Construction output in Great Britain: September 2020, new orders and Construction Output Price Indices, July to September 2020

• Construction output grew by 2.9% in the month-on-month all work series in September 2020, driven by increases in both new work (2.7%) and repair and maintenance (3.4%); this is the fifth consecutive month of growth but the lowest rise in that time.

• The level of construction output in September 2020 was 7.3% below that in February 2020, with only infrastructure and private new housing having returned to above their pre-pandemic levels of output; all other types of work in September 2020 have yet to recover, with public new housing the furthest below its February 2020 level at 29.4%.

• Quarterly construction output grew by a record 41.7% in Quarter 3 (July to Sept) 2020 compared with Quarter 2 (Apr to June) 2020; this was driven by record quarterly growth in both new work (40.8%) and repair and maintenance (43.4%).

• The increase in new work (40.8%) in Quarter 3 2020 was because of record quarterly growth in all new work sectors; the largest contributor was private new housing, which grew by 84.4% in Quarter 3 2020 compared with Quarter 2 2020.

• The increase in repair and maintenance (43.4%) in Quarter 3 2020 was because of record growth in all repair and maintenance sectors; the largest contributor was private housing repair and maintenance, which grew by 70.9% in Quarter 3 2020 compared with Quarter 2 2020.

• New orders grew by a record 89.2% in Quarter 3 2020 compared with Quarter 2 2020, following the record quarterly fall in Quarter 2 2020 of 54.0%; following this record quarterly growth new orders returned to a level comparable with Quarter 3 2019, increasing by 0.6% in the quarter-on-year series.

• The record new orders quarterly growth (89.2%) was because of 88.7% growth in new housing and 89.4% in all other work; public new housing was the only sector to decline in Quarter 3 2020 compared with Quarter 2 2020, falling by 1.8%.

• The annual rate of construction output growth was 0.4% in September 2020.

• In this publication we have released a short survey about the monthly construction output bulletin to gain feedback on its content. The survey should take less than five minutes to complete and we would be grateful for any feedback.

Monthly construction output increased by 2.9% in September 2020 compared with August 2020, rising to £12,938 million, which was the highest level of output since March 2020. Output in the all work construction output series in September 2020 remains 7.3% (£1,026 million) below the February 2020 level, before the full impact of the coronavirus (COVID-19) pandemic.

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, compared with the more volatile monthly series.

Construction output grew by a record 41.7% in Quarter 3 (July to Sept) 2020 compared with Quarter 2 (Apr to June) 2020, following the record quarterly decline of 35.7% in Quarter 2 2020. As shown in Figure 2, the growth in Quarter 3 2020 is by far the largest since quarterly records began in Quarter 1 1997 and substantially larger than the previous record quarterly growth of 4.9% in Quarter 2 2010.

Quarter 3 2020 was the first quarter since Quarter 2 2018 where all three months in the quarter saw month-on-month growth. However, the rate of monthly growth has slowed throughout the quarter as construction output grew by 17.4% in July 2020 followed by growth of 3.8% in August 2020. The growth of 2.9% in September 2020 was the fifth consecutive month of growth and was driven by growth in all sectors apart from public new housing, infrastructure and public other new work.

Table 1 shows the change in output for the types of construction work between February 2020 and September 2020, showing that only private new housing and infrastructure have recovered above their February 2020 pre-pandemic levels. All other types of work in September 2020 have yet to recover to pre-pandemic levels, with public new housing the furthest below its February 2020 level at 29.4%.

Impact of the coronavirus in September 2020

We have worked closely with respondents to the Monthly Business Survey (MBS) for construction and allied trades and have used additional data sources to inform the estimates in this publication. We have also used qualitative information sourced from construction industry respondents to the Business Impact of Coronavirus Survey (BICS) to quality assure responses we received for September 2020.

Anecdotal evidence from responders to both the BICS and the MBS suggested a continued return to activity across the construction sector in September 2020. However, health and safety measures such as social distancing, where businesses are working on premises and sites, still meant that the capacity and level of work are not at the same level experienced prior to these restrictions being imposed as a result of the coronavirus pandemic.

For further information, we have released a public statement on COVID-19 and the production of statistics.

