Construction output in Great Britain: February 2018

• Construction output continued its recent decline in the three-month on three-month series, falling by 0.8% in February 2018.
• The three-month on three-month decrease in construction output was driven predominantly by the continued decline in repair and maintenance work, which fell by 2.6% in February 2018.
• Construction output also decreased in the month-on-month series, contracting by 1.6% in February 2018, stemming from a 9.4% decrease in infrastructure new work.
• Compared with February 2017, construction output fell 3.0%; the biggest month-on-year fall since March 2013.
• Office for National Statistics has received some anecdotal information from a small number of survey respondents regarding the effect of the snow on their businesses in the final week of February 2018. The adverse weather conditions across Great Britain could have potentially contributed to the decline in construction output, although it is difficult to quantify the exact impact on the industry.
• In line with the National Accounts Revisions Policy, data in this publication is consistent with the Quarterly National Accounts: October to December 2017 published 29 March 2018, incorporating the latest standard revisions and updated Value Added Tax (VAT) data for January 2017 to June 2017 and new VAT data for July 2017 to September 2017.

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 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-making 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.

Summary information can be found in the Construction output Quality and Methodology Information report.

Compared with the previous Construction output in Great Britain: January 2018 publication released on 9 March 2018, this February 2018 release contains revisions for January 2017 onwards. This means that we have incorporated additional data since this period.

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
• imputations being replaced by actual data
• revisions to seasonal adjustment factors, which are re-estimated every month and reviewed annually
• HM Revenue and Customs (HMRC) VAT returns replacing MBS data for small- and medium-sized businesses when VAT estimates become available each quarter

Data published in this release are consistent with the release of Quarterly national accounts: October to December 2017 published on 29 March 2018. The Quarterly national accounts incorporated the latest revisions across 2017. This includes Value Added Tax (VAT) data for January 2017 to June 2017 and new VAT data for July 2017 to September 2017. This approach is consistent with the National Accounts Revisions Policy. For further information as to the use of VAT turnover within the national accounts please see VAT turnover data in National Accounts: background and methodology (published 19 March 2018).

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 then 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.

The impact of improvements to construction statistics article explains and highlights the impact of recent improvements to construction statistics, affecting the nominal data series, output price indices and seasonal adjustment. As a result, the output price indices are no longer considered to be an interim method.

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.

Construction output fell by 0.8% during the three-month on three-month period to February 2018, representing the fourth consecutive three-month on three-month decline in output. The 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 consecutive periods of month-on-month growth in the final two months of 2017, construction output reached a record high. In the first two months of 2018, output has subsequently begun to contract, decreasing by 1.6% in the month-on-month series in February 2018. Construction output peaked in December 2017, reaching a level that was 30.3% higher than the lowest point of the last five years, April 2013. Despite the month-on-month decrease in February 2018, construction output remains 24.2% above this level.

This February 2018 release contains revisions for January 2018, with month-on-month growth in January 2018 being revised up 0.3 percentage points, from negative 3.4% to negative 3.1% due to the receipt of new data.

Since the previous Construction output in Great Britain: January 2018 publication, released 9 March 2018, further revisions have been made to construction output in line with Quarterly national accounts, published on 29 March 2018. As a result of the inclusion of VAT turnover data and late survey returns, there have been minimal upward revisions to construction output in Quarter 1 (Jan to Mar) and Quarter 2 (Apr to June). In Quarter 3 (July to Sept), the incorporation of VAT returns for the first time has resulted in the negative growth reported in the second estimate of GDP now showing positive growth of 0.4%. For Quarter 4 (Oct to Dec), late survey returns have revised the data from negative 0.7% to negative 0.1%. These revisions are depicted in Figure 4 of the Monthly economic commentary: March 2018.

The annual growth in 2017 of 5.7% is revised upwards from the 5.1% growth reported in the second estimate of GDP and is stronger than the 3.9% growth seen in 2016. This strength reflects strong growth in construction output in late 2016 and the first quarter of 2017.

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.

