Office for National Statistics

Construction Statistics

construction.statistics@ons.gsi.gov.uk

Name of indicator/source: Construction output

NACE Rev. 2.

Activities coveredNACE Rev. 2. Section F, excluding Group 41.1 - Development of Building Projects)

Size classes covered Not available

List and definition of variables: The tender price indices are calculated by analysing Bills of Quantities, one for each construction project considered. These give, for each item or service (building operations covered by the contract), how much this operation contributes to the total value of the contract in GBP. The sum of these contributions equals the total tender price of the project. These values are converted into quantities and rates to obtain "quantifiable items". The rate in GBP per unit quantity, for the index base year, is known from a separate exhaustive study carried out in the base year. Thus for each item in the bill of quantities the actual price and a hypothetical base year price are available.

The deflator can be constructed from the value and volume of orders placed in previous quarters once adjustments have been made to tender prices for changes in materials and labour costs for which reimbursement is allowed under "variation of price" clauses. The value of orders placed in a given quarter used to estimate the value of output is obtained from the statistics on orders. The volume of orders is obtained by deflating the value of orders placed in one quarter by the tender price index of this quarter. The output price index corresponds to the quotient of the value at current price of the work done in quarter T on the basis of contracts placed in quarter T and in preceding quarters and of the volume of the same work done.

For types of constructions such as private housing or various forms of repair and maintenance work, for which the Government has no tender price indices to employ, a mix of materials costs indices and labour cost indices is used instead.

Public sector house-building price index: the index provides a measure of the change in tender prices based on the Bill of Quantities for the successful tenders for dwellings in blocks of up to 4 storeys built by traditional methods.

Public sector non-housing price index: the index measures the movement of prices in competitive tenders for building contracts in the public sector.

Road construction price index: the index provides a measure of the change in tender prices based on the Bill of quantities of the winning tenders for new contracts with a work cost of 1 million GBP or more.

The output price index for private housing is compiled using the method described above with a proxy-tender price index calculated on the basis of:
— house prices at mortgage approval stage (50% of the index);
— house building costs of materials (25% of the index);
— house building labour cost (25% of the index). This in turn is made up of 56% of skilled labour, 29% of unskilled labour, 8% of labour on heating and ventilation, 7% of labour on electrical activities).

The output price series for infrastructure are based for 75% on the road construction tender price index and for 25% on the tender price for industrial building.

Output price indices: output price indices measure inflation in the total amount of a particular type of construction being carried out during the reference quarter.

Planned changes in information collected: None planned.

Accounting conventions: Output (production) of new construction work in a quarter is made up of work done on contracts let during or before that quarter.

Reporting unit: KAU (Kind of activity unit) for the indicators in industry and construction

Observation unit(s): The reference population is defined in terms of building projects for which the Department for Business, Innovation and Skills collects the successful tender prices.

The survey collects output by sector from businesses in the construction industry.

Geographical area covered: The scope of the Public sector house building tender price index is limited to England and Wales, although a similar index is produced for Scotland. The Public sector non-housing building and the Road construction tender price indices extend to England, Scotland and Wales but do not cover Northern Ireland. The Commercial and industrial buildings tender price indices cover the whole of the United Kingdom. The construction output price indices cover the same area as the tender price indices they are derived from.

Date of first use as a source: Not available. Data were first published in 1942.

Base (reference) year : All indices are expressed in 2015 base year.

Indices, percentage changes (%).

Reference year of this report: 2019

Legal basis: Statistics of Trade Act 1947.

Obligation on units to provide data:  Under the Statistics of Trade Act respondents are obliged to provide data.

Planned changes in legal basis, obligation to respond and frame used: None planned.

Eurostat makes available all the non-confidential data on its dissemination website. Selected data in special formats are transmitted daily to the ECB (European Central Bank) and monthly to the OECD (Organisation for Economic Cooperation and Development).

Dissemination of terms and conditions under which official statistics are produced, including confidentiality of individual responses: 

A description of the sources and methods is available on the ONS website. In addition, information on the National Statistics protocols under which the information is produced is available from the ONS. The Statistics of Trade Act 1947 is also publicly available. Output in the Construction Industry is compliant with the Code of Practice of Official Statistics. Principle 5.

