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The relationship between Gross Value Added (GVA) and Gross Domestic Product (GDP)

What is Gross Value Added (GVA)?

GVA measures the contribution to the economy of each individual producer, industry or sector in the United Kingdom. 

What is it used for?

GVA is used in the estimation of Gross Domestic Product (GDP).

GDP is a key indicator of the state of the whole economy. In the UK, three theoretical approaches are used to estimate GDP: 'production', 'income' and 'expenditure'.

When using the production or income approaches, the contribution to the economy of each industry or sector is measured using GVA.

What is the 'production' approach to estimating GDP?

The 'production' approach to estimating GDP looks at the contribution of each economic unit by estimating the value of an output (goods or services) less the value of inputs used in that output's production process.

What is the 'income' approach to estimating GDP?

The income approach to estimating GDP measures the incomes earned by individuals (e.g. wages) and corporations (for example, profits) in the production of outputs (goods or services).

What is the 'expenditure' approach to estimating GDP?

The expenditure approach to estimating GDP measures total expenditure on finished or final goods and services produced in the domestic economy.

What is the method used for balancing GDP?

All three approaches to estimating GDP are balanced annually using the Input-Output Supply and Use Tables accounting framework.

How does GVA relate to GDP?

The link between GVA and GDP can be defined as: 

  • GVA (at current basic prices; available by industry only) 

  • plus taxes on products (available at whole economy level only) 

  • less subsidies on products (available at whole economy level only) 

  • equals GDP (at current market prices; available at whole economy level only)

or, in summary:

GVA + taxes on products - subsidies on products = GDP
Content from the Office for National Statistics.
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