Table 2 highlights the significant weakness in construction output in Quarter 2 (Apr to June) 2020, with every sector in Quarter 3 (July to Sept) 2020 seeing record quarterly growth in comparison. However, all sectors have yet to recover to their Quarter 3 2019 level, as illustrated in the most recent three-months on year growth rates.

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 3. All new work accounts for approximately two-thirds of all work, while repair and maintenance accounts for approximately one-third of all work.

There was growth in both new work, and repair and maintenance, in September 2020, with repair and maintenance the first to recover above its March 2020 level. However, both remain below their pre-pandemic February 2020 level, with new work 8.5% below and repair and maintenance 5.2% below.

Construction output grew by a record 41.7% (£11,070 million) in Quarter 3 (July to Sept) 2020 compared with Quarter 2 (Apr to June) 2020, since quarterly records began in 1997. This was because of increases in every sector, as shown in Figure 4, all of which were record quarterly increases.

New work grew by 40.8% (£7,035 million) in Quarter 3 2020 because of record growth in all new work sectors. The largest contributor to this increase was private new housing, which grew by 84.4% (£3,860 million).

Repair and maintenance grew by 43.4% (£4,035 million) in Quarter 3 2020 because of record growth in all repair and maintenance sectors. This was largely driven by private housing, and non-housing repair and maintenance, which grew by 70.9% (£1,984 million) and 26.4% (£1,427 million) respectively. This growth in repair and maintenance is the second consecutive month of growth in the three-month on three-month series, prior to which there were 13 consecutive months of decline.

Figure 5 shows the contribution from private housing new work and private housing repair and maintenance work, compared with all other construction sectors combined. Total private housing work contributed significantly to the decline in growth in Quarter 2 2020 and led the record growth in Quarter 3 2020.

Construction output grew by 2.9% (£369 million) in September 2020 compared with August 2020 because of increases in most sectors, as shown in Figure 6. Public other new work, infrastructure, and public new housing were the only sectors not to see monthly growth in September 2020.

This is the fifth consecutive month of growth in all work since the record decline in April 2020 but is also the lowest monthly growth since then. The level of output in September 2020 remains 7.3% (£1,026 million) below the February 2020 level.

New work grew by 2.7% (£218 million) in September 2020 compared with August 2020. The largest contributors to this increase were private new housing and private commercial new work, which grew by 4.2% (£122 million) and 4.8% (£92 million) respectively.

In comparison, infrastructure output fell by 0.3% (£7 million) in September 2020 compared with August 2020. Despite this, infrastructure and private new housing were the only sectors in September 2020 where output was above their pre-pandemic February 2020 levels of output, as shown in Figure 7.

Private industrial new work grew by 15.4% (£48 million) in September 2020 compared with August, which was the highest monthly growth rate since June 2017 when it grew by 15.5%. The private industrial sector is a comparatively smaller and sometimes volatile series and the level of output still remains below that of February 2020.

Repair and maintenance grew by 3.4% (£151 million) in September 2020 because of increases in all repair and maintenance sectors. The largest contributor was public housing repair and maintenance, which grew by 10.3% (£59 million), the fourth consecutive month of double-digit growth. Despite this, all repair and maintenance sectors in September 2020 remain below their February 2020 level of output, as shown in Figure 8.

Business Impact of Coronavirus (COVID-19) Survey (BICS)

Qualitative information sourced from the Business Impact of Coronavirus (COVID-19) Survey (BICS) survey was used to quality assure responses we received for the Monthly Business Survey for construction and allied trades (MBS) for September 2020.

Evidence from this survey shows that the construction industry respondents had a lower proportion of their workforce on partial or furlough leave than the average for all industries. BICS Wave 14 data, which relate to the period 7 September to 20 September 2020, shows that construction industry respondents had 71.6% of their workforce at their normal place of work compared with the 55.8% average for all industries, as shown in Table 3.

This was the second-highest of all industries, behind only "human health and social work activities", and possibly illustrates how the construction industry returned to work quicker than other areas of the economy. Compared with other industries, there are likely to be a lower proportion of the workforce in the construction industry who are able to work remotely or away from their normal place of work, and these are likely to be those who undertake office and administrative work within the construction industry.

