The ONS needs to figure out the problem

By Richard Steer2015-06-23T06:00:00+01:00

Following recent revisions to their data, the Office of National Statistics could benefit from listening to those who work in the industry day-to-day “The only bit of information that you can trust in a national newspaper is the date on the front.” I was once told this some time ago by a well-known public figure who had suffered a bashing at the hands of a particularly vicious gossip columnist that very morning.

However, I am beginning to get the same feeling about the recent data from the Office of National Statistics (ONS). Last week we saw them have to revise their figures upwards – for instance, a 2.2% contraction in construction output estimated for the fourth quarter last year has been revised up to now show 0.2% growth – meaning the construction sector did not technically enter recession at the start of this year as previously thought.

Construction economists had been questioning the accuracy of the data after the organisation’s last set of figures suggested our sector entered recession at the start of 2015. The figures suggested output in the sector decreased by 1.1% over the first quarter of this year, compared with the previous quarter.

In the face of increasing levels of disbelief, a recent spokesperson for the ONS bravely argued that they were “the biggest and best measure of the UK construction sector”.

They acknowledged there were differences between what the ONS published and other research, but added: “I’m confident that the data we have published is right. The chained volume data show falls in recent quarters, and this is seen in the current price data.” Now that we have seen this statistical equivalent of the hokey cokey – one minute “in” the next minute “out” of recession. This reversal does not fill me with confidence and the fact that they have recently moved away from their industry partners, deciding not to renew their contract, is also worrying.

Other surveys, such as the CIPS purchasing managers’ data, have pointed to consistent growth in recent months, and the Construction Products Association (CPA) issued a statement in May that said the official data “contradicted a growing body of recent evidence”, which reported growth in construction activity. Not just them but also several independent organisations, including Experian and Markit / CIPS, have similarly reported growth in construction activity.

All this is a bit worrying since it is often ONS data that helps shape the mind set of potential investors in the constructions sector. If we take a common sense approach then a review of other recent data also seems to support a more “glass half full” picture. The RICS, for instance, recently reported that demand for commercial property is growing at its fastest pace since 1998, triggering a surge in investment in new projects.  Their survey for the first part of this year marks the 10th consecutive quarterly acceleration of demand for commercial properties, with 46% more respondents seeing greater interest. The RICS chief economist is quoted as saying that traditionally this kind of data has been the pre-cursor to giving a strong steer to the performance of the economy as a whole in the next two or three quarters.

Another good indicator of the stability or otherwise of our sector are salary levels and recruitment. Salary levels are increasing quite substantially and work levels are quite high now in the UK as people attempt to retain the best talent. This is a view supported by Hays’ UK Consultants’ Survey, published in February, that showed UK salaries had grown by 5.25% on average in 2014.

It is telling that those headhunters specialising in international recruitment activity also say that they are starting to see people returning to the UK. The reasons for this are two-fold. Firstly, we have some interesting and career defining projects that are due to come on line in the UK soon, in the power, rail and infrastructure arenas. It is also true that some foreign markets which proved attractive in the past are beginning to decline in comparison to the UK. Australia, in particular, do not seem to want to import talent as they did in the past since the market is not expanding at the same rate and they have a local labour pool supplemented by the UK expats who settled some time ago. They have been hit by the decreasing demand for raw materials from China which has had a knock on effect in mining and associated industries.

This is reflected in the salary survey findings, which have, for example, shown a drop in the highest nominal pay rate for experienced quantity surveyors in Australia to £92,000 from £100,000 per year. China, still the busiest construction market globally, is not as busy as it was a couple of years ago, and this comes across in the broad drop in salaries for Hong Kong. While demand is still strong, it is not as acute, meaning, for example, the upper end salary for a civil engineer has dropped by £14,000 to £61,000, according to data from international recruiters.

So, while I am not saying that everything in the UK is back to the pre-recession levels, I do feel that the Office for National Statistics may need to revisit their metrics and perhaps take note of those of us who work in the industry day-to-day rather than rely on figures that are subject to revision at best and be plain inaccurate and misleading at worse.

Richard Steer is chairman of Gleeds Worldwide.
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