1. Main points

  • Construction output continued its recent decline in the three-month on three-month series, falling by 1.7% in May 2018; representing the third consecutive decline in this series.

  • The three-month on three-month decrease in construction output was driven predominantly by a fall in new work, which also fell for the third consecutive month, decreasing by 2.5% in May 2018.

  • Following a broadly negative start to 2018 in the month-on-month series, construction output showed signs of recovery in May 2018, increasing by 2.9% compared with April 2018.

  • The month-on-month growth in construction output was in part driven by the recovery of private housing repair and maintenance work, which grew 7.3% in May 2018 following a weak start to the year.

  • Estimates in this release are consistent with the Quarterly national accounts: January to March 2018 publication released on 29 June 2018 and will feed into the national accounts Blue Book 2018 publication, due to be released on 31 July 2018.

  • Improvements made to construction output estimates include changes to nominal data, a seasonal adjustment review, inclusion of the latest mark-up data used within the price indices and improvements to the methodology to address bias in early construction estimates; as a result, revisions can be seen from Quarter 1 (Jan to Mar) 2010.

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2. Things you need to know about this release

This May 2018 release is the first time that the Index of Services (IoS), the Index of Production and output in the construction industry, are published alongside each other, allowing for an estimate of monthly GDP, which is also published today (10 July 2018).

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.

Estimates in this release are consistent with the Quarterly national accounts: January to March 2018 publication released on 29 June 2018 and will feed into the national accounts Blue Book 2018 publication, due to be released on 31 July 2018. Improvements made to construction output estimates include changes to nominal data, a seasonal adjustment review, inclusion of the latest mark-up data used within the price indices and improvements to the methodology to address bias in early construction estimates. As a result, revisions can be seen from Quarter 1 (Jan to Mar) 2010. This is in line with the standard National Accounts Revisions Policy.

Compared with the previous Construction output in Great Britain: April 2018 publication, this May 2018 publication contains revisions from January 2010 onwards. The revisions up to Quarter 1 2018 are consistent with those published in the Quarterly national accounts: January to March 2018 publication. In addition to these revisions, further revisions have also been made to April 2018 construction output estimates in this publication.

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

It is also worth noting that the chained volume measures have been re-referenced to 2016. Our indices are therefore now presented in the 2016 equals 100 format.

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3. Construction output in May 2018

Construction output fell by 1.7% during the three-month on three-month period to May 2018, representing the third 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 31.5% higher than the lowest point of the last five years, May 2013. Despite a weak start to 2018, construction output has begun to show signs of recovery and, following the growth in May 2018, construction remains 30.3% above the level seen in May 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 has begun to bounce back, increasing by 2.9% in May 2018, following flat growth in April 2018. The month-on-month rise in construction output in May 2018 stemmed from increases across all types of work. Total all new work increased by 2.3% while repair and maintenance work increased by 4.0% in May 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 £683 million in the three-month on three-month time series in May 2018. The most notable contribution to the decline came from private housing new work, which decreased by £394 million in the three months to May 2018. Elsewhere, public other new work also fell sharply, decreasing by £238 million.

In contrast, the relatively small and volatile private industrial sector continued to provide the most notable positive contribution to growth in the three months to May 2018, increasing by £89 million. The only other notable upward pressure on three-month on three-month output came from non-housing repair and maintenance, which increased by £65 million in May 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.

Compared with the previous month, construction output increased by £384 million in May 2018. The increase in construction output occurred as a result of increases across all types of work. The most notable increases came from total housing repair and maintenance, which increased by £125 million, and private housing new work, which rose by £78 million. Elsewhere, public other new work rebounded somewhat following four months of sustained contraction, increasing by £25 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 £13,700 million in May 2018. This increase stems from a rise in both all new work, and total repair and maintenance, which grew to £8,959 million and £4,741 million respectively.

In comparison with May 2017, construction output grew 1.6%. This month-on-year increase occurred as a result of a 1.6% increase in both repair and maintenance, and all new work. The increase in all new work stemmed from the continued increase in the value of private housing new work, which increased by 8.4% compared with May 2017. In addition, infrastructure work also continued its sustained growth in the month-on-year series, increasing by 6.4%. In contrast, the main downward pressure on month-on-year construction output growth came from public other new work, which continued to fall sharply in May 2018, decreasing by 17.0%.

Despite month-on-month and month-on-year increases in May 2018, construction output fell for the second consecutive month in the most recent three-month on year series, decreasing by 0.3%. The increase in new private housing work, which grew 6.4%, was more than offset by falls in public other new work and private commercial new work, which contracted by 17.4% and 5.5% respectively.

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6. Revisions

The Impact of improvements to construction statistics article was released on 29 June 2018, alongside the Quarterly national accounts publication for January to March 2018. This was the first release of the data that will be found in the annual national accounts Blue Book 2018 publication, due to be released on 31 July 2018.

Revisions have been made back to January 2010, resulting from improvements to nominal data, a seasonal adjustment review, inclusion of the latest mark-up data for price indices and improvements to the methodology to address bias in early construction estimates. An indication of the main causes of the quarterly revisions is outlined in Table 3 of the Impact of improvements to construction statistics article.

Figure 5 shows the index volume series for all construction work, comparing the previous publication with the latest publication.

Revisions to construction output estimates have been made back to Quarter 1 (Jan to Mar) 2010, as shown in Table 2 of the Impact of improvements to construction statistics article. The most significant revision to quarterly growth can be seen in Quarter 1 2018, which has been upwardly revised by 1.9 percentage points, from negative 2.7% to negative 0.8%. This revision has been predominantly caused by the improved imputation methodology.

The bulk of the revision to the first quarter of 2018 has been driven by the revision to construction output in January 2018, which has been upwardly revised by 1.1 percentage points, from negative 2.6% to negative 1.5%.

In addition to the revisions to construction output first published within Quarterly national accounts on 29 June 2018, this publication also includes a downward revision to the April 2018 construction output estimate, which has been revised down by 0.5 percentage points, from positive 0.5% to flat growth. This revision has mainly been caused as a result of the annual review of the seasonal adjustment model, which more than offset the positive revision coming from nominal data changes.

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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

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.

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 overall impact of the improvements to construction statistics that were included in Quarterly national accounts: April to June 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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