Construction output in Great Britain: December 2021, new orders and Construction Output Price Indices, October to December 2021

• Monthly construction output increased by 2.0% in volume terms in December 2021; this came solely from an increase in new work (3.5%) as repair and maintenance saw a decline of 0.7% on the month. 

• The level of construction output in December 2021 was 0.3% (£35 million) above the February 2020 pre-coronavirus (COVID-19) pandemic level; new work was 2.0% (£190 million) below the February 2020 level, while repair and maintenance work was 4.5% (£225 million) above the February 2020 level.

• Despite the monthly increase in December 2021, downward revisions because of late and revised survey data, most notably in September and November 2021, means output has recovered less than previously estimated in November 2021 (see Table 4).

• Alongside the monthly growth, quarterly construction output increased 1.0% in Quarter 4 (Oct to Dec) 2021 compared with Quarter 3 (Jul to Sept) 2021; both new work (1.1%) and repair and maintenance (0.8%) saw increases.

• Annual construction output increased by a record 12.7% in 2021 compared with 2020, mainly as a result of the coronavirus pandemic contributing to a very weak 2020, which saw the record largest decline in annual growth (fall of 14.9%).

• Total construction new orders increased by 9.2% (£1,121 million) in Quarter 4 2021 compared with Quarter 3 2021; total new orders are now at their highest level (£13,326 million) since Quarter 3 2017, which was affected by large value orders for High Speed 2 (HS2).

• The annual rate of construction output price growth was 6.2% in the 12 months to December 2021; this was the strongest annual rate since records began in 2014.

• At the type of work level, the annual rate of price growth in the 12 months to December 2021 was at its strongest in new housing (9.9%), which is the strongest growth since records began in 2014.

Monthly construction output grew 2.0% in volume terms in December 2021 compared with November 2021. This is the second consecutive month of growth and the largest single-month growth since March 2021 (3.9%).

Anecdotal evidence from both returns received for the Monthly Business Survey for Construction and Allied Trades and the Business Insights and Conditions Survey (BICS) suggested some of the issues in sourcing construction products in the second half of 2021 had continued to ease.

Month-on-month change in construction output in December 2021

Construction output grew 2.0% (£281 million) in December 2021 compared with November 2021.

Infrastructure new work and private new housing were the largest contributors to the monthly increases growing 8.5% (£212 million) and 3.1% (£95 million) respectively. Notable increases were also seen in the smaller sectors of private industrial and public new housing, which grew by 9.1% (£41 million) and 7.4% (£30 million) respectively.

All sectors in repair and maintenance saw small decreases on the month.

Anecdotal evidence suggests that the increase in private new housing is because of businesses pushing more work through than a usual December as a result of it being their year end. The easing of sourcing certain construction products in December 2021 compared with previous months is also likely to have helped house builders output.

Anecdotal evidence also suggests the increase in December 2021 in private industrial came from a rise in warehouses and distribution centres. This is further illustrated in the new orders data with warehouses in private industrial seeing annual growth of 144.6% in 2021, likely to be linked to a change in consumers' shopping habits during the coronavirus (COVID-19) pandemic.

Quarter-on-quarter change in construction output in Quarter 4 2021

Construction output increased 1.0% (£421 million) in Quarter 4 (Oct to Dec) 2021 reversing the 1.4% fall in Quarter 3 (Sept to July) 2021.

Both new work 1.1% (£287 million) and repair and maintenance 0.8% (£133 million) saw increases in Quarter 4 2021.

Eight of the nine sectors saw an increase in Quarter 4 2021. The largest contributors were public other, private industrial and private commercial new work, which increased 8.7% (£110 million), 4.9% (£112million) and 2.1% (£108million) respectively.

Year-on-year change in construction output in 2021

Total construction output increased 12.7% in 2021 compared with 2020. This is the largest increase since annual records began in 1997 surpassing the previous record of 9.9% in 2014. It follows a record fall of 14.9% in 2020, largely because of the coronavirus pandemic.

The annual increase in 2021 was because of rises in both new work, and repair and maintenance, which rose 11.2% and 15.5% respectively.

At a sector level, eight of the nine sectors saw an increase in annual growth in 2021.  Record annual growth increases were seen in infrastructure (30.4%), private housing repair and maintenance (20.2%) and non-housing repair and maintenance (14.1%).

Anecdotal evidence suggests the large increase seen in infrastructure new work in 2021, is from projects such as High Speed 2, motorway improvements and green energy developments.

Private commercial was the only type of work to see an annual decline in 2021 (6.8%). This fall is on the back of a record decline in 2020 (22.2%) and is the fourth successive decline in annual growth for private commercial new work. Anecdotal evidence from some businesses suggests that they have put investment decisions on hold over the last few years because of economic uncertainty.

Total construction new orders increased by 9.2% (£1,121 million) in Quarter 4 (Oct to Dec) 2021 compared with Quarter 3 (July to Sept) 2021.  