Figure 2 shows that since the beginning of 2015, new work, and repair and maintenance have followed a broadly similar pattern. Both repair and maintenance, and new work have risen steadily, resulting in all work reaching a level peak in December 2017.

Construction output fell by 1.6% month-on-month in February 2018, following a contraction of 3.1% in January 2018. The decrease stemmed from a fall in all new work, which also continued to fall following a contraction in January 2018, decreasing by 1.7%. Elsewhere, repair and maintenance also fell in February 2018, albeit to a lesser extent than all new work, decreasing by 1.5% compared with the previous month. 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.

Office for National Statistics has received some anecdotal information from a small number of survey respondents regarding the effect of the snow on their businesses in the final week of February 2018. Therefore, part of the fall in construction output in February 2018 could potentially be attributed to the adverse weather conditions across Great Britain. However, due to the volatile nature of the industry, it is difficult to quantify the impact on the industry as a whole.

Figure 3 shows the difference in the three-month on three-month volume from the different construction sectors in terms of real volume growth, taken from our seasonally adjusted chained volume measure series.

Construction output fell by £298 million in the three-month on three-month time series, stemming from falls across all but two sectors. The most notable decline came from repair and maintenance work, which continued its recent fall due to decreases in both non-housing and housing repair and maintenance, which fell by £191 million and £172 million respectively. Elsewhere, the value of private commercial new work also continued to decrease, falling for the eighth consecutive period in the three-month on three-month series, decreasing by £103 million.

In contrast, private housing and infrastructure new work provided the only positive contributions to growth. Following strong growth throughout the majority of 2017 and the first month of 2018, private housing continued to grow in February 2018, increasing by £232 million. In addition, the value of infrastructure work carried out between December 2017 to February 2018 compared with September to November 2017 also increased, rising by £60 million.

Figure 4 shows the difference in month-on-month volume from the different sectors in terms of real volume growth, taken from our seasonally adjusted chained volume measure series.

Compared with January 2018, construction output fell by £206 million in February 2018. The main contribution to the fall in all work came from a decrease in the value of infrastructure new work, which decreased by £152 million in February 2018, falling from its third-highest level on record in the previous month. Elsewhere, the only other notable drag on output came from non-housing repair and maintenance, which decreased by £66 million.

The only positive contribution to growth came from new housing. Following a large fall in the previous month, private housing new work increased by £42 million in February 2018, remaining at a relatively high level. Similarly, public housing new work also grew following a decline in the previous month, increasing marginally by £9 million.

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 decreased to £12,658 million in February 2018. This fall stems from a decrease in all new work, which decreased to £8,211 million. Elsewhere, total repair and maintenance also fell, decreasing to £4,447 million.

In comparison with February 2017, construction output fell by 3.0%, representing the biggest month-on-year decline since March 2013. This month-on-year fall has been driven by falls in both all new work, and repair and maintenance, which fell 2.4% and 4.0% respectively. The fall in all new work stemmed from decreases in private commercial new work, which fell 7.7% compared with February 2017 and public other new work, which fell 12.9%. Meanwhile, the fall in repair and maintenance occurred as a result of the continued slowdown in non-housing repair and maintenance, which contracted by 6.6%.

Construction output also fell in the most recent three-months on year series, contracting by 1.2%. The increase in private housing, which grew 8.3%, was more than offset by falls in public other new work, which contracted 11.0% and private commercial work, which decreased 5.4%.

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 19 March 2018 for January 2018, showed the seasonally adjusted production in the construction sector (PDF, 520KB) decreased by 2.2% in the Euro area (EA19) and decreased by 2.1% in the EU28 when compared with December 2017.

Outside the EU, the US Census Bureau release Value of construction put in place (PDF, 246KB) was published on 2 April 2018. This includes the total dollar value of construction work done in the US.

The Construction statistics: Number 18, 2017 edition was published on 2 October 2017. This publication contains analysis on the construction sector in 2016, 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 3 (July to Sept) 2017. Further information on the use of VAT turnover and its impact can be found in the VAT turnover implementation into national accounts article.