Construction output in Great Britain: July 2019 and new orders April to June 2019

• Construction output decreased by 0.8% in the three-month on three-month all work series in July 2019; this was driven predominately by a fall in repair and maintenance of 2.2% with a minor contribution from a 0.1% fall in new work.

• In repair and maintenance, the fall in the three-month on three-month series in July 2019 was largely because of the 6.3% decline in private housing repair and maintenance, with a smaller contribution from the 0.6% fall in non-housing repair and maintenance.

• In new work, the decline in the three-month on three-month series in July 2019 was driven by public other new work and private new housing, with falls of 6.2% and 0.5% respectively; these were offset by an increase in public new housing of 6.8%.

• Construction output increased by 0.5% in the month-on-month all work series in July 2019; this was because of a 0.8% increase in new work along with flat growth (0.0%) in repair and maintenance.

• New orders in Quarter 2 (Apr to June) 2019 fell by 13.3% reversing the increase of 10.4% in Quarter 1 (Jan to Mar) 2019. This was driven by a 17.0% decline in all other work; all sectors apart from infrastructure experienced a decrease in comparison with Quarter 1 2019.

Great Britain construction output statistics and construction new orders are designated as National Statistics, in accordance with the Statistics and Registration Service Act 2007 and signifying compliance with the Code of Practice for Statistics.

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 subcontractors.

The survey’s results are used to produce non-seasonally and 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 are used to replace survey data for small- and medium-sized businesses. However, because of 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 report.

Compared with the previous Construction output in Great Britain: June 2019 publication released on 9 August 2019, today’s publication contains no revisions. This is in line with the National Accounts Revisions Policy. Further to this release, the Quarterly national accounts published on 30 September 2019 will include the annual updates from the Blue Book and Pink Book 2019 (published 31 October 2019). This will contain revised construction data from January 2010 to June 2019. These revised data will also include Value Added Tax (VAT) data for the first time in Quarter 4 (Oct to Dec) 2018 and Quarter 1 (Jan to Mar) 2019.

Blue Book 2019

Each year we produce an annual update to the UK National Accounts in the Blue Book and Pink Book and the associated releases. As already announced, the Blue Book and Pink Book 2019 consistent datasets will be published on 30 September 2019.

Details have already been provided on the scope in the article Latest developments and changes to be implemented in Blue Book and Pink Book 2019. Indicative impacts on headline gross domestic product (GDP) components for the years 1997 to 2016 were published on 27 June 2019 in the article Blue Book 2019 indicative impacts on GDP current price and chained volume measure estimates: 1997 to 2016.

This year, because of the very demanding set of changes being put through in the annual update, we are exceptionally not going to fully reconcile 2017 annual data, instead producing an indicative balance to allow further time for final quality assurance of the data.

Consequently, the reference year and last base year for all chained volume measure series will remain as 2016.

In the monthly series, construction output grew by 0.5% in July 2019. This growth helps partially reverse the decline of 0.7% seen in June 2019 but continues a trend of subdued growth over the latest year.

After recording a record high in February 2019 in monthly construction output, the industry has experienced a downward trend. Over the longer term, the industry has experienced a slight upward trend in growth in the all work series since the start of 2017, however this is markedly slower growth in comparison to the period prior to 2017.

Figure 1 shows the monthly and quarterly indexed chained volume measure, seasonally adjusted series. The quarterly series provides a smoother and more comprehensive view of trends within the construction industry than the more volatile monthly series.

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.

There was a month-on-month increase in new work of 0.8% in July 2019, while repair and maintenance saw flat growth (0.0%). For new work, there were increases in most types of work with the largest contribution coming from private new housing, which saw its strongest month-on-month growth since August 2017 with a 4.4% increase. This was somewhat offset by a 11.7% fall in public new housing, as well as a small decrease of 0.2% in private commercial new work.

In repair and maintenance, the flat (0.0%) growth rate was the result of the decline in private housing repair and maintenance, which fell by 4.3%, being counterbalanced by growths in public housing and non-housing repair and maintenance of 7.8% and 1.1% respectively. The growth in public housing repair and maintenance is the strongest since the 8.2% growth seen in August 2013.

Figure 3 shows the difference in the three-month on three-month levels from the different construction sectors, taken from our seasonally adjusted, chained volume measure series. Construction output decreased by £333 million in the three months to July 2019, compared with the previous three months.