Total construction new orders increased by a record 89.2% (£5,234 million) in Quarter 3 (July to Sept) 2020 compared with Quarter 2 (Apr to June) 2020, following the record quarterly fall of 54.0% (£6,888 million) in Quarter 2 2020. This is the largest quarterly growth since records began in 1964, and substantially larger than the previous record of 36.8% in Quarter 3 2017, when several high value contracts relating to High Speed 2 (HS2) were awarded.

Despite this record quarter-on-quarter growth, quarter-on-year all new work growth was 0.6% (£70 million). Aside from Quarter 2 2020, and Quarter 2 and Quarter 3 2019, new orders were last lower in Quarter 1 (Jan to Mar) 2013 as shown in Figure 9.

The record quarterly growth in all new work (89.2%) in Quarter 3 2020 was driven by increases in both all new housing and all other work, as shown in Figure 10.

New housing grew by 88.7% (£1,527 million) in Quarter 3 2020, driven by 102.9% (£1,531 million) growth in private housing. This more than offset the 1.8% (£4 million) fall in public new housing, which was the only sector to decline in Quarter 3 2020. All other work grew by 89.4% (£3,707 million) because of increases across all sectors, the largest contributor of which was private commercial, which grew by 104.9% (£1,663 million) in Quarter 3 2020 compared with Quarter 2 2020.

Table 4 shows that despite strong quarter-on-quarter growth, some sectors remain below their Quarter 3 2019 level, particularly within all new housing work.

Prices in the construction industry, as estimated by the Construction Output Price Index (OPI), rose 0.7% between January 2020 and September 2020, as shown in Figure 11.

Peaks and troughs seen within the new work index between January 2016 and September 2020 are mostly because of movements within the earnings component of the OPI, which is sourced from the Average Weekly Earnings (AWE) index for construction.

All construction work

The annual and monthly rates of inflation for all construction were 0.4% and 0.1% respectively in September 2020 as shown in Table 5. This is an increase from 0.2% and 0.0% respectively seen in August 2020. Annual growth for new work was 0.2% in September 2020 following three consecutive periods of decline in this series. In comparison, annual growth for repair and maintenance was 0.8% in September 2020, which was the highest since May 2020 when it was 0.9%.

New work

The Construction OPI for new construction work grew by 0.2% on the year to September 2020 following three periods of decline from June 2020. While public other new work and private commercial were flat (0.0%) on the year, infrastructure and housing grew by 0.5% and 0.2% respectively in the 12 months to September 2020. In comparison, private industrial fell by 0.7%.

Repair and maintenance

The Construction OPI for all repair and maintenance grew by 0.8% on the year to September 2020. While the annual growth for housing repair and maintenance was 0.8%, non-housing repair and maintenance grew by 0.9%, which was the highest in this series since May 2020.

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 this year) 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.

Feedback survey

In this publication we are releasing a short survey about the monthly construction output bulletin to gain feedback on its content. The survey should take less than five minutes to complete and we would be grateful for any feedback.

Construction output data collection

Our monthly Construction Output Survey measures output from the construction industry in Great Britain. The survey samples 8,000 businesses, with all businesses employing over 100 people, or with an annual turnover of more than £60 million, receiving an online questionnaire every month. 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).

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

Revisions in the 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

In this release there are revisions to construction output for July and August 2020, first published within the Construction output in Great Britain: August 2020 release published on 9 October 2020.

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.

Construction new orders data collection

New orders data are sourced from Barbour ABI who web scrape planning application data from all local authorities in England, Scotland and Wales; this method allows identification of planning applications as soon as they are published, while projects outside the planning application process are captured via investigations from Barbour's in-house team of researchers. These data are then validated firstly by Barbour ABI and supplied to the Office for National Statistics (ONS), who also further validate, process and quality assure the data before new orders in the construction industry estimates are published.

