Construction output in Great Britain: February 2019

• Construction output decreased by 0.6% in the three-month on three-month all work series in February 2019; the all repair and maintenance, and all new work series saw decreases of 1.0% and 0.4% respectively.

• The decrease in the all new work series was driven by a fall in private commercial new work, which decreased by 3.7% whereas the decrease in all repair and maintenance, was driven by a fall in non-housing repair and maintenance which decreased by 2.6%.

• Construction output increased by 0.4% in the month-on-month all work series in February 2019.

• In the month-on-month series, there was a 1.1% increase in all new work, while all repair and maintenance fell by 1.0% in February 2019.

• Estimates in this release are consistent with the GDP quarterly national accounts, UK: October to December 2018 publication released on 29 March 2019.

• Because of this, revisions can be seen throughout 2018 with the 2018 annual growth rate revised down to 0.3% from 0.7%.

Following the announcement by the UK Statistics Authority on 7 March 2019, Construction Output Price Indices, Great Britain construction output statistics and Construction new orders have been re-designated as National Statistics, in accordance with the Statistics and Registration Service Act 2007 and signifying compliance with the Code of Practice for Statistics. This means the independent regulator has judged that these statistics provide the highest levels of “trustworthiness, quality and value”. This announcement follows a long-term development programme, during which the Office for National Statistics (ONS) worked extensively with users to make significant improvements to the statistics. More information on these improvements can be found in Section 9.

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 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 (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, these data are only taken on after a lag period. Currently, VAT turnover data are used for the period Quarter 1 (Jan to Mar) 2016 to Quarter 3 (July to Sept) 2018.

Furthermore, 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: subnational and sub-sector.

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

For this publication, revisions are being made to ensure consistency with the GDP quarterly national accounts, UK: October to December 2018 publication released on 29 March 2019. This makes the monthly series published here for the first time consistent with the quarterly series published in the quarterly national accounts. Furthermore, January 2019 is open to revisions in today’s publication in line with the National Accounts Revisions Policy.

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; in this release this impacts Quarter 3 (July to Sept) 2018 for the first time

• revisions to the input series for the construction 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.

The three-month on three-month series for all work saw a decline of 0.6% in February 2019. This is due largely to the weakness in December 2018. February 2019 marks the third consecutive decline in the three-month on three-month series, with a general trend in this series of a slowing of growth since mid-2018.

At type-of-work level, the largest contributors to the decline seen in the three-month on three-month series were private commercial new work and non-housing repair and maintenance, which fell by 3.7% and 2.6% respectively. The largest growths offsetting this were public other new work and infrastructure, which grew 4.7% and 1.5% respectively. Overall the top-level growth rate is representative of a very mixed picture at a type of work level, with strong growths in certain sectors being more than offset by declines seen elsewhere.

In comparison with the more volatile monthly series, the rolling three-month time series provides a more comprehensive picture of the underlying trends within the industry as illustrated in Figure 1.

Both the monthly and rolling three-month series saw slight increases in February, with both series growing by 0.4%. However, while the monthly series has grown to a new record high, the rolling three-month series has yet to recover to the levels seen prior to the large declines of December 2018.

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 a 1.1% increase in all new work was the driving force behind the 0.4% month-on-month growth in all work, as repair and maintenance saw a 1.0% decline over the same period. This brings the all work series to a new high level of £13,926 million, the highest seen since monthly records began in January 2010, and overtaking the previous record of £13,880 million seen in September 2018.

Despite its decline month-on-month, repair and maintenance remains relatively high in comparison with the historic series, being at similar levels to those seen throughout much of 2018. It should be noted that February’s decline is after a record month-on-month growth of 6.6% in January 2019. The February 2019 all repair and maintenance decline is driven exclusively by non-housing repair and maintenance, where a month-on-month decline of 2.7% follows January’s increase of 9.2%, that increase having been the largest seen since April 2016. All other components of repair and maintenance saw month-on-month growths in February 2019.

In the new work series, the growth of 1.1% was driven by increases in private new housing and infrastructure, which saw growths of 2.9% and 2.6% respectively. These more than offset declines in public other new work and private commercial new work of 1.6% and 0.5% respectively. The fall in private commercial new work is a continuation of the trend of weakness seen in this series, which has only seen three monthly periods of growth since January 2018.

As can be seen from Figure 3, all work has fallen by £256 million in the three-month period to February 2019, in comparison with the previous three months.

This period has seen similar patterns across both repair and maintenance, and new work: individual large declines in specific series offsetting less extreme growth seen in most types of work. For repair and maintenance, which declined by £138 million, this was entirely driven by a fall of £186 million in non-housing repair and maintenance. This was slightly offset by growth in both public and private housing repair and maintenance in the three-month period to February 2019, seeing increases of £5 million and £44 million respectively.

All new work has seen a comparable magnitude of decline, falling by £116 million. The picture seen here is more polarised, with declines of £264 million and £158 million in private commercial and private housing new work respectively being offset somewhat by growths of £117 million and £79 million seen in public other new work and infrastructure respectively.

