This bulletin includes commentary on the dataset in addition to relevant graphs and tables. Accompanying background notes provide information on coverage, quality reporting, revisions and publication policy.
Detailed estimates of gross fixed capital formation, including business investment, at current prices and measured in chained volume terms for seasonally and non-seasonally adjusted estimates are available to download in the reference table associated with this release.
ONS has been reviewing the Business Investment release. In response to user feedback this publication presents provisional estimates of sector and asset breakdowns of GFCF for the first time. These breakdowns were previously first available in the Quarterly National Accounts and UK Economic Accounts releases in the third month of each quarter.
ONS will review this trial publication of provisional results over the coming year. The review will include an assessment of the scale of revisions to these preliminary estimates when later results are published. We would welcome feedback on the publication of these sector and asset breakdowns, and on how else the release might be improved, in either its content or presentation.
An experimental dataset containing detailed industry and asset breakdowns of GCF can be found on the ONS ad hoc publication web pages. These breakdowns, available for the first time since 2010, can be used to make international comparisons, unlike the business investment breakdowns previously published in this release. Comparable data from other EU countries can be found on the Eurostat website, under ‘Economy and Finance’.
The publication of this experimental dataset is part of the programme of continuous improvement to the UK National Accounts, which includes an ongoing review of GCF publications. ONS is considering the publication of a regular quarterly release of these GCF breakdowns and we would welcome your feedback on this dataset.
ONS previously announced that the industry and asset breakdowns of business investment usually published in this release would be updated on 26 September 2013. However, priority has had to be given to meeting the UK’s legal requirements to implement significant changes to the compilation of GCF by September 2014. These changes are required under European legislation, which requires all EU countries to produce National Accounts compliant with the European System of Accounts 2010. This means that it will not be possible to publish the industry and asset breakdowns of business investment until September 2014.
ONS apologises for any inconvenience, and has published the GFCF detailed industry and asset breakdowns as an alternative.
We have recently undertaken a significant programme of work to improve our estimation of GFCF and business investment, and most of that work has been successfully completed. We have not only implemented an improved methodology, but we will have also been able to reinstate the asset by sector breakdown series in the UK National Accounts (Blue Book) 2013 which have been suspended in recent years. A description of these improvements and their impacts on estimates of GFCF can be found in the article: Explaining the Impact of the Blue Book 2013 Changes to Gross Fixed Capital Formation and Business Investment - 31 July 2013.
This release presents a provisional estimate of GFCF and its asset and sector breakdowns for Q2 2013. There are no revisions in this release.
Later estimates for Q2 2013 will be published on 26 September 2013. Provisional estimates are subject to revision as a higher response rate from surveys and other sources is achieved between the two releases, improving the quality of the later estimates.
ONS has recently implemented significant methodological improvements to the estimation of GFCF. A description of these improvements and their impacts on estimates of GFCF can be found in the articles:
These developments are part of the programme of continuous improvement to the UK National Accounts.
The current level of GFCF is similar to that between 1998 and 2003. Total GFCF grew by 1.7% quarter-on-quarter in Q2 2013 but fell by 4.8% compared with the same quarter of 2012.
Other buildings and structures was the only asset category to experience negative quarterly growth in Q2 2013 (falling by 6%). However, intangible fixed assets was the only asset category to experience positive growth in Q2 2013 compared with the same quarter a year ago, suggesting mixed GFCF activity.
Economic sentiment in the UK improved towards the end of 2012 after being broadly flat earlier in the year and has been largely stable in the second quarter of 2013, according to Eurostat. At the industry level, construction and services confidence each continued on upward trends that started in mid-2012. Consumer confidence remains negative but stable over the same period, while sentiment in the retail sector was broadly flat over the quarter and was slightly negative in June. Services was the only sector to end the quarter with a positive sentiment value, although it should be noted that all indicators are higher than the respective levels during the 2008-09 economic downturn. Stable economic sentiment should support GFCF activity, although the negative values suggest that this could be a factor in the mixed growth profile across GFCF categories.