Revisions to new orders data

Revisions in the release to new orders are as a result of:

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

• revisions to the input series for the Construction Output Price Indices; most notably this is the first new orders release where the improvement in the methodology of business prices to implement chain-linking, which affects both the Producer Price Indices (PPI) and Service Producer Price Indices (SPPI) has been implemented

• the reference year for new orders has been moved onto 2018 equals 100; this is to make the new orders reference year consistent with the construction output reference year, which changes at the previous monthly publication

• new orders data are also open for revision in the current price, non-seasonally adjusted data (Tables 4 to 6) for the previous quarter; there are no revisions to the current price Quarter 2 2020 data in this release

Quality and methodology

More quality and methodology information on strengths, limitations, appropriate uses, and how the data were created is available in the Construction output QMI and New orders in construction QMI.

Value Added Tax (VAT) data

Alongside the Monthly Business Survey (MBS), 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 2 (Apr to June) 2016 to Quarter 1 (Jan to Mar) 2020.

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

• VAT turnover data in National Accounts: background and methodology

• Quality assurance of administrative data (QAAD) report for VAT turnover data

Coronavirus impact on ONS construction output in September 2020

Temporary ceasing of Output in the construction industry: sub-national and sub-sector data

The coronavirus (COVID-19) pandemic presents a significant challenge to the UK, and the Office for National Statistics (ONS) is working to ensure that the UK has the vital information needed to respond to the impact of this pandemic on our economy and society. This means we will need to ensure that information is provided faster, using new data sources and changing how our surveys operate, to ensure we provide the information necessary as the situation unfolds.

The effects of the outbreak on ONS capacity and capability during this period means we have reviewed the existing construction statistics releases and will be temporarily suspending the Output in the construction industry: sub-national and sub-sector dataset. This is to protect the delivery and quality of our remaining outputs as well as ensuring we can respond to new demands as a direct result of the coronavirus. This is also partially a reflection of the limitations of the model used to apportion new orders data to produce sub-level output data.

Impact of online data collection on response rates

Data for the Monthly Business Survey for construction and allied trades (MBS) have been collected via online questionnaire since April 2020. This has meant that respondents can log on from any location and submit their data at an appropriate time. The paper questionnaire was moved to an online data collection platform, with minimal changes made to the questionnaire design. The only notable change has been the reclassification of housing associations as private housing, rather than public housing as previously on paper. For further information on this classification decision please see this statement for England and this article for Scotland, Wales and Northern Ireland.

Response rates were comparatively low in March 2020 and since then have improved when measured by both the turnover coverage of the industry and proportion of questionnaire forms returned. This illustrates the benefits of the move to electronic data collection, though response rates remain lower when compared with reference periods prior to February 2020.

Table 7 shows the response rates to the MBS at time of publishing, for each reference period. While response rates are lower for the reference months in 2020 at the first time of publication, further responses have since been submitted and will be used subject to the National Accounts Revisions Policy.

August 2020 response rates at first estimate were the highest they had been since January 2020, and the highest since moving to the electronic questionnaire. For September 2020, because of the gross domestic product timetable, the data collection period for the MBS was shorter compared with that of July and August 2020, by around one week, and as a result response rates at first estimate are lower. However, when compared with June 2020, where the data collection period was similar to September 2020, response rates at first estimate have improved.

Figure 12 shows the data content based on turnover response rate at the time of the first estimate of each quarter, since the move to monthly gross domestic product estimates in mid-2018. Quarterly response rates at the time of the first quarterly estimate have in been lower in 2020.

To deal with non-response we impute for missing data using ratio imputation. This is a simple but effective method, used as a standard internationally. The method calculates the growth in the industry based on those businesses that did respond and applies it to the last known value for the non-responder. This means that if output notably reduces in an industry from one month to the next, the imputed values for non-respondents in that industry will also notably reduce when compared with the last known value.

Further information on the imputation methods for non-response is available.

While international best practice is used to impute for non-response, with the lower response rates highlighted in Table 7, it is important to note that the revisions to the months in 2020 may be larger than the revisions profile prior to 2020, as actual data and revised data replace the larger than normal number of imputations for non-response at the time of the first monthly estimate.

Zero return responses to the Monthly Business Survey for construction and allied trades

A zero return refers to when a survey respondent reports figures of zero across all types of work, meaning the total value of work done is zero for that reference month. Figure 13 shows zero returns as a proportion of all returns at the time of the first estimate for a reference month. This is broken down by size of business as per registered turnover on the IDBR (Inter-Departmental Business Register).

