Official Measures of Construction Activity

The Office for National Statistics recently published a paper on the similarities and differences on the two main measures of housing construction; that is the Gross Fixed Capital Formation for new dwellings and the construction output series for ‘new public housing’, ‘new private housing’ and ‘repair and maintenance for housing total’. It is logical to assume that the GFCF data for new dwellings is broadly in line with the construction output numbers, as GFCF measures investment expenditure on property assets and construction measures the building of structures.

While the two series are very similar, roughly 80% of the investment into new dwellings is equal to the construction output of new dwellings, there are some differences. The dwellings improvement part of the GFCF series is also in part derived from the construction output series, but ‘contract improvements’ only includes the part of repair and maintenance that adds value to the property, as well as including contract charges and VAT not found in the output numbers.

The main differences between the GFCF measures and the construction output measure are the certain elements that are included in the GFCF but not included in the output measure. Some building activity occurs outside the construction industry, such as ‘self-build’ new properties, which contribute roughly 10% to expenditure on total private housing. Also certain improvements that are carried out are outside the construction industry, both ‘DIY improvements’ and ‘hidden improvements’ are included in the GFCF data but are not counted as construction industry activity. Other elements that are included in the investment data are other associated costs and fees that not counted as construction industry activity.