Construction output in Great Britain: March 2018

• Construction output continued its recent decline in the three-month on three-month series, falling by 2.7% in March 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 2.8% and 2.6% respectively.

• Following several months of consistently strong growth, private housing also experienced a slowdown in March 2018, contracting in the three-month on three-month series by 1.6%.

• Construction output also fell in the month-on-month series, contracting by 2.3% in March 2018.

• Office for National Statistics has 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; the adverse weather conditions across Great Britain could have potentially contributed to the decline in construction output, although it is difficult to quantify the exact impact on the industry.

• The estimate for construction growth in Quarter 1 (Jan to Mar) 2018 has been revised up 0.6 percentage points to negative 2.7%, from negative 3.3% in the preliminary estimate of gross domestic product (GDP), which has no impact on quarterly GDP growth to one decimal place.

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.

Compared with the previous Construction output in Great Britain: February 2018 publication released on 11 April 2018, this March 2018 release contains revisions for January 2018 onwards. This means that we have incorporated additional data since this period.

Revisions can be made for a variety of reasons, the most common include:

• late responses to surveys and administrative sources, or changes to original returns

• imputations being replaced by actual data

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

• HM Revenue and Customs (HMRC) VAT returns replacing MBS data for small- and medium-sized businesses when VAT estimates become available each quarter

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.

Construction output fell by 2.7% during the three-month on three-month period to March 2018, representing the fifth 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 reached a record high. However, in the first three months of 2018, construction output has subsequently begun to contract, decreasing by 2.7% in the three-month on three-month series in March 2018. 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 the month-on-month decrease in March 2018, construction output remains 22.7% above this level.

This March 2018 release contains revisions from January 2018 onwards, with month-on-month growth in January 2018 being revised up 0.5 percentage points, from negative 3.1% to negative 2.6% and month-on-month growth in February 2018 being revised up 0.6% percentage points from negative 1.6% to negative 1.0%. These revisions have been caused by the receipt of new data.

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.

Construction output fell by 2.3% month-on-month in March 2018, following decreases in output in the first two months of 2018. The decrease stemmed from a fall in all new work, which also continued to fall following a contraction in February 2018, decreasing by 2.9%. Elsewhere, repair and maintenance also fell in March 2018, albeit to a lesser extent than all new work, decreasing by 1.3% 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.

As stated in Gross domestic product, preliminary estimate: January to March 2018, Office for National Statistics (ONS) has received some anecdotal information from a number of survey respondents regarding the effect of the adverse weather on their businesses across the first quarter of 2018. However, due to the volatile nature of the industry, it is difficult to quantify the impact on the construction industry as a whole.

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 £1.043 billion in the three-month on three-month time series in March 2018, stemming from falls in all but one sector. The most notable decline came from repair and maintenance work, which continued its recent fall due to decreases in both housing and non-housing repair and maintenance, which fell by £211 million and £180 million respectively. Elsewhere, the recently strong private housing sector, which has experienced consistent growth in this series since June 2017, fell by £139 million.

The only positive contribution to growth came from the relatively small and volatile private industrial sector, which grew following four consecutive periods of contraction, increasing by £20 million in the three months to March 2018.

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.

Construction output fell by £299 million in March 2018 compared with February 2018. The main contribution to the fall in all work came from a decrease in the value of private housing new work, which fell sharply in March 2018, decreasing by £121 million. Infrastructure also fell sharply for the second consecutive month, decreasing by £76 million. Elsewhere, the majority of other sectors experienced month-on-month declines.

However, as also seen in the three-month on three-month series, the private industrial sector provided the only positive contribution to growth. Following a sharp month-on-month decline in February 2018, private industrial work grew by £19 million in March 2018.

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 £12,514 million in March 2018. This fall stems from a decrease in all new work, which decreased to £8,083 million. Elsewhere, total repair and maintenance also fell, decreasing to £4,431 million.

In comparison with March 2017, construction output fell by 4.9%. This month-on-year fall in March 2018 represents the third consecutive fall in output in this series, the first time this has occurred since May 2013. This month-on-year fall has been driven by continued decreases in both all new work, and repair and maintenance, which fell 5.2% and 4.2% respectively. The fall in all new work stemmed from a decrease in private commercial new work, which fell 8.7% compared with March 2017. Meanwhile, the fall in repair and maintenance occurred as a result of the continued slowdown in non-housing repair and maintenance, which contracted by 5.8%.

Construction output also fell in the most recent three-months on year series, contracting by 2.7%. The increase in private housing, which grew 6.0%, was more than offset by falls in public other new work, which contracted 14.1% and private commercial work, which decreased 6.8%.

Output in the construction industry follows the Eurostat Short Term Statistics (STS) regulation for production in construction. Before any comparisons are made with the Euro area or EU28, it is worth noting that the UK is the only member state to follow the A method for compiling production in construction statistics.

The latest release of Production in construction published by Eurostat on 18 April 2018 for February 2018, showed the seasonally adjusted production in the construction sector (PDF, 520KB) decreased by 0.5% in the Euro area (EA19) and decreased by 0.8% in the EU28 when compared with January 2018.

Outside the EU, the US Census Bureau release Value of construction put in place (PDF, 200KB) was published on 1 May 2018. This includes the total dollar value of construction work done in the US.

The Construction statistics: Number 18, 2017 edition was published on 2 October 2017. This publication contains analysis on the construction sector in 2016, as well as information on sources and outputs in the industry.

• Ministry of Housing, Communities and Local Government (Housing starts and completions)

• Construction statistics in Northern Ireland

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

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:

VAT turnover implementation into national accounts article

VAT turnover data in National Accounts: background and methodology

Office for National Statistics is releasing two 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 will detail two major improvements to the construction output methodology:

• improvements to address the revisions performance and bias in output data, which will be incorporated for the first time in the Quarterly national accounts, Quarter 1 (January to March) 2018 on 29 June 2018

• improvements to regional and sub-sector level output estimates using new orders data supplied by Barbour ABI, which will be incorporated for the first time in the Construction output in Great Britain: April 2018 and New orders: January to March 2018 publication on 11 June 2018

In our next release, Construction output in Great Britain: April 2018, no previous periods will be open for revision. This is in line with the standard National Accounts Revisions Policy. The Construction output in Great Britain: May 2018 release will include methodological updates and revisions back to 1997 and is our Blue Book-consistent publication.