ONS statistics: Open your eyes

It’s the case of the Great Disappearing Airport Terminal. Heathrow’s Terminal 5, costing a cool £4.3bn, was a great fillip for the construction industry between 2002 and 2008. But you would never know it, looking through the UK’s official construction new orders or output statistics. It is an open secret among construction and government statisticians that the project - the biggest since the Channel Tunnel and its rail link - simply never got registered.

At the 2012 London Olympic village, which will provide accommodation for athletes and then Londoners, 1,439 units are under construction or have been completed. But none of these have yet been registered in the housing starts, let alone completions, exasperated government officials concede.

The pages of this magazine in recent weeks have been filled with feverish analysis of perceived shortfalls in government data. The normally diplomatic Paul Sheffield, chief executive at Kier is just one of many critics, dismissing last year’s output figures from the Office of National Statistics (ONS) as “baloney” (6 May, page 16). The furore has prompted the ONS to review its methodology. Seemingly iffy construction data has relevance beyond the confines of the industry: it feeds into national GDP statistics - a vital ingredient in setting interest rates.

If you tot up the housing starts they are always above the housing completions. is this because there is a residue of unfinished hulks littering the country?

I, for my sins, sit on a construction forecasting committee (I am reminded of the words of Groucho Marx, “I would never join a club that would have me as a member”) that includes economists, statisticians and officials from the government and quangos.

One of the many oddities that regularly baffle panel members is that, no matter how long a period one chooses, if you tot up the housing starts they are always above the housing completions. Is this because there is a residue of unfinished hulks littering the country? Or is it the housebuilder is under pressure to register a “start” within the conditions of its planning consent but less compelled to fill in the paperwork once the last homes on a site have been sold?

What has become clear is that it is unfair to lay all the blame at the feet of officials, who depend on submissions from the industry, often through public sector intermediaries. “Rubbish in, rubbish out” is a charge regularly levelled at equities analysts. So officials have my sympathy.

The launch of the review does appear to be a tacit admission from the ONS that methodology could be tightened up. But it’s the fragmented nature of the construction industry where most of the blame surely lies. Hundreds of companies were involved in Terminal 5. Who was responsible for popping the paperwork in the post to ONS?

There is also the question: when is a start a start? When the first sod of earth is turned? Or when individual homes or blocks of flats are started? I have heard government officials mutter that some local authorities are better than others at logging data. One suspects that the myriad form filling required in both private and public sectors means that statistical input remains at the bottom of the pile for longer than most tasks.

A yard full of unsold bricks at a brickworks can be an earlier and possibly more accurate indicator of the direction of housing starts than the official ones

Maybe too much store is set by government statistics. The most reliable statistical instrument is normally one’s own eyes. The number of trucks ploughing up and down the M1 is as good a guide as any to the nation’s and construction’s health.

A yard full of unsold bricks at a brickworks can be an earlier and possibly more accurate indicator of the direction of housing starts than the official ones (which come out months after the event, and are subject to subsequent revisions).

Sadly there is not a National Skip Count. But counting the number while jogging through the streets is a prescient indicator of impending housing transaction trends.

Other industries are often quickly on the ball when it comes to the waxing and waning of construction’s fortunes. Executives of a major British gambling group have been heard to grumble that takings in bookies suffer when builders are under-employed.

I am personally a great fan of the baconbuttyometer. One can usually gauge with some accuracy employment numbers in the building industry by counting the number of high vis jackets at lunchtime outside branches of Greggs the bakers - the caterer of choice for generations. The sausage roll count may be the way forward for perplexed industry decision makers.

Alastair Stewart is a construction analyst at UniCredit Research