Treatment of confidential data: Where a published cell contains confidential data, the practice is to amalgamate that cell with a neighbouring cell. This occurs in a few tables in the Construction Statistics Annual. In general, regularly published tables are designed so that this does not need to occur. All necessary steps are taken to protect the confidentiality of data collected from construction businesses. This includes statistical disclosure controls to ensure that individual businesses are not identified in the published statistics.

Advance dissemination of release calendar: Subscribers are given a timetable showing when the book is expected to be published.

http://www.ons.gov.uk/releasecalendar

Simultaneous release to all interested parties: Access to data is via a printed publication. All copies are distributed at the same time.

Identification of internal government access to data before release: None.

Transmission to Eurostat and further use of the statistics: 

Data are transmitted to Eurostat through a quarterly email report approximately 2 months after the quarter of reference.

The key users of data are:

• National Accounts, where estimates are fed into Gross Domestic Product (GDP) at Month one, Month two and Month three of the quarter
• Industry analysts requiring estimates of the construction industry output of Great Britain
• Trade associations making UK and international comparisons
• Other government departments including; BEIS, HM Treasury (HMT) and the Department for Communities and Local Government (DCLG). Named individuals with pre-release permission within these departments have access to construction statistical outputs 24 hours before they are released to the public

Monthly.

Identification of ministerial commentary on the occasion of statistical releases: None

Name of national paper publications: 

The Public sector house building tender price index, the Public sector non-housing building tender price index, the Road construction tender price index and all the Output Price Indices are published quarterly and annually:
— in Construction Statistics Annual (ONS);
— through a quarterly subscription service;
— in Quarterly building price and cost indices (DTI).

The Commercial and industrial buildings tender price indices are published together and as separate series in the monthly bulletin of the Royal Institute's Building Cost Information Service.

Name of national electronic dissemination: None.

To be filled in.

N/A

Planned changes in national dissemination methods: None planned

Dissemination of documentation on methodology and sources used in preparing statistics Published in the appendices to the Construction Statistics Annual.

Description of standard tables produced:

As well as publishing the simple indices, the Public sector non-housing building tender price index is published by type of contract, fixed price and variation of price contracts and all-in contracts. Separate adjustment factors are also published for 36 different areas of Great Britain as well as for 21 different types of building.

To be filled in.

Summary description of quality criteria calculated for national purposes:

Our monthly construction survey samples 8,000 businesses, with all business employing over 100 people or with an annual turnover of more than £60 million receiving a questionnaire by post every month. There are two response rates included, with one percentage for the amount of turnover returned and the other percentage for the amount of questionnaire forms.

The latest Quality and Methodology report for the Output of the Construction Industry estimates can be found on our website. This contains important information on:

• the strengths and limitations of the data and how it compares with related data
• users and uses of the data
• how the output was created
• the quality of the output including the accuracy of the data

Guidelines for measuring statistical quality: http://www.ons.gov.uk/ons/guide-method/method-quality/quality/guidelines-for-measuring-statistical-quality/index.html

Basic Quality Information relevant to each release is available in the background notes of the relevant Statistical Bulletin.

The needs of Construction Output users were assessed by a public consultation when the responsibility for the series moved to ONS. A detailed look at how the survey was designed to meet those needs, and where it does not, is given in the report on the consultation. In particular, Appendix 2 gives a table of the unmet user needs, while Appendix 3 looks at the details of the changes made and their impact on users.

All issues relating to the collection and dissemination of construction statistics are discussed at the Consultative Committee on Construction Industry Statistics (CCCIS). This is a joint forum which meets biannually and consists of members of the industry, BIS and ONS.

The Monthly Business Survey for Construction was introduced from January 2010, replacing the earlier Quarterly Inquiry of Activity for Construction and Allied Trades and the Building and Civil Engineering Employment and Output Inquiry. The change, part of the development of Construction Statistics, followed the transfer of responsibility from BERR, now BIS to ONS.

Data by regional splits and further sub-divisions of the type of work are published on the first month of each quarter. This information is not collected directly from the Construction Output survey for logistical and burden reasons. Instead, this split is modelled from New Orders data in conjunction with information collected from the Projects in Progress Survey (now discontinued), which mapped the duration of projects for differing sectors. It has been pointed out to users that this level of granular data is indicative only. User reaction has been that they still want the data regardless of the concerns regarding accuracy. 

The survey also does not collect information regarding the output of Property Developers (SIC 41.1). This is consistent with many other European National Statistical Institutes (NSI). Property developers tend to sub-contract work to other businesses in the construction sector that carry out the actual building activity. Businesses are asked to exclude any sub-contracted work to avoid any double counting.  

