1. Main points

  • Construction output continued its recent decline in the three-month on three-month series in January 2018, contracting for the ninth consecutive period, falling by 1%.

  • The three-month on three-month fall in construction output was driven predominantly by the continued decline in private commercial work, which fell by 4.1% in January 2018.

  • Construction output also decreased in the month-on-month series following growth in the final two months of 2017, contracting by 3.4% in January 2018.

  • Compared with January 2017, construction output decreased by 3.9%, representing the biggest month-on-year decline since March 2013.

  • New orders decreased by 25% in Quarter 4 (Oct to Dec) 2017 following a record high in the previous quarter, caused by the awarding of several high-value new orders relating to High Speed 2 (HS2).

  • Despite the fall in Quarter 4 2017, total new orders increased by 4.3% in 2017, reaching the highest total since 2008, at £55,130 million.

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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.

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

In line with the updated revisions policy, the back series for construction output prior to January 2018 is not open for revision in this publication.

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.

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.

The impact of improvements to construction statistics article explains and highlights the impact of recent improvements to construction statistics, affecting the nominal data series, output price indices and seasonal adjustment. As a result, the output price indices are no longer considered to be an interim method.

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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3. Construction output falls in January 2018

Construction output fell by 1% during the three-month on three-month period to January 2018, representing the ninth consecutive three-month on three-month decline in output. 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 contracted from a relatively high level, decreasing by 3.4% in the month-on-month series in January 2018. Construction output peaked in March 2017, reaching a level that was 31% higher than the lowest point of the last five years, January 2013. Despite the month-on-month decrease in January 2018, construction output remains 25.6% above this level.

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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 March 2017.

Construction output fell by 3.4% month-on-month in January 2018, the largest fall in this series since June 2012. The decrease stemmed from a fall in all new work, which fell from a record high in December 2017, decreasing by 4.8%. Elsewhere, repair and maintenance also fell in January 2018, albeit to a lesser extent than all new work, decreasing by 0.7% compared with the previous month. 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 value growth, taken from our seasonally adjusted chained volume measure series.

Construction output fell by £390 million in the three-month on three-month time series, stemming from falls across all but three sectors. The most notable decline came from private commercial work, which continued the recent three-month on three-month decline seen in this series since June 2017, falling by £298 million. Repair and maintenance also continued to contract, with non-housing repair and maintenance, and total housing repair and maintenance decreasing by £154 million and £137 million respectively.

In contrast, only the private housing and infrastructure sectors made notable positive contributions to growth. Following strong growth throughout the majority of 2017, private housing continued to expand, increasing by £251 million in the three-month on three-month series. In addition, the value of infrastructure work carried out between November 2017 to January 2018 compared with August to October 2017 also increased, rising by £130 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 December 2017, construction output fell by £444 million in January 2018. The main contribution to the fall in all work came from private housing, which fell from a record high in December 2017, decreasing by £239 million. Elsewhere, as seen in the three-month on three-month series, private commercial and public other new work provided a further downward drag on output, decreasing by £91 million and £75 million respectively.

The only notable positive contribution to growth came from the private industrial sector, which recovered from two consecutive months of decline, increasing by £57 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 decreased to £12,614 million in January 2018. This fall stems from a decrease in all new work, which fell from a record high in December 2017, to £8,178 million. Elsewhere, total repair and maintenance also fell, decreasing to £4,436 million.

In comparison with January 2017, construction output fell by 3.9%, representing the biggest month-on-year decline since March 2013. As seen in the month-on-month series, the decline in month-on-year construction growth has been caused predominantly by a fall in all new work, which was 4.4% lower in January 2018 than it was in the same period in 2017. This fall stems from slowdowns in both public other and private commercial work, both of which contracted across all series in January 2018.

Construction output also fell in the most recent three-months on year series, contracting by 1.1%. The increases in public and private housing, which grew 2.1% and 6.4% respectively, were more than offset by falls in public other new work, which contracted 14.6% and private commercial work, which decreased by 5.7%.

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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, after experiencing a slowdown in Quarter 1 (Jan to Mar) 2009, the value of all other work has remained broadly stable since 2013, with the exception of Quarter 3 (July to Sept) 2017, in which all other work spiked due to high-value new orders relating to High Speed 2 (HS2). Over the same period, housing new orders have increased gradually.

All new work fell by 25.0% in Quarter 4 (Oct to Dec) 2017, with the value of new orders falling back following the record 38.1% growth in all new work in Quarter 3 2017. However, despite this decline, all new work remains at a relatively high level.

The sharp drop in all new work is mirrored in the all other work series, which also spiked as a result of HS2 in Quarter 3 2017. Despite falling by 31% compared with the previous month, all other work remains at a relatively high level. Elsewhere, all new housing orders fell by 6.1% in Quarter 4 2017, falling back from the 9.0% growth experienced in Quarter 3 2017. This was driven predominantly by a 2.3% decrease in private housing new orders.

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

Following the fall in all other work, new orders decreased to £12,701 million in Quarter 4 2017. Despite this fall, total new orders increased by 4.3% in 2017, reaching the highest total since 2008, at £55,130 million. The 25% quarter-on-quarter fall in all new orders in Quarter 4 2017 came as a result of new orders falling from a historic high in Quarter 3 2017. The most recent quarter-on-year and four-quarters on a year series, shown in Table 2, provide the more underlying trend in new orders.

Compared with Quarter 4 2016, all new work fell by 1.3%. This contraction came as a result of falls in both all new housing and all other work, which fell by 2.6% and 0.8% respectively. The fall in all new housing was driven by decreases in public housing, which fell by 3.5%, and the considerably larger private housing new orders, which decreased by 2.5%. Meanwhile, the quarter-on-year decline in all other work occurred as a result of the strong growth in infrastructure and private commercial work being more than offset by declines in private industrial and public other work.

In contrast to both the quarter-on-quarter and quarter on a year earlier series, all new work grew by 4.3% in the most recent four quarters on a year earlier series. The growth in this series was driven by 35.2% growth in infrastructure new orders, alongside a 4.5% increase in private housing. Some of this growth was offset by the sharp declines in both public other new work and private commercial new work, which fell by 14.2% and 7.9% respectively in Quarter 4 2017.

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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

Since the publication for November 2017, 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 2 (Apr to June) 2017. Further information on the use of VAT turnover and its impact can be found in the VAT turnover implementation into national accounts article.

The New orders in construction Quality and Methodology Information report provides similar information for the new orders data.

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