1. Main points

  • Construction output continued to recover following a relatively weak start to the year, increasing by 3.3% in the three months to July 2018.

  • The three-month on three-month growth in July 2018 was driven by growth in both repair and maintenance, and all new work, which increased by 5.3% and 2.3% respectively.

  • Construction output also grew in the month-on-month series, increasing by 0.5% in July 2018, driven predominantly by a 4.0% increase in new private housing work.

  • Total construction new orders declined 6.5% in Quarter 2 (Apr to June) 2018, decreasing for the third consecutive quarter, reaching its lowest level since Quarter 1 (Jan to Mar) 2013.

  • The quarter-on-quarter decrease in construction new orders in Quarter 2 2018 is driven predominantly by a 17.6% fall in new housing orders, which fell to a similar level seen in Quarter 4 (Oct to Dec) 2017, following strong growth in Quarter 1 2018.

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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 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).

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.

Compared with the previous Construction output in Great Britain: June 2018 publication released on 10 August 2018, this July 2018 release contains no revisions in the back series of construction output estimates. However, the Quarterly national accounts, UK: April to June 2018, set to be released on 28 September 2018, will include revisions to construction output from January 2017 onwards.

This July 2018 release represents the third monthly construction output release in which the new improved methodology has been used to impute data for businesses that have not yet returned their Office for National Statistics (ONS) survey, along with a further adjustment to address any bias in early survey responses for construction output. Full details of these improvements can be found in Improvements to construction statistics: Addressing the bias in early estimates of construction output, June 2018.

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3. Construction output in July 2018

Construction output increased by 3.3% in the three months to July 2018, as the industry continues to recover following a weak start to the year. 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 a marked fall in the rolling three-month series at the beginning of 2018, construction output continued to recover in July 2018. Following the month-on-month growth in July 2018, construction output has reached a record monthly level, surpassing the previous high seen in the previous month. As a result of the growth in July 2018, construction output is now 30.9% above the lowest point in the last five years, seen in July 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. 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 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 July 2018.

Following four consecutive months of contraction in the month-on-month series at the start of 2018, construction output has increased in the latest three months. Following growth of 2.9% in May 2018 and 1.4% in June, construction output increased by 0.5% in July 2018. The month-on-month rise in construction output in July 2018 stemmed from an increase in all new work, which increased by 1.0% compared with June 2018, more than offsetting the month-on-month fall in repair and maintenance work, which fell by 0.4% in July 2018.

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 increased by £1.34 billion in the three months to July 2018. The most notable contribution to growth came from infrastructure, which increased by £414 million in the three months to July 2018. In addition, notable three-month on three-month growth came from the repair and maintenance sector, with both non-housing repair and maintenance, and housing repair and maintenance experiencing growth, increasing by £348 million and £375 million respectively.

In contrast, the only sector to provide downward pressure on output in the three months to July 2018 was public other new work, which fell for the sixteenth consecutive month in the three-month on three-month series, decreasing by £73 million in July 2018.

As indicated in the Construction output in Great Britain February 2018 and March 2018 publications, the adverse weather in these months potentially contributed to the level of three-month on three-month growth in July 2018, although it is difficult to quantify the exact impact on the industry.

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 July 2018.

The most notable increase came from private housing new work, which increased by £118 million in July 2018, this more than offset the £40 million fall in public housing, which decreased following strong growth in June 2018. The only other notable contribution to month-on-month growth came from public other new work, which despite continuing to contract in the three-month on three-month series depicted in Figure 3, increased by £38 million in the month-on-month series in July 2018.

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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 £13,949 million in July 2018. This increase stems from a rise in all new work, which grew to £9,136 million, outweighing the fall in total repair and maintenance, which fell to £4,813 million.

In comparison with July 2017, construction output grew by 3.5%. This month-on-year increase occurred as a result of a 4.3% increase in new work and a 2.2% increase in repair and maintenance. The most notable contributions to month-on-year growth came from infrastructure and private housing new work, which grew by 11.5% and 10.4% respectively. In contrast, compared with the same period in 2017, the public other and private commercial new work sectors continued their month-on-year declines falling by 9.2% and 2.7% respectively compared with July 2017.

Following consecutive falls in April and May 2018, construction output grew 2.4% in the three-month on year series in July 2018. The 9.0% and 7.5% respective three-month on year growth in infrastructure and private housing in July 2018 more than outweighed the 14.6% and 3.7% respective fall in public other and private commercial new work.

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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, until the latest quarter, the value of total construction new orders had remained broadly stable since 2013, with the exception of the spike in Quarter 3 (July to Sept) 2017. This was caused by the awarding of several high-value contracts awarded for the construction of HS2. This trend was also reflected in the value of all other work and housing new orders, which had also remained broadly stable.

The value of all construction new orders fell for the third consecutive period in Quarter 2 (Apr to June) 2018, decreasing by 6.5% compared with the previous quarter. As a result of the quarter-on-quarter decrease in Quarter 2 2018, the value of total new orders fell to its lowest level since Quarter 1 2013.

The fall in all new orders has been driven by the decrease in new housing new orders, which fell by 17.6% in Quarter 2 2018, albeit from its highest level since Quarter 3 2007. This contraction was driven by a fall in the value of private housing new orders, which more than offset the rise in public housing contracts. In contrast, the value of all other work new orders has remained relatively flat in Quarter 2 2018 – increasing by 0.2% compared with the previous quarter – driven by increases in infrastructure and private commercial 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.

As a result of the 6.5% fall in all new orders in Quarter 2 2018, the value of all construction new orders fell to £10,801 million. The value of new housing new orders contracted from its highest level since the economic downturn in the previous quarter, decreasing to £3,552 million. Meanwhile the rises in the infrastructure and private commercial sectors offset the falls in public other and private industrial new orders, resulting in all other work new orders remaining stable at £7,249 million.

Compared with Quarter 2 2017, total new orders fell by 7.4% in Quarter 2 2018. In contrast to the quarter-on-quarter series, the quarter-on-year fall was driven by a decrease in all other work new orders, which decreased by 10.1% compared with the same quarter in 2017. The overall fall in total new orders occurred as a result of decreases across all but one sector – public new housing – with notable declines in public other work and private commercial new orders, which fell 18.0% and 11.6% respectively.

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 3.0% increase, with growth in both all new housing and all other work. The large four quarters on a year 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 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 4 (Oct to Dec) 2017. In line with Quarterly national accounts, UK: April to June 2018, set be released on 28 September 2018, VAT data will be included in construction output estimates for Quarter 1 2018 for the first time.

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 engagement and 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.

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 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.

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 to the improvements made in September 2017, we have since announced two further methodological improvements to construction output estimates, which have since been implemented, detailed in the two articles:

The overall impact of the improvements to construction statistics that were included in Quarterly national accounts: Jan to Mar 2018 are outlined in the article released on 29 June 2018.

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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