Data are sourced from the Monthly Business Survey for Construction (also known as the Construction Output Survey), which collects information from businesses in the construction industry within Great Britain. The survey’s results are used to produce estimates of Output in the construction sector of the economy.

Published estimates no longer include estimates of unrecorded output. This is work carried out by sole proprietors who do not pay PAYE and are below the VAT threshold and therefore cannot feature in the sample. Estimates are, however, included in the calculation of National Accounts estimates of activity in the construction industry.

Northern Ireland is also excluded as they carry out their own survey of construction activity.

The survey obtains its samples from the IDBR, which is a database of UK businesses that is maintained by ONS (Northern Ireland businesses are not selected). The sample is periodically reviewed and optimised. Targeted survey response rates are set at 70 per cent by number of questionnaires and 80 per cent by turnover. Respondents are sent reminder letters to encourage response and are also contacted by telephone to achieve the response targets. Enforcement of persistent non-responders has also been introduced.

Estimates produced from the survey data are subject to various sources of error that can be categorised into sampling and non-sampling error.

This occurs because estimates are based on a sample rather than a census. Sampling error is minimised for the Monthly Business Survey through the use of a scientifically chosen sample which is reviewed and refined periodically. Sampling error is continually monitored with standard errors and coefficients of variation calculated for each output question asked.

Response rate:

Historicall, the response rate depends on the size of the firms. The response rates are higher when measured by employment than by number of units. Bigger firms answer better, typically 70% response rate is achieved.

Actions to speed up or increase the rate of response:

One postal reminder is sent. Large enterprises may also receive up to three telephone reminders. Non-sampling error is minimised through comprehensive input and output editing processes. The Monthly Business Survey uses the IDBR as its sampling frame and uses it to calculate the design and calibration weights used in the estimation. The IDBR is updated frequently but inevitably suffers from some frame error. The IDBR is based on VAT and PAYE registered businesses, so small construction businesses may be missed. Responses are checked for internal consistency, and compared with those for similar units. Quarter-on-quarter comparisons are made at respondent level and aggregate level. Disparities are investigated to ensure consistent returns. The definition of output is complex and it is possible that measurement errors result from businesses returning turnover data or another measure of activity which better matches their accounting processes. For smaller businesses, where there is little sub-contracting, turnover will equate to output. Further discrepancies may occur if figures provided are based on invoices, which may lag actual activity rather than confirm work carried out in a particular period.

Timeliness Usually published within three months of the reference quarter.

Timetable of data collection:

Questionnaires dispatched – last Tuesday before the end of the reference month.

Return date – seven working days after the end of reference month.Provisional result run last Monday of the following reference month.Provisional results produced from the Monthly Business Survey are delivered approximately two months after the reporting month. Revised results, for previously published periods, are published for the following 12 months on the same date as the latest provisional data.

For more details on related releases, the release calendar is available online from the GOV.UK website and provides 12 months’ advance notice of release dates. If there are any changes to the pre-announced release schedule, public attention will be drawn to the change and the reasons for the change will be explained fully at the same time, as set out in the Code of Practice for Official Statistics.

It is difficult to make a comparison of the GB estimates of Output in the Construction industry with the Euro area or EU28 owing to each country measuring construction output in different ways. ONS follow the A (ideal) method for the compilation of these statistics as described by the Short Term Statistics Regulation – no other European country follows this method.

Construction output data for Northern Ireland is now consistent with data for GB after the Northern Ireland Statistics and Research Agency moved from constant price estimates to chained volume measures. However when making a comparison of these data, users should note that the NI data are not as timely as the GB data and users will have to wait approximately 3 months after the GB data are published to make an assessment.

The Output Survey began in 1955, with the Board of Trade (later BERR) having responsibility for producing the data. Ownership of responsibility transferred to ONS in March 2008. The subsequent redevelopment of the Output statistics has meant that a revised back series of data at sector level to 1955 and at type of work and regional level to 1980 has been produced.

Dissemination of information that support statistical cross-checks and provide assurance of reasonableness:

Some comparison of trend can be made with information from trade association and other surveys. The ONS Annual Business Inquiry (ABI/2) also allows some general comparison. In June 2009 ONS announced major changes to the arrangements for producing construction statistics and indicated that the changes would take effect from the beginning of 2010.