New work fell by £16 million, with a fall of £148 million in public other new work being the single largest decline. The only other sector to fall was private new housing, which decreased by £43 million. All other types of new work grew, with public new housing growing by £120 million. There were smaller increases in other sectors, although these were not enough to entirely offset the larger declines.

Alongside the small decline in new work, there were more substantive falls in repair and maintenance output, which declined by £318 million. This fall in repair and maintenance was driven predominantly by private housing repair and maintenance which fell by £339 million along with a decline of £42 million in non-housing repair and maintenance. The only growth seen in repair and maintenance was public housing repair and maintenance, which grew by £61 million.

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 June 2019, construction output grew by £74 million in July 2019.

In new work, there was an increase of £75 million in July 2019 compared with June 2019. This was driven by private new housing, which increased by £131 million. There were relatively smaller increases seen in public other new work, private industrial new work and infrastructure of £16 million, £7 million and £4 million respectively. Public new housing saw the largest month-on-month decline, seeing a decrease of £78 million, with private commercial new work being the only other decline in new work, falling £5 million.

Repair and maintenance saw a fall of £2 million in July 2019. This resulted in flat growth (0.0%) in repair and maintenance for July 2019 in the month-on-month series. While repair and maintenance saw flat growth at the lower level, the profile of growth was mixed. Private housing repair and maintenance fell by £73 million which was then largely counterbalanced by public housing repair and maintenance and non-housing repair and maintenance, which increased by £45 million and £26 million respectively.

Total all work grew to £13,706 million in July 2019 compared with June 2019, rising by 0.5% (£74 million). This was driven by a 0.8% increase in new work, with repair and maintenance seeing flat (0.0%) growth. When looking at month-on-month growth rates it can be noted that while private new housing saw a strong growth of 4.4%, public new housing declined 11.7% in the same period. At the same time, in repair and maintenance the inverse pattern is seen; public housing repair and maintenance saw strong growth of 7.8%, while private housing repair and maintenance fell by 4.3%.

When looking at the month-on-year total all work series, there has been an increase of 0.3%. This was primarily driven by a 12.1% month-on-year increase in infrastructure output. This was accompanied by smaller contributions from public and private new housing, which grew by 14.1% and 1.9% respectively. These growths were offset by a decline in private housing repair and maintenance of 12.6%, the largest month-on-year decline in growth for the series since October 2012. This overwhelmed a 3.3% increase in public housing repair and maintenance to set a record low growth rate in all housing repair and maintenance, which saw an 8.7% decline.

In the three-month on three-month total all work series in July 2019, output fell by 0.8% compared with the previous three months. This was driven by declines in both new work (negative 0.1%), and repair and maintenance (negative 2.2%). The most substantial contributions to the falls were seen in private housing repair and maintenance, and public other new work, which decreased by 6.3% and 6.2% respectively. These falls were partly offset by increases in growth seen in both public housing series with new work increasing by 6.8% and repair and maintenance increasing by 3.6%.

In the three-month on three-month a year earlier total all work series in July 2019, the growth of 0.5% was driven by new work, which increased by 2.5%, while repair and maintenance declined by 3.2% in the same period. The strongest drivers of growth were infrastructure and public new housing, which saw increases of 11.8% and 24.1% respectively. The largest negative contributions to growth were private housing repair and maintenance, and private commercial new work, which fell 9.6% and 3.7% respectively. For both series this represents a trend of declines, with private housing repair and maintenance falling the last three periods, while private commercial new work has declined for 19 consecutive periods in the three-month-on-year-earlier series.

As seen in Figure 5, following the increase of 10.4% in Quarter 1 2019 the value of total construction new orders has declined by 13.3% in Quarter 2 2019 compared with the previous quarter. This decrease has seen the value of total construction new orders fall to its lowest level since Quarter 1 2013. However, this quarter-on-quarter fall in the value of total new orders is not as substantial, in percentage growth terms, as the decline seen in Quarter 4 2017 where total value fell by 24.6% following the spike in contracts relating to High Speed 2 (HS2). Following Quarter 4 2017, all new work has experienced negative growth in four of the latest six quarters in the quarter-on-quarter series.

