1. Main points

  • Construction output continued its recent decline in the three-month on three-month series, falling by 3.4% in April 2018; the biggest fall seen in this series since August 2012.

  • The three-month on three-month decrease in construction output was driven by falls in both repair and maintenance and new work, which fell 3.0% and 3.7% respectively.

  • Following three consecutive months of contraction in the month-on-month series at the start of 2018, construction output experienced a slight bounceback in April 2018, increasing by 0.5%.

  • Improvements to the quality and accuracy of regional and sub-sector construction estimates have been made as a result of a methodological improvement, which results in revisions to Tables 5 and 6 of this publication back to 2010. However, in line with the standard National Accounts Revisions Policy, no top-level revisions will be made in this publication.

  • Total construction new orders also decreased in Quarter 1 (Jan to Mar) 2018, falling by 4.6%, driven by the continued fall in all other work new orders.

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2. Things you need to know about this release

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 (GDP).

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

New orders in construction measures the value of new orders of main contractors by type of work and region within Great Britain. Since April 2013, data have been supplied directly from Barbour ABI with a sample size of all local authorities in England, Scotland and Wales, plus 10,000 contractors per year. It should be noted that there may be some discontinuity in the data around Quarter 3 (July to Sept) 2013 where the Barbour ABI data were used for the first time to compile these statistics.

Summary information can be found in the New orders in construction Quality and Methodology Information report.

Our next release, Construction output in Great Britain: May 2018 will include methodological updates and revisions back to 1997 and is our Blue Book-consistent publication. This is in line with the standard National Accounts Revisions Policy. These annual changes will include updating the reference year from 2015 equals 100 to 2016 equals 100, along with adding an additional year of chain-linking weights for 2016 and updated VAT data.

In addition to these Blue Book changes, the Construction output in Great Britain: May 2018 publication will also be the first construction output release in which an improved methodology is used to address the bias in early estimates of construction output.

While no top-level revisions have been made to construction output in the release, some lower-level revisions can be seen in Tables 5 and 6 of this publication from 2010 onwards. These revisions are as a result of a methodological improvement, which increases the quality of Office for National Statistics (ONS) regional and sub-sector construction estimates, as outlined in Construction development: improvements to regional and sub-sector level estimates, published on 4 June 2018.

In July 2018, short-term economic indicators will become part of monthly GDP. In addition to this release on 10 July 2018, the following will be published:

  • UK Index of Production: May 2018

  • UK Index of Services: May 2018

  • Construction output in Great Britain: May 2018

  • UK Trade: May 2018

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3. Construction output in April 2018

Construction output fell by 3.4% during the three-month on three-month period to April 2018, representing the sixth consecutive three-month on three-month decline in output in this series. 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. 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 three consecutive periods of month-on-month decline at the beginning of 2018, construction output did bounce back slightly in April 2018 and as a result construction remains 23.4% above its lowest point in April 2013.

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4. 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.

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.

Following three consecutive months of contraction in the month-on-month series at the start of 2018, construction output experienced a slight bounceback in April 2018, increasing by 0.5%. This rise in construction output stemmed from increases in both all new work, and total repair and maintenance, which grew 0.7% and 0.3% respectively in April 2018. 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 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 £1.35 billion in the three-month on three-month time series in April 2018, stemming from falls in all but one sector. The most notable decline came from infrastructure new work, which fell sharply in the three months to April 2018, decreasing by £379 million. Elsewhere, other notable falls in output came from total housing repair and maintenance, and private housing new work, which fell by £230 million and £189 million respectively. As highlighted in the Construction output in Great Britain: March 2018 bulletin, we received some anecdotal information from a small number of survey respondents regarding the effect of adverse weather on their businesses in February and March 2018. This weather potentially contributed to the decline in construction output in the three-month on three-month series to April 2018, although it is difficult to quantify the exact impact on the industry.

In contrast, as was the case in the previous publication, the relatively small and volatile private industrial sector provided the only positive contribution to growth in the three months to April 2018, increasing by £29 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 the previous month, construction output increased by £68 million in April 2018. The main contributions to the rise in all work came from an increase in the value of infrastructure and private commercial new work, both of which recovered somewhat from weak starts to 2018, increasing by £40 million and £37 million respectively. Elsewhere, non-housing repair and maintenance also provided a notable contribution to growth, increasing by £34 million in April 2018.