Figure 4 shows the difference in month-on-month levels from the different construction sectors, taken from our seasonally adjusted, chained volume measure series. Compared with the previous month, construction output increased by £51 million in February 2019.

Following relatively strong month-on-month growth seen in January 2019, this period saw more subdued growth, recording relatively small movements in most sectors. In comparison with the three-month on three-month series, repair and maintenance followed almost the same pattern: a large fall of £65 million in non-housing repair and maintenance offset slightly by small increases in all other types of repair and maintenance work.

The same is not true of new work, which saw an overall growth of £101 million compared with January 2019, due to increases of £88 million and £48 million seen in private new housing and infrastructure respectively. Conversely, public other new work sees a decline of £14 million in the month-on-month series. This represents the largest contribution to the decline seen in new work this period, while private commercial new work and private industrial new work also decreased by £10 million, and £8 million respectively.

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

In the three-month on three-month series, the large falls seen in December 2018 continue to depress the growth rates seen in this series at an all work level, where the series is down 0.6% in the most recent three months compared with the period September 2018 to November 2018. However, certain series that either did not fall in December 2018, such as public new housing and public other new work, or have recovered strongly since their falls, such as infrastructure, have managed to defy the overall trend of declines.

Looking at the longer view, we see in the three-months on three-months a year earlier series the relative strength of the December 2018 to February 2019 period when contrasted with the same period a year earlier. There have been almost universal increases, with only private commercial new work, and public housing repair and maintenance seeing declines. Infrastructure, and non-housing repair and maintenance were the two biggest contributors to growth, growing 7.1% and 4.1% respectively.

After strong growth seen in January 2019, February 2019 has a more mixed picture for growth, with the all work series increasing by 0.4%. This modest month-on-month growth was due to an increase of 2.9% in private housing new work being mostly offset by a 2.7% fall in non-housing repair and maintenance.

When looking at February 2019, there was month-on-year growth of 3.3% in the all work series. When looking at the type of work month-on-year growth rates, only private commercial new work fails to see positive growth for February 2019 in comparison with February 2018. The weakness in private commercial new work series is further highlighted as this is now the 15th consecutive decline in this series. Infrastructure, and non-housing repair and maintenance were the two biggest contributors to the growth seen in the month-on-year series, increasing by 12.6% and 7.1% respectively. When looking at growth between February 2019 in comparison with February 2018 it should be noted the adverse weather conditions experienced in early 2018 may have had an impact on the levels of output. However it is difficult to quantify the exact impact on the industry.

This is the first monthly release to incorporate the revisions made in the GDP quarterly national accounts, UK: October to December 2018 release, published on 29 March 2019. As a result, revisions have been made back to January 2018, resulting from improvements to nominal data by incorporating the latest survey and Value Added Tax (VAT) turnover data. Because of these changes in the nominal data, this has also impacted on the seasonally adjusted estimates.

This monthly release is also the first time in which VAT turnover data for Quarter 3 (July to Sept) 2018 have been used to replace survey returns in the monthly data for that period. We have now used VAT data for approximately 84,000 businesses to replace 2,400 survey returns in the monthly construction output sample. For a list of those industries selected to use VAT turnover within construction, please see the VAT industry selection matrix.

The revisions to the calendar quarter growth, all work, chained volume measure, seasonally adjusted series, along with an indication of the main causes of the quarterly revisions, are outlined in Table 2. This compares the previous monthly release Construction output in Great Britain: January 2019 and new orders October to December 2018 (published on 12 March 2019) with today’s publication (10 April 2019).

Revisions to all calendar quarters for the all work, chained volume measure, seasonally adjusted series have been within a range of plus 0.2 to negative 0.3 percentage points across 2018. These revisions have had no impact on the output measure of gross domestic product to 1 decimal place.

It should be noted that these revisions have seen a downward revision to the annual growth rate for 2018. This has been revised down 0.4 percentage points to 0.3%. This is the weakest annual growth for the industry since 2012 where we had annual growth of negative 6.9%.

In addition to the revisions to construction output first published within GDP quarterly national accounts, UK: October to December 2018 release, published on 29 March 2019 , this publication also includes revisions to the January 2019 construction output estimates first published in Construction output in Great Britain: January 2019 and new orders October to December 2018 on 12 March 2019. January 2019 is revised up by 0.7 percentage points (from 2.8% to 3.5%) at the all work level for the month-on-month chained volume measure, seasonally adjusted series. These revisions are due to late and revised survey returns. At the type of work level revisions can be seen, with these varying in direction and magnitude by each type of work.

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 19 March 2019 for January 2019, showed the seasonally adjusted production in construction (PDF, 567KB) decreased by 1.4% in the Euro area (EA-19) and was flat at 0.0% growth in the EU-28 when compared with December 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, 304KB) for February 2018 was published on 1 April 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 (updated 16 November 2018) 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) 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

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.

These improvements have led to the re-designation of Construction output, Construction Output Price Indices and New orders as National Statistics. A letter concerning the re-designation is available. Please note: this National Statistics re-designation did not include the Output in the construction industry: subnational and sub-sector dataset.

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:

• 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.