increases in the month-on-year (up 4.2%) and the three-month-on year series (up 9.1%). This is due to both strong output in Quarter 4 (Oct to Dec) 2018 and comparatively weak output in Quarter 4 (Oct to Dec) 2017.

The earliest period open for revision in this release was January 2018. Table 2 illustrates the revisions to the all work quarterly chained volume measure seasonally adjusted growth rates in this publication in comparison with the previous Construction output in Great Britain published on the 11 January 2019. Revisions are due to survey data changes and updates to the construction output price indices for Quarter 3 (July to Sept) 2018. These changes have also impacted on the seasonally adjusted estimates. It should be noted that all monthly revisions from January 2018 to September 2018 are within a range of plus or minus 0.3 percentage points.

For the latest months we see downward revisions of 0.4 percentage points for October 2018 (0.0% to negative 0.4%) and 0.5 percentage points for November 2018 (0.6% to 0.1%) to the all work monthly chained volume measure seasonally adjusted series. The main reasons for the October 2018 revision are revised survey data, with the revision to November 2018 being caused by updates to the latest information for our input series for the construction output price index.

When looking at the total output for 2018 across all months, there was a growth in all work of 0.7% compared with 2017. This is the lowest year-on-year growth since 2012, which saw a fall of 6.9% in all work. That said, despite relatively flat performance at a top level, individual series have showed strong growth. Examples of this include private housing new work, infrastructure, and non-housing repair and maintenance, which grew by 6.1%, 5.7% and 3.9% respectively. The annual growth output series can be seen in Figure 5.

As can be seen, following on from strong growth in 2017, 2018 has seen relatively lower growth. It is also interesting to note that since 2016, the repair and maintenance series and new work have tracked each other closely in terms of growth. Prior to then the series diverge more strongly, as repair and maintenance saw somewhat flat output between 2014 and 2016 while new work saw strong growth.

Looking at the monthly movements of the series in 2018, Figure 6 shows all work, and its two components, in solid lines, whilst other series of interest are displayed in dashed lines. Please note that “other new work excl infrastructure” is not published in the tables as a specific series. Instead, it is the combination of public new work, private industrial new work, and private commercial new work, as an indexed series.

Total housing new work saw steady growth across 2018, seeing a 5.1% increase between January and December 2018. This growth would have been stronger were it not for declines in the most recent month, as new housing had grown by 9.9% in the period January to November 2018.

The growth in housing new work sat in contrast to a relatively flat performance from all new work, which only grew by 0.1% in the period January to December 2018. This is due to infrastructure new work falling 3.0% over the year, as well as other new work excluding infrastructure decreasing by 2.9%. It is worth noting that infrastructure has been very volatile as a series, seeing a 12.6% fall between January and March of this year, as well as a 9.1% rise between August and September.

Despite being almost flat in terms of growth, all new work still outperformed repair and maintenance over 2018, which saw a 2.9% drop in output between January and December. For the first two calendar quarters of 2018, repair and maintenance was seeing steady growth, but in Quarter 3 (July to Sept) housing repair and maintenance began to decline, followed by non-housing repair and maintenance doing much the same in Quarter 4 (Oct to Dec). This was capped off by a particularly slow December, meaning that over the year housing and non-housing repair and maintenance saw declines of 3.8% and 1.9% respectively.

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 17 January 2019 for November 2018, showed the seasonally adjusted production in construction (PDF, 563 KB) decreased by 0.1% in the Euro area (EA19) but was up by 0.2% in the EU28 when compared with October 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 Monthly construction spending report (PDF, 262KB) for November 2018 was published on 1 February 2019. This includes the total dollar value of construction work done in the US.

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 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 suite 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: 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.

As previously indicated in Section 7 of the October 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, which will be the next publication to be released. At the same time, the reference year for our new orders series will move from 2005 equals 100 to 2016 equals 100. This will make the reference year consistent with our construction output series and will provide users with a more up-to-date frame of reference. This change will impact the index numbers (Table 1) and the constant price series we publish (Tables 2 and 3), as within the current publication these tables are presented on a 2005 equals 100 basis. This will not affect our growth rate series (Tables 8 and 9) or our current price data (Tables 4 to 6) in the New Orders dataset.

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.