Since April 2020, the proportion of zero returns has continued to decline towards the stable element of approximately 7% to 10% of businesses reporting zero returns present prior to March 2020.

It is worth noting small-sized (less than £1 million registered annual turnover) and medium-sized (£1 million to £10 million registered annual turnover) businesses make up the majority of these zero returns. This is the case both during and before the pandemic-impacted period.

Impact on seasonal adjustment of September 2020

The monthly chained volume measures are seasonally adjusted using a seasonal adjustment software tool (X-13-ARIMA-SEATS). The monthly series individual type of work series is then aggregated to form the quarterly seasonally adjusted chained volume measure series.

The seasonal adjustment parameters for output in the construction industry are reviewed annually. However, because of the volatility of these statistics, time series analysis experts are regularly asked to review the seasonal adjustment when required. This approach has been adopted for the latest months and has resulted in changes to seasonal adjustment specification files to ensure the seasonal adjustment parameters are appropriate.

Coronavirus impact on the September 2020 bias adjustment

Typically, an adjustment to address any bias in survey responses for construction output is applied to the early construction output monthly estimates. See Improvements to construction statistics: addressing the bias in early estimates of construction output, June 2018 published on 4 June 2018. The bias adjustment methodology is based on historical data. As the response rates for September 2020 are lower in comparison with months prior to February 2020 (Table 7) and no comparable historical data are available at the time of the first estimate for a reference month, no bias adjustment has been applied for September 2020.

Links to additional ONS sources of coronavirus information

Our latest data and analysis on the impact of COVID-19 on the UK economy and population are also now available on a new webpage. This will be the hub for all special virus-related publications, drawing on all available data. A Coronavirus (COVID-19) roundup is also updated as and when data become available.

Recent releases that help describe the ONS response to the coronavirus might be seen in our estimates:

• Coronavirus and the latest indicators for the UK economy and society: 5 November 2020 (Released 5 November 2020)

• Coronavirus and housing indicators in England and Wales (Released 2 July 2020)

• Coronavirus and the effects on UK GDP (Released 6 May 2020)

• Meeting the challenge of measuring the economy through the coronavirus pandemic (Released 6 May 2020)

• Real-time turning point indicators: a UK focus (Released 27 April 2020)

• Communicating gross domestic product (Released 27 April 2020)

The Office for National Statistics (ONS) has released a public statement on the coronavirus and the production of statistics and any specific queries can be directed to the Media Relations Office.

Exiting the EU

As the UK leaves the EU, it is important that our statistics continue to be of high quality and are internationally comparable. During the transition period, those UK statistics that align with EU practice and rules will continue to do so in the same way as before 31 January 2020.

After the transition period, we will continue to produce our national accounts statistics in line with the UK Statistics Authority’s Code of Practice for Statistics and in accordance with internationally agreed statistical guidance and standards.

The Withdrawal Agreement outlines a need for UK gross national income (a fundamental component of the national accounts, which includes gross domestic product (GDP)) statistics to remain in line with those of other EU countries until the EU budgets are finalised for the years in which we were a member. To ensure comparability during this cycle, the national accounts will continue to be produced according to European System of Accounts (ESA) 2010 definitions and standards.

Data quality

These estimates are widely used by private and public sector institutions, particularly by the Bank of England and HM Treasury, to assist in informed decision-making and policymaking. 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 Uncertainty and how we measure it for our surveys is available.

National Statistics status

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.

Comparability

Output in the construction industry follows the Eurostat short-term business 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.

Eurostat has also developed short-term business statistics (STS) indicators on the impact of the coronavirus (COVID-19) pandemic in Impact of Covid-19 crisis on construction.

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, a longer data time series back to 1997 can be obtained in the monthly GDP datasets. Monthly data prior to 2010 are derived using statistical methods from the available quarterly construction output data and should therefore be treated with some caution.

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.

Construction statistics recent engagement and development work

Further information on construction statistics development can be found in:

• Housing in construction output statistics, Great Britain: 2010 to 2019 (30 January 2020)

• Comparing ONS’s economic data with IHS Markit and CIPS Purchasing Managers’ Index surveys (published 21 October 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)

Further articles on other construction statistics development work and analysis are available.