However, some of the growth in April 2018 was offset by the sustained fall in public other new work, which decreased by £28 million compared with the previous month. The only other notable decrease came from total housing repair and maintenance, which decreased by £22 million.

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5. Detailed growth rates

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 increased to £12,582 million in April 2018. This increase stems from a rise in both all new work, and total repair and maintenance, which grew to £8,139 million and £4,443 million respectively.

In comparison with April 2017, construction output fell 3.3%, representing the fourth consecutive month-on-year contraction and the most sustained fall in this series since May 2013. This month-on-year fall in construction output has been driven by falls in both new work, and repair and maintenance. The fall in new work occurred as a result of the continued fall in both private commercial work, which decreased 7.3%, and public other new work, which contracted 15.3% compared with April 2017. Meanwhile, the only notable positive contribution to month-on-year growth came from the consistently strong private housing sector, which grew 8.5% in April 2018.

Construction output also fell in the most recent three-months on year series in April 2018, contracting by 3.3%. The increase in private housing, which grew 6.8%, was more than offset by falls in public other new work, which contracted 14.0% and private commercial work, which decreased 7.6%.

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6. New orders

Figure 5 shows the split in new orders between housing new orders and all other work new orders.

As seen in Figure 5, the value of total new orders has remained broadly stable since 2013, with the exception of Quarter 3 (July to Sept) 2017. This trend is also reflected in the value of all other work new orders. Over the same period, housing new orders have increased gradually, continuing this trend in Quarter 1 (Jan to Mar) 2018.

All other work new orders fell by 13.4% in Quarter 1 2018, driven by large falls in infrastructure and private commercial new orders. Excluding the fall in all other work in Quarter 4 (Oct to Dec) 2017, which occurred as a result of the drop-off in new orders following the high-value contracts awarded relating to High Speed 2 (HS2), the Quarter 1 2018 fall is the largest contraction in all other work new orders since Quarter 2 (Apr to June) 2012.

In contrast, all new housing orders increased by 15.2% in Quarter 1 2018, recovering from a slight drop-off at the end of 2017, reaching a post-downturn peak. The quarterly growth in all new housing was driven by private housing new orders, which more than offset a fall in public housing.

Overall, despite experiencing a fall in Quarter 1 2018, all new work remains at a relatively high level.

Table 2 provides a detailed description of the growth rates of each work type, alongside the seasonally adjusted volume level of new orders.

New orders decreased by 4.6% in Quarter 1 2018 compared with Quarter 4 2017, falling to £11,628 million. This occurred as a result of a 13.4% fall in all other work, with the most notable downward pressure coming from the infrastructure and private commercial sectors, which fell 43.6% and 12.2% respectively. The fall in other new work more than offset the growth of 18.6% in private housing new orders in Quarter 1 2018.

Compared with Quarter 1 2017, total new orders fell by 6.6% in Quarter 1 2018. Similar to the quarter-on-quarter growth, this contraction came as a result of a fall in all other work. Both infrastructure and private commercial new orders experienced particularly large falls, decreasing by 33.6% and 28.5% respectively. In contrast, all new housing experienced 18.5% growth compared with Quarter 1 2017, with growth in both private and public housing.

Despite the decrease in new orders in both the quarter-on-quarter and quarter-on-year series, the most recent four quarters on a year earlier series experienced a 1.8% increase, with growth in both new housing and new all other work. The large increase in infrastructure, which was driven predominantly by the spike relating to HS2 in Quarter 3 2017, was offset slightly by decreases in public other work, new orders and private commercial new orders.

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9. Quality and methodology

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

The New orders in construction Quality and Methodology Information report provides similar information for the new orders 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 following articles:

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10. Construction statistics development

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.

In September 2017, we released 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.

In addition, we released two further methodological articles on 4 June 2018 detailing the improvements we are making to construction statistics as part of wider improvements to national accounts. These articles detail two major improvements to the construction output methodology:

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.

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