From January 2010, a new Monthly Business Survey replaced the quarterly output surveys for construction, and a quarterly new orders survey replaced the previous monthly new orders survey. 

Confrontation with other data sets: Not available.

To ensure that the Output series is coherent, period-on-period growths are analysed appropriately. Employment data are collected in the survey on the third month of every quarter. These data will feed into Short Term Employment and Vacancies Statistics.

£940,000 is spent producing Construction Output and New Order statistics.  It is not possible to split this further by variable. 

The burden associated with the monthly Construction Output survey is £3.4 million. 

Construction output conforms to the Revisions policies for economic statistics which can be found on the National Statistic website and is applied nationally and to transmissions to Eurostat.

Provision of information about revision and advance notice of major changes in methodology:

The interim construction OPIs are dependent on the revisions policies associated with their component series. For routine revisions, such as inclusion of late respondent data and monthly re-estimation of seasonal adjustment factors, the interim construction OPIs will be open to revisions for a period of 5 months, in line with PPI, its main component. Non-routine revisions may also occur, for example, as a result of reviews and updates of methodologies of component series. When historic changes to component series arise, their impact on the construction OPI series will be assessed and any changes highlighted to users

Type of source:  Depending on the index, data are obtained from different sources. For the Public sector house building tender price index, the data correspond to prices mentioned in successful tenders for all such schemes undertaken for local authorities and housing associations in England and Wales. For the Public sector non-house buildings tender price index the principal contributors to the data are the Ministry of Defence, Scottish Development Department, Department of Health, Department of Social Security, Home Office and Department for Education. Data for the Road construction price index are obtained from the authorities in charge of the different kinds of road construction, namely the English Department of Transport, the Scottish and the Welsh Offices, County councils, metropolitan districts and London boroughs. The output price indices are derived from the tender price indices mentioned above and from the new orders received indices also compiled by the BIS. Data for the Commercial and industrial building price indices are obtained from the members of the Royal Institute of Chartered Surveyors.

Frame on which the source is based:  Interdepartmental business register (IDBR).

Sample or census: Sample.

Criteria for stratification: The sample is stratified according to the number of persons employed and NACE.

Threshold values and percentages: The sample contains 8,000 units each month. Units with employment over 100, and those with an employment between 10-99 and register turnover of over GBP 60million have a sampling probability of 100%.

Frequency of updating the sample: Sample is based on new projects, so changes each period.

Periodicity of data collection:

The following price indices are compiled quarterly:

— public sector house building tender price index;
— public sector non-house building tender price index;
— road construction tender price index;
— all output price indices.

The commercial and industrial tender price indices are calculated monthly.

Questionnaires used in the survey: Monthly Business Survey – sent to VAT and PAYE registered construction enterprises in Great Britain.

Planned changes in national questionnaires:  Not available.

Data collection media:  Data are collected by means of questionnaires.

Planned changes in data collection methodology:  Electronic Data Collection.

Responses from businesses are validated using rules built into the processing system (Common Software) which is used to calculate the current price estimates. Validation gates use information from previous responses or from register information to identify any possible response errors. Such errors are reported to the editing and validation team, who will contact the businesses to check the data and provide an explanation for the provided values. Any incorrect data is changed at this stage. All contact with businesses is recorded to provide an audit trail for future validation purposes.

Estimates for non-response:

Businesses that don't respond are response chased via reminder letters and telephone calls; the data for remaining non-responders are then imputed. Imputed values are estimated based on the pattern of responses for similar businesses. A link factor, based on growths of returns from businesses in the same industry, is calculated and applied to previous returns for each non-responder. The original construction for a never-responding business is calculated from a ratio (calculated as the ratio between the returned value and register turnover of those businesses that have made returns) being applied to the register turnover from the IDBR of that never responding business.

Estimates for grossing-up to population levels:

The results are grossed from the sample (response + imputation) to the population. There are three grossing weights, the main one being the design weight (a simple population/sample, adjusted for closedowns). In addition, a model weight is used to adjust according to known independent properties of the companies sampled (in this case, ONS turnover information). An outlier weight is applied to those responses identified as outliers using Winsorisation methodology: http://www.unece.org/fileadmin/DAM/stats/documents/1997/10/data_editing/33.e.pdf Grossed responses are disseminated.

Type of index:

All indices are compiled on the basis of the "Schedule of prices method" except for the Public Sector House building price index that is compiled according to the method of "Standard component / services".

