1. Main points

  • Construction output contracted for the sixth consecutive period in the three-month on three-month time series, falling by 1.4% in October 2017.
  • The three-month on three-month fall in construction output stemmed from falls in both repair and maintenance, and all new work, which fell by 3% and 0.6% respectively.
  • Construction output also contracted month-on-month in October 2017, decreasing 1.7%, in part due to a 1.5% fall in all new work.
  • New orders saw record growth in Quarter 3 (July to September) 2017, growing by 37.4% compared with the previous quarter.
  • The record growth was driven predominantly by growth in the infrastructure sector, caused by the awarding of several high-value new orders relating to High Speed 2 (HS2).
  • Housing new orders also grew in Quarter 3 2017, increasing by 9.5%, recovering from a fall of 4.2% in the previous quarter.
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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 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 Summary Construction Output Quality and Methodology information.

In line with the updated revisions policy outlined in the latest VAT article, the back series for construction output prior to October 2017 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. These figures represent the full value of projects whose contract has been awarded in a quarter, with many of these projects being scheduled to take place over a multi-year period. Since April 2013, data has 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 Quality and Methodology information.

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 has put out a request for feedback and comments from users of these statistics, as part of the process for re-assessing the National Statistic status for Construction statistics: output, new orders and price indices. Responses are requested for eight different areas of these statistics, as well as any other aspect, and should be sent to regulation@statistics.gov.uk by 15 December 2017.

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3. Construction output falls in October 2017

Construction output fell by 1.4% three-month on three-month in October 2017, the largest decline seen in this series since September 2012. The monthly time series shows how volatile construction output can be. Therefore the rolling three-month time series is also shown in Figure 1, providing a more comprehensive picture of the underlying trends within the construction industry.

Both the month-on-month and three-month on three-month time series continued to fall in October 2017. However, Figure 1 shows that despite these recent consecutive declines, construction output still remains at a relatively high level. Construction output peaked in January 2017, reaching a level that was 29% higher than the lowest point of the last five years, January 2013. Despite falling in October 2017, construction output remains 23.6% 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 through to mid-2014, new work, and repair and maintenance followed a similar pattern but since reaching a level peak in August 2014, repair and maintenance has contracted slowly. Over the same period, new work has also increased steadily. However, since early 2017, the series has begun to contract.

The 1.7% month-on-month fall in construction output in October 2017 occurred due to falls in both repair and maintenance, and all new work. Total repair and maintenance fell for the fifth consecutive month in October 2017, decreasing by 2% compared with the previous month. Elsewhere, all new work fell by 1.5% in October 2017. 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 three-month on three-month volume from the different sectors in terms of real value growth, taken from our seasonally adjusted chained volume measure series.

Construction output fell by £553 million in October 2017. This fall has been broadly driven by decreases in repair and maintenance, with housing repair and maintenance falling by £265 million and non-housing repair and maintenance decreasing by £144 million. In addition, private commercial also continued its recent decline, contracting by £260 million in October 2017.

The majority of other industries were broadly flat in October 2017, with only private industrial work and housing providing notable positive contributions to growth. Private industrial work increased by £82 million in October 2017, while growth in housing came as a result of increases in both public and private housing, which grew by £43 million and £35 million respectively.

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 £211 million compared with September 2017. As in the three-month on three-month series, the fall stems primarily from a decrease in repair and maintenance, with non-housing repair and maintenance falling by £73 million. Private housing also provided a notable drag on output, also decreasing by £73 million. Elsewhere, private commercial work also fell sharply, decreasing for the second consecutive month, falling by £58 million in October 2017.

The only positive contributions to the month-on-month construction output came from infrastructure and private industrial work, which grew by £36 million and £14 million respectively.

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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 £12,417 million in October 2017. This fall stems from decreases in both total all new work, which contracted to £8,087 million and total repair and maintenance, which fell to £4,330 million.

Compared with October 2016, construction output fell 0.2%, representing only the second month of negative growth in the month-on-year series since May 2013. As in the three-month and month-on-month series, both total repair and maintenance and private commercial new work contracted, both falling by 2.7% compared with the same period in the previous year.

In contrast, some positive month-on-year growth can be seen in new housing. Despite falling sharply in the month-on-month series, housing remains strong month-on-year, with public housing work increasing 14.2% and private housing work expanding 2.7%. Meanwhile infrastructure continued the month-on-year growth seen throughout the majority of 2017, expanding 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 enduring a greater slowdown beginning in Quarter 1 (January to March) 2009, the value of all other work has remained broadly stable since 2013.

However, as can be seen in Figure 5, the value of all new orders has endured an unprecedented increase in Quarter 3 (July to September) 2017, increasing by 37.4% compared with the previous quarter. This increase has occurred as a result of growth in the infrastructure sector, which occurred as a result of the first high value High Speed 2 (HS2) contracts being awarded in Quarter 3 2017. The 37.4% growth in new orders is the highest on record, exceeding the previous high of 32.0% seen in Quarter 3 1987, which occurred as a result of new orders placed for the construction of the Channel Tunnel.

Elsewhere, it is worth noting that all new work, excluding infrastructure, grew by 4.1%. This was led by all new housing orders, which recovered from contraction of 4.2% in Quarter 2 (April to June) 2017, increasing by 9.5% in Quarter 3 2017.

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 large growth in all other work, new orders grew to its highest value since Quarter 4 (October to December) 2007, reaching £16,699 million in Quarter 3 2017.

The 37.4% quarter-on-quarter growth in new orders was caused predominantly by the 174.5% growth in infrastructure, which stems from the awarding of the main civil engineering works contracts for stage one of HS2. Without this growth in railways new orders, infrastructure would have seen an overall contraction, due to a substantial fall in electricity projects.

In contrast, both public and private housing increased, expanding by 35.4% and 6.4% respectively. Following a sharp decline in Quarter 2 2017, private commercial also expanded, increasing by 1.0%. The only quarter-on-quarter decline within new orders came from public other work, which fell 0.5%.

New orders also grew quarter-on-year, increasing by 25.5% compared with Quarter 3 2016. Similar to the quarter-on-quarter time series, growth was seen across all industries with the exception of one industry. Only the private commercial sector fell quarter-on-year, contracting by 9.3% compared with Quarter 3 2016. The main upward pressures on quarter-on-year new orders growth came from infrastructure, which grew 111.6%, as well as housing, which expanded by 3.0% compared with Quarter 3 2016. Private industrial, despite being relatively small, continued to expand quarter-on-year; increasing by 13.9%.

The more underlying trend in new orders can be seen in the most recent four quarters on four quarters a year earlier series, where the effect of the HS2 new orders is smaller. All other work grew by 4.5%, owing in part to 36.9% growth in infrastructure, however, this was offset partially by a sharp fall in private commercial work, which fell 14.5%. Elsewhere, as in the quarter-on-year series, new housing grew by 3.0%.

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8. 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
  • how the output was created
  • the quality of the output including the accuracy of the data

The New Orders Quality and Methodology Information report provides similar information for the new orders data

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9. Upcoming changes

On 10 January 2018, the next bulletin will reflect the inclusion of VAT data alongside Monthly Business Survey data for the first time. In advance of this, on 22 December 2017 the Quarterly national accounts publication will include VAT estimates as outlined in the latest VAT article and include consequential revisions to the Index of Services, Index of Construction and Index of Production.

It should be noted that the Index of Construction data released on 8 December 2017 will not necessarily be consistent with the data used in the next Quarterly national accounts publication on 22 December 2017.

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