The Bank of England’s latest Financial Stability Report found that bank funding and credit conditions had improved between November 2012 and June 2013. However, the Bank observe that confidence in the financial system remains fragile and markets had become more volatile following shifting expectations around monetary policy in a number of major advanced economies. The Bank’s Credit Conditions Survey for Q2 2013 also points to improving financial conditions within the UK. The supply of credit to households and the corporate sector is reported to have increased. However, the cost of credit fell more for larger companies than smaller ones. The July Agents’ Summary of Business Conditions also found that improving efficiency was a key factor in business investment intentions. However, despite the improvements in credit availability, businesses still tended to prefer internal or non-bank sources of funding, such as retained profits or intra-company transfers, for their investment activity.
|Most recent quarter on previous quarter||Most recent quarter on a year earlier||Most recent level **|
Total GFCF rose by an estimated £857 million (1.7%) in Q2 2013 compared with the previous quarter. This is the strongest growth since Q1 2012 (4.1%). However, growth in Q2 2013 compared with Q2 2012 was negative, at -4.8%.
|Most recent quarter on previous quarter||Most recent quarter on a year earlier||Most recent level **|
|Private sector dwellings||3.5||-4.3||11,502|
|Private sector transfer costs||-14.5||-16.0||2,359|
|Public corporations dwellings||0.1||-11.2||787|
|Public corporations transfer costs||-11.0||-17.0||-73|
Business investment grew by an estimated £270 million between Q1 2013 and Q2 2013, to stand at £29.5 billion. There was also growth in investment by general government and in dwellings (new dwellings and improvements to dwellings), which was partially offset by a fall in transfer costs.
|Most recent quarter on previous quarter||Most recent quarter on a year earlier||Most recent level **|
|Buildings includes transfer costs||-6.0||-9.2||19,640|
|Other machinery and equipment, inc. cultivated assets||0.0||-3.4||10,673|
|Intangible fixed assets||7.5||0.3||8,476|
Growth in investment in dwellings (13.3%), transport equipment (5.4%) and intangible fixed assets (7.5%: includes investment in software, artistic originals and mineral exploration) in Q2 2013 compared with Q1 2013 contributed to an overall growth in total GFCF of 1.7%. This was partially offset by a 6.0% fall in investment in buildings and other structures (including transfer costs).
The only asset or sector which showed positive growth in Q2 2013 when compared with Q2 2012 was intangible fixed assets (0.3%).
Gross National Inventory - Reservations
Business investment is a component of gross capital formation (GCF). GCF estimates are subject to scrutiny from the European Statistical Commission as to their compliance, comparability and reliability in accordance with the harmonisation of gross national income regulation (council regulation 1287/2003). Article 1 of the regulation states that GNI shall be defined in accordance with the European system of national and regional accounts (ESA95). Where member states are deemed not to be compliant with regulations 'reservations' are placed on the data involved.
Business Investment is subject to one reservation regarding the inclusion of estimates of cinematographic film originals in the business investment data. A brief guide to the GNI process and the reservations placed on the UK GCF estimates can be found on the ONS website. In this publication, improvements to the measurement of investment in cinematographic originals have been adopted. Following a review period, Eurostat will conclude whether the reservation can be lifted.
Understanding the data
Short guide to business investment
Gross fixed capital formation is used in the compilation of the UK National Accounts’ expenditure measure of the second estimate of gross domestic product (GDP) at provisional (month 2) and the quarterly national accounts (QNA) at revised (month 3). It is an estimate of capital expenditure by both the public and private sectors. Examples of capital expenditure include spending on machinery and plant, transport equipment, software, dwellings and other buildings, and structures such as roads. Business investment statistics exclude expenditure on dwellings and the costs associated with the transfer of ownership of non-produced assets.
Business investment estimates are a short term indicator of capital expenditure by manufacturing and non-manufacturing businesses within the UK, at current prices and constant prices both seasonally and non-seasonally adjusted. Business Investment is one component of gross fixed capital formation.
Interpreting the data
When making comparisons it is recommended that users focus on chained volume, seasonally adjusted estimates as these show underlying movements rather than seasonal movements, with the effect of changes in prices removed.
GFCF and business investment estimates are regularly subject to revision because of:
late responses to the Quarterly Capital Expenditure Inquiry
revisions to seasonally adjusted factors which are re-estimated every quarter
annual updating of the Inter-Departmental Business Register (IDBR) that forms the basis of the sampling for the Quarterly Capital Expenditure Inquiry. This occurs in Quarter 1 and can have an impact on the Quarter 1 provisional results usually published in May each year.
Definitions and explanations
Definitions found within the main statistical bulletin are listed here.