Public sector house building price index: the index is based on the pricing of 21 well defined items selected to represent all the work in a particular trade section so that price movements of the work in a trade section are assumed to be broadly similar to those of the representative item. The index is compiled as a Laspeyres price index in which a weighted arithmetic average of the price relatives is taken for the 21 items for the current quarter in relation to the base year. This method is close to the concept of a "standard component" method.

Public sector non-housing building price index: for each project surveyed, an index is calculated by repricing projects at base year rates. Each contract is broken down into disjoint sub-sections, and items amounting to 25% by value are costed within each sub-section. The base period prices are taken from a document published every 5 years entitled "Schedule of Rates". From all the project indices, the quarterly index is calculated according to a Paasche formula. A simple three point moving average is applied to median values estimated from the project indices for three quarters centred on the reference quarter. The use of the Paasche formula, rather than the Laspeyres formula as in the housing index, reflects the much greater diversity in these non-housing projects. This method is close to the concept of a "schedule of price" method.

Road construction tender price index: for this index, individual project indices are calculated according to the Paasche formula. For each project all items included in the Bill of Quantities are costed, these items numbering around 2,000 taken across all projects. The base period prices are taken from a document published every 5 years entitled "Schedule of Rates". For each quarter, the individual project indices for that quarter and the 11 past quarters are then used to calculate adjustment factors by type of work, size of contract and region of country. Quarterly medians are obtained from the individual project indices. The medians are transformed (to normality) after being divided through by the Public sector non-housing price index. The resultant series is smoothed using a Kalman filter, the transformation is reversed and the result multiplied by the Public sector non-housing index to obtain the published index. This method is close to the concept of a "schedule of price" method.

Commercial and industrial building tender price index: the index is calculated on the basis of a Paasche formula according to a method similar to the one used for the Public sector non-housing buildings price index.

Method of weighting and chaining: 

As it is not possible to survey every business in the population, it is necessary to weight the data from the sample of businesses to provide estimates for the full population. In strata that are not fully enumerated two weights are applied to data collected in the Monthly Business Survey:

1. Design ‘a’ weight. This is the inverse of the inclusion probability of businesses in the sample, essentially the ratio of the size of the population from which the sample is selected to the size of the sample. The ‘a’ weight calculation is adjusted for closedowns, based on assumptions about the births to deaths ratio: this ratio is assumed to be 1 except in large businesses where it is assumed to be 0.

2. Calibration ‘g’ weight. This adjusts for the imbalance of the selected sample compared to the population from which the sample is selected, where the imbalance is defined in terms of average register turnover. The ‘g’ weight is given by the average population register turnover divided by the average sample register turnover within a group, which can be either a stratum or a combination of strata.

The chained volume measures (CVM) of construction output are annual re-weighted chain Laspeyres indices referenced to current price values, currently 2012. As with constant price estimates, chained volume measures only vary with changes in the quantities of commodities produced or sold. However, unlike constant price estimates and fixed-weight indexes, which value quantities using the prices of some base period which were updated (or reweighted) once every 5 years, chained volume measure value quantities by using prices in a base period which is updated annually. These annually reweighted (rebased) volume change measures are then linked, or ‘chained’ together to produce a time series of chained volume measures. A chained volume series is an economic series for successive years put in real terms by computing the volume for each year in previous year’s prices and then chain linking the data together to obtain a time series of volume figures from which the effects of price changes have in theory been removed. The chain-linking method used is consistent with the standard National Accounts method.

Planned changes in production methods:  Not available.

WDA, SA and other calculations:

Output price indices are used as deflators to produce a constant prices series. The monthly chained volume measures are seasonally adjusted (CVMSA) using a seasonal adjustment software tool called X-13 Arima. This monthly series is aggregated to form the quarterly seasonal adjusted chained volume measure series. The seasonal adjustment parameters for Output in the Construction Industry are reviewed annually. However, due to the volatility of these statistics and a high volume of revisions as a result of seasonal adjustment, time series analysis experts are regularly asked to review the seasonal adjustment.

Users should note that 60 months is the minimum time span recommended by Eurostat for seasonal adjustment. While the seasonal pattern is generally established after 60 months in a monthly time series, there is still potential for increased revisions until the seasonal pattern has matured. The seasonal adjustment parameters for Construction output data are reviewed annually. However, due to the volatility of these statistics and a high volume of revisions as a result of seasonal adjustment, the data are often reviewed on a more frequent basis.

Not applicable.