New orders are now higher than before the coronavirus (COVID-19) pandemic. Compared with Quarter 4 2019, which was the last full quarter not affected by the pandemic, and not seeing a noticeable short-term spike (as was the case in Quarter 1 2020), total construction new orders are now 16.6% (£1,894 million) higher, with all six sectors having recovered to above their pre-pandemic level in Quarter 4 2021.

All other new work (such as non-housing new orders) increased 15.0% (£1,218 million) in Quarter 4 2021. An increase was seen across all non-housing sectors, most notably in both infrastructure 23.1% (£386 million) and private industrial 21.8% (£349 million) new orders. Housing new orders saw a quarterly fall of 2.4% in Quarter 4 2021 driven by public housing which fell 19.1% (£81 million).

Looking at private industrial more specifically, factories and warehouses both contributed to the increase in Quarter 4 2021 (Figure 7). For warehouses this is likely to represent the continued need for storage space as consumers' requirements have adapted during the pandemic, for example the increase in online retail. For factories, a large one off order was placed in the north east, which contributed significantly to the quarterly growth in Quarter 4 2021.

The increase in infrastructure new orders was led by orders for both rail and harbour projects. New orders in rail projects saw its largest quarterly growth since Quarter 3 2019 and harbour projects saw it highest value since records began, driven by a one off project in the north east.

Prices in the construction industry, as estimated by the Construction Output Price Index (OPI), increased to 6.2% in the 12 months to December 2021. This was the strongest annual rate of construction output price growth since records began in 2014.

This supports the anecdotal evidence received from survey returns to the Monthly Business Survey for Construction and Allied Trades. The evidence continues to suggest that the rising prices of raw materials such as steel, concrete, timber and glass have contributed to the overall rise in the cost of materials throughout Quarter 4 (Oct to Dec) 2021, however prices began to stabilse in the latter part of the quarter.  

The monthly rate of prices for all construction is 0.3% in December 2021, but this has slowed slightly from 0.4% in November 2021 and substantially from the record monthly rise of 1.2% in October 2021.

New work

The Construction OPI for new construction work grew 6.6% in the year to December 2021.  

The new work sector with the strongest annual growth rate of prices was new housing, which rose 9.9%. This is the strongest rate of growth for new housing output prices since records began in January 2014.

Repair and maintenance

The Construction OPI for all repair and maintenance grew 5.3% in the year to December 2021. This is the strongest rate of growth for repair and maintenance output prices since records began in January 2014.

The repair and maintenance sector with the strongest annual growth rate of prices was non-housing repair and maintenance, which rose 5.4%.

Construction output estimates

Construction output estimates are monthly estimates of the amount of output chargeable to customers for building and civil engineering work done in the relevant period, excluding Value Added Tax (VAT) and payments to subcontractors.

Seasonally adjusted estimates

Seasonally adjusted estimates are derived by estimating and removing calendar effects (for example, leap years) and seasonal effects (for example, decreased activity at Christmas because of site shutdowns) from the non-seasonally adjusted estimates.

Value estimates

The value estimates reflect the total value of work that businesses have completed over a reference month.

Volume estimates

The volume estimates are calculated by taking the value estimates and adjusting to remove the impact of price changes.

Quality and methodology

More quality and methodology information is available in:

• Construction output QMI

• New orders in construction QMI

• Construction output price indices QMI

Sub-national and sub-sector output

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: sub-national and sub-sector.

Revisions to construction output data

In this release revisions to construction output estimates are back to January 2021.

Revisions in this release are a result of:

• late responses to survey returns replacing imputations, or revisions to original returns

• revisions to seasonal adjustment factors, which are re-estimated every month and reviewed annually

• revisions to the input series for the Construction Output Price Indices

For further information on the revisions profile please see the output in the construction industry revisions triangles published on a one-month growth and three-month growth basis.

Despite the monthly increase in December 2021, output has recovered less than estimated in last month's release. In today's release output is 0.3% above pre-coronavirus (COVID-19) pandemic levels (February 2020), whereas in the November 2021 edition of the release output was estimated to be 1.3% above. These downward revisions mainly come from September and November 2021.

Bias adjustment

Typically, since the move to monthly gross domestic product (GDP) estimates, an adjustment to address any bias in survey responses for construction output is applied to the early construction output monthly estimates.

Like November 2021, the response rate for December 2021 is slightly lower at 65.3% turnover response compared with a normal turnover response of approximately 70% for the third month in the quarter. Therefore, no comparable historical data are available at the time of the first estimate for a reference month, so we have not applied a bias adjustment for December 2021.

Blue Book 2021

In Blue Book 2021, a new framework was introduced to improve how we produce volume estimates of GDP for balanced years as part of the supply use process. This framework included the implementation of double-deflated industry-level gross value added (GVA) for the first time. This improvement was reflected in the September 2021 quarterly national accounts and October 2021 monthly GDP estimates for the first time.

As a result, volume estimates in the monthly GDP and construction outputs releases will differ for the period 1997 to 2019 because the construction publication measures the volume of construction work (output), while the GDP series measures GVA (that is, output minus intermediate consumption). Construction estimates will align, however, from January 2020 onwards on a growth basis.

Articles on the impact of double deflation and Blue Book changes provide information and indicative effects of this change to industry-level GVA volume.