Current price (CP)
Current prices are the actual or estimated recorded monetary value over a defined period. They show the value for each item expressed in terms of the prices of that period.
Chained volume measure (CVM)
A chained volume measure is a series of economic data from successive years put in real terms by computing the production volume for each year in the prices of the preceding year. The data are then chain linked together to obtain a time-series of production figures from which the effects of price changes (that is, monetary inflation or deflation) have been removed. In other words, a series is obtained from the raw data which reflects only the production volume.
Seasonally adjusted (SA)
Seasonal adjustment aids interpretation by removing effects associated with the time of the year or the arrangement of the calendar, which could obscure movements of interest.
Institutional sectors are defined in the System of National Accounts (SNA) glossary as:
Units that are grouped together to form institutional sectors, on the basis of their principal functions, behaviour and objectives.
The resident institutional units that make up the total economy are grouped into five mutually exclusive sectors:
non-profit institutions serving households
In the case of non-financial and financial sectors these can be further broken down into the private sector, i.e. those units controlled by private individuals or groups, and the public sector, i.e. those units controlled by the state.
The non-manufacturing industries are industries that do not produce products. The non-manufacturing industries in the bulletin include construction, distribution services, other services and other production. The other services industries are: hotels and restaurants; financial services; transportation and storage; information and communication; real estate; education; and health and social work. Other production industries include electricity, gas and water, agriculture, forestry and fisheries, and mining and quarrying industries. There is also a small industry entitled other services which includes non-manufacturing industries not included in the groups described above.
Use of the data
Business investment estimates are used by the Office for National Statistics (ONS) in the compilation of the UK National Accounts, and externally by the Bank of England and Her Majesty’s Treasury to monitor economic performance and inform monetary and fiscal policy decisions. Business investment is also used by other government departments, such as the Department for Business, Innovation and Skills, the business and research communities, education, the media and general public.
Details of the business investment methodology are published in the Summary Quality Report for Business Investment (128.9 Kb Pdf) . This report describes the intended uses of the estimates presented in this publication, their general quality and the methods used to produce them.
Composition of the data
Business investment estimates are produced twice each quarter: an early provisional estimate in month 2, and revised results in month 3. They are based primarily on the results of the Quarterly Capital Expenditure Inquiry which collects data on the acquisition and disposal of capital assets in the private sector.
Both public and private sector estimates cover acquisitions less disposals of vehicles and of other capital equipment together with expenditure on leased assets and new building work. Spending on land and existing buildings, including dwellings is excluded.
The Quarterly Capital Expenditure Inquiry covers around 95% of the data used in the Business Investment estimates and is sourced from the manufacturing, other production, construction, distribution and other services sectors.
More information about the Quarterly Capital Expenditure Inquiry can found in the ‘ Summary Quality Report for Quarterly Capital Expenditure Inquiry (287.8 Kb Pdf) ’.
The remaining data included in the business investment estimates are returned by public corporations.
It is common for the value of a group of financial transactions to be measured in several time periods. The values measured will include both the change in the volume sold and the effect of the change of prices over that year. Deflation is the process whereby the effect of price change is removed from a set of values.
The business investment estimates are aggregated and weighted and used to produce chained volume estimates in both seasonally adjusted and non-seasonally adjusted forms. The chained volume estimates (reference year 2010=100) are derived by taking the value (current price) estimates and adjusting to remove the impact of price changes (968.6 Kb Pdf) using Producer Price Indices.
Estimates of business investment are predominantly based on the financial data collected through the Quarterly Capital Expenditure Inquiry at month two of each quarter (provisional) and month three (revised). GFCF includes additional data from Central and Local Government. Response rates for Quarterly Capital Expenditure Inquiry for the current quarter reflect the response rates at the time of publication. Late returns for the previous quarter’s data are included in the month three (revised) results. Response rates for historical periods are updated to reflect the current level of response at the time of this publication.
|At month two (Provisional)||At month three (Revised)|
|Period||Overall response rates (per cent) Questionnaires||Period||Overall response rates (per cent) Questionnaires|
National Accounts revisions policy
In accordance with National Accounts revisions policy, the business investment estimates are revised for specific periods during certain quarters.
