Construction output in Great Britain: July 2022

• Following the 1.4% decrease in June 2022, monthly construction output decreased 0.8% in volume terms in July 2022; this is the second consecutive decrease in monthly construction output after seven consecutive months of growth.

• The decrease in monthly construction output in July 2022 came solely from a decrease in repair and maintenance (2.6%) as new work saw a slight increase (0.3%) on the month. 

• At the sector level, the main contributors to the decrease seen in July 2022 were public housing new work, and public and private housing repair and maintenance, which decreased 13.1%, 8.0% and 2.6%, respectively.

• The level of construction output in July 2022 was 2.1% (£300 million) above the February 2020 pre-coronavirus (COVID-19) pandemic level; new work was below at 1.9% (£181 million) its February 2020 level, while repair and maintenance work was 9.7% (£481 million) above the February 2020 level.

• Despite the monthly decrease, construction output increased 1.4% in the three months to July 2022; this came solely from an increase seen in new work (2.7%) as repair and maintenance saw a slight decrease (0.7%), and this is the ninth consecutive period of growth in the three-month-on-three-month series, but the slowest rate of growth since the three months to December 2021 (1.0%).

Monthly construction output decreased 0.8% in July 2022. This follows the 1.4% decrease in June 2022. This is the second consecutive decrease in monthly construction output, following seven consecutive months of growth in the sector between November 2021 and May 2022.

Anecdotal evidence received from returns for the Monthly Business Survey for Construction and Allied Trades (MBS) and the Business Insights and Conditions Survey (BICS) continues the narrative around the increased prices for certain construction products. As in previous months, increased costs of products, most notably concrete, plaster, bricks, sand, gravel and asphalt-related products, are mentioned. There have also been continued mentions of higher fuel and energy costs, and VAT tax increases for red diesel, which have had an impact again this month. This is supported as the annual rate of all construction work price growth is 9.6% in June 2022 and is a record high since the Construction Output Price Indices series began in January 2014.

Along with high prices for construction products, we had evidence from businesses who stated that new orders are starting to slow, with many mentioning the cost of living crisis for households and businesses as a possible reason to explain this contraction in demand. This is backed up by the recent new orders in the construction industry data, which saw a fall of 10.4% in Quarter 2 (Apr to June) 2022.

The warm weather experienced in July 2022 also saw a number of amber and red weather warnings and record-breaking temperatures across much of the country. For the construction industry, working days were lost during this time, as suggested in the anecdotal evidence from returns received for the MBS. Businesses reported that it was too hot to work because of the extreme weather conditions and record-breaking temperatures particularly seen around 18 and 19 July.

Detailed growth rates

Despite the monthly fall in output in July 2022, the level is still above the pre-coronavirus (COVID-19) pandemic level (February 2020) at 2.1% above (£200 million).

Month-on-month construction output growth in July 2022

The 0.8% in construction output in July 2022 represents a decrease of £114 million in monetary terms compared with June 2022, with seven out of the nine sectors seeing a decrease on the month.

Public housing new work, and public and private housing repair and maintenance were the largest contributions to the monthly decrease in July 2022, decreasing 13.1% (£58 million), 8.0% (£50 million), and 2.6% (£53 million), respectively.

Decreases were seen across all the repair and maintenance sectors this month. Anecdotal evidence gathered from businesses over the month suggested the cost of living crisis was a major factor as businesses and households are spending less on repair and maintenance work. Many firms suggested that the high prices for construction materials meant some repair and maintenance projects were being put on hold (whether temporarily or permanently). In contrast, some new projects were continuing as costings were agreed prior to the recent price increases and, as such, the construction firms were having to absorb these. This is further backed up by the latest BICS data (Figure 3); when businesses were asked in which ways their business had been affected by any price rises they had experienced, 38% of construction firms reported they had to absorb costs. This figure has remained relatively stable since late April 2022 and has consistently been the highest reported response option.

Like in recent months, strong price growth for certain construction products continued to be an issue in July 2022. Using the implied deflator, which is the best indicator of construction prices until the next Construction Output Price Indices release on 11 November 2022, annual price growth for all construction work is 9.5% in July 2022.

This is further illustrated for total construction output in value terms (for instance, before the impact of price changes) and in volume terms (for instance, after the impact of price changes) in Figure 4. Despite construction output in volume terms having recovered to above its pre-pandemic level since the start of 2022, the gap between value and volume estimates has continued to widen as prices continue to rise.

Three-month-on-three-month construction output growth in July 2022

In contrast to the monthly fall, construction output rose 1.4% (£616 million) in the three months to July 2022. This is the slowest rate of growth in the three-month-on-three-month series since December 2021 (1.0%). Despite this slowdown in growth, this is the ninth consecutive increase in the three-month-on-three-month series. The increase came solely from a increase in new work (2.7%) as repair and maintenance decreased slightly (0.7%).

Four out of the nine sectors saw an increase in the three months to July 2022, with the largest contributors being private industrial, private commercial and private housing new work. These sectors increased 14.3% (£222 million), 5.1% (£277 million) and 4.5% (£438 million), respectively.

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 such as 2020) 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 (QMI) is available in the:

• Construction output QMI

• Construction output price indices QMI

Revisions

In line with the National Accounts revision policy, there are no revisions to previously published data, and July 2022 is being produced for the first time.

The next monthly construction output release will be published on 12 October 2022, and we are open for revisions for all periods. These revisions will be consistent with the quarterly national accounts release that will be published on 30 September 2022, and they will incorporate improved source data, updated seasonal adjustment parameters, and additional updated data as would happen in all quarterly national accounts releases. This includes new Value Added Tax (VAT) turnover data for Quarter 4 (Oct to Dec) 2021 and Quarter 1 (Jan to Mar) 2022.

Sub-national and sub-sector construction 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 our Construction output: sub-national and sub-sector dataset.

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.

As the response rate for July 2022 is slightly lower (75.3% turnover response compared with a normal turnover response of approximately 79% for this month in the year, pre-coronavirus (COVID-19) pandemic), 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 July 2022.

Differences with monthly GDP construction estimates

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.

Construction statistics annual

The 2021 edition of the construction statistics annual will be released on 18 October 2022.