The decline seen in all new work in Quarter 2 2019 has been driven by all other work which saw a 17.0% decrease quarter on quarter, following a 14.5% increase in Quarter 1 2019. The fall in other work has been driven by a fall in private commercial new orders in Quarter 2 2019 which made up 56.7% of the fall. Infrastructure was the only sector to report growth in value of new orders growing at 0.8% compared to Quarter 1 2019. However, it is important to note a single project in the North West made up 46.1% of the value in infrastructure. New housing orders saw a slight decline in Quarter 2 2019 falling by 3.9% with public housing reporting a decline of 13.0% and private new housing falling by 3.2%.

In the quarter on the same quarter a year previous series, all new work was down overall by 4.7% in Quarter 2 2019 compared with Quarter 2 2018 with infrastructure (7.0%) and public other new work (2.9%) the only sectors to report growth over the period. Private commercial new orders were the main contributor to the fall recording a decline of 10.5% in Quarter 2 2019. Public housing was significantly down (41.4%) compared to a year earlier (Quarter 2 2018), however it should be noted movements of this magnitude both positive and negative have been seen previously.

Compared with the previous Construction output in Great Britain: June 2019 released on 9 August 2019, today’s publication contains no revisions. This is in line with the National Accounts Revisions Policy. Further to this release, the Quarterly national accounts published on 30 September 2019 will include the annual updates from the Blue Book and Pink Book 2019 (published 31 October 2019). This will contain revised construction data from January 2010 to June 2019. These revised data will also include Value Added Tax (VAT) data for the first time in Quarter 4 (Oct to Dec) 2018 and Quarter 1 (Jan to Mar) 2019.

New orders estimates for this release have revisions which can be seen in the back series when compared with the previous new orders dataset released on 10 June 2019. Revisions have occurred primarily as the result of changes to the input series calculations for the construction output price indices and revisions to the seasonal adjustment factors, which are re-estimated on a continual basis and, in this instance, have undergone an annual review. These revisions do not impact the current price, non-seasonally adjusted data published in tables 4 to 6 in the new orders dataset.

For further information on the revisions profile, please see the output in the construction industry revisions triangles, published on a one-month and three-month growth basis. The new orders revision triangles are published on a quarter-on-quarter growth basis.

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 20 August 2019 for June 2019, showed the seasonally adjusted production in construction (PDF, 564KB) was flat at 0.0% in the Euro area (EA-19) and fell by 0.3% in the EU-28 when compared with May 2019.

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 (PDF, 299KB) for June 2019 was published on 3 September 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. The next edition of this release which will contain analysis for 2018 will be published on October 18 2019.

Construction output data used within this release are also used in the compilation of the GDP monthly estimate. While monthly data are available in the output in the construction industry back to January 2010, it should be also noted that a longer time series can be obtained in the monthly gross domestic product datasets. Within this publication, a monthly, all work chained volume measure, seasonally adjusted series can be obtained back to January 1997 in index form to four decimal places. This can be found in the following datasets; Monthly GDP and main sectors to four decimal places and Monthly gross domestic product: time series. Monthly data from the construction survey are only available from January 2010, therefore the data prior to this period are derived using statistical methods from the available quarterly data and should therefore be treated with some caution.

• 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 9 August 2019) 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

• Quality assurance of administrative data (QAAD) report for Value Added Tax turnover data

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 the 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 redesignation 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 redesignation did not include the Output in the construction industry: subnational and sub-sector dataset.

We have also published a series of methodological articles to help communicate recent improvements:

• Construction output quality and methodology information (published 9 August 2019)

• New orders in construction quality and methodology information (published 9 August 2019)

• Conceptual and methodological differences between private housing construction output and gross fixed capital formation private sector dwellings (published 31 May 2019)

• Construction statistics development: improving the understanding of new orders in the construction industry and the gap between output and new orders (published 30 October 2018)

• Impact of improvements to construction statistics: June 2018 – implemented as part of Blue Book 2018 (published 29 June 2018)

• Improvements to construction statistics: Addressing the bias in early estimates of construction output, June 2018 (published 4 June 2018)

• Construction development: improvements to regional and sub-sector level estimates, June 2018 (published 4 June 2018)

• Construction development: Impact of improvements to construction statistics: September 2017 (published 29 September 2017)