The reliability of key indicators can be estimated by monitoring the size of revisions. However, the methodology used to produce GFCF and its component series significantly changed in June 2013. A more useful comparison of estimates produced using two very different methodologies is an impact analysis. Hence, the revisions tables are not published in this release, and instead, an impact analysis has been published in the articles listed in Section 5. Revisions triangles will be re-instated when both provisional and revised estimates have been produced using the new methodology.
Further information on methodology
Information on the improvements to the estimation of gross fixed capital formation (including business investment) can be found in:
Further information about the UK National Accounts and the programme of continuous improvement can be found at:
British Nuclear Fuels Ltd (BNFL)
In April 2005 nuclear reactors were transferred from British Nuclear Fuels Ltd (BNFL) to the Nuclear Decommissioning Authority (NDA). BNFL is classified as a public corporation in National Accounts and the NDA as a central government body. The capital formation estimates in this release reflect this transfer from the public corporations manufacturing category. The value of the transfer was -£15.6 billion. The negative value reflects the fact that the reactors are at the end of their productive lives and have large decommissioning and clean-up liabilities. This shows up as a prominent trough in Quarter 2 2005 in the general government series, and a complementary peak in Quarter 2 of the business investment series, which includes investment by public corporations (except dwellings and transfer costs). A more detailed explanation about the transfer can be found in the December 2006 Business Investment release (414.3 Kb Pdf) .
On 1 January 2011 a change was made to the zero-rating of VAT on qualifying aircraft. More information on this can be found on the HMRC website. This may have contributed to the high level of aircraft imports for Q4 2010 and the low level of aircraft imports for Q1 2011.
Other relevant sources of data
International business investment comparisons are not available on a like for like basis as the compilation of European statistics on business investment differs from the data provided within this release. However European estimates of business investment provided by Eurostat, the European statistical office can be found on the Eurostat website.
Business investment in the United Kingdom accounts for just over half of total gross fixed capital formation. Total gross fixed capital formation forms around 15% of gross domestic product as seen in Table 1 of the United Kingdom National Accounts 2012.
The GSS Business Statistics – interactive user guide is an interactive tool to help you find what business and economic statistics are available, and choose the right data for your needs.
ONS publishes the following statistical releases, which provide complementary information on UK business and economic performance:
Profitability of UK Companies - quarterly data on capital employed by Private Non-Financial Corporation’s (PNFCs). Contains annual, net and gross rates of return (expressed as percentages) on capital used by PNFCs
Quarterly National Accounts - includes UK data on gross fixed capital formation and changes in inventories
UK Economic Accounts - quarterly detailed estimates of national product, income and expenditure, UK sector accounts and UK balance of payments, including data on gross fixed capital formation
UK National Accounts - the Blue Book - annual publication of the UK National Accounts, including data on gross fixed capital formation
Retail Sales - monthly estimate of UK retail sales
UK Manufacturers' Sales by Product (PRODCOM) - annual output by manufacturers
Labour Market Statistics - monthly data on employment, unemployment, economic inactivity, claimant count, average earnings, labour productivity, vacancies and labour disputes
Business Demography – annual statistics on UK business births, deaths and survival
ONS welcomes your feedback on the business investment release and data. Further enquiries about business investment can be addressed to the business investment team at email@example.com, or, to engage in discussion about business investment, and to share information with other users or producers of financial and economic statistics, visit the Financial and Economic Statistics User Group on the Royal Statistical Society’s StatsUserNet discussion forum.
Details of the policy governing the release of new data are available from the Statistics Authority or from the Media Relations Office. A list of the names (40.3 Kb Pdf) of those given pre-publication access to the contents of this bulletin is also available.
The business investment statistical bulletin conforms to the standards set out in the UK Statistics Authority Code of Practice.
Time series used in this bulletin and time series datasets carry unique identifiers for ease of use. More information on these identifiers is available in the article published on 25 August 2011, 'New series identifiers for GDP(O), IoS and IoP and GCF'.
Code of Practice for Official Statistics
National Statistics are produced to high professional standards set out in the Code of Practice for Official Statistics. They undergo regular quality assurance reviews to ensure that they meet customer needs. They are produced free from any political interference. © Crown copyright 2013.
Thursday 26th September 2013.
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Details of the policy governing the release of new data are available by visiting www.statisticsauthority.gov.uk/assessment/code-of-practice/index.html or from the Media Relations Office email: firstname.lastname@example.org
|Louisa Nolan||+44 (0)1633 455250||Office for National Statisticsemail@example.com|