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Statistical bulletin: Business Investment, Q3 2012 revised results This product is designated as National Statistics

Released: 21 December 2012 Download PDF

Key findings

  • Business investment estimates are a short term indicator of the spending on assets, such as buildings, vehicles and machinery, by manufacturing and non-manufacturing businesses throughout the United Kingdom.
  • All business investment data referred to in this bulletin are seasonally adjusted chained volume measures.
  • Business investment was estimated to have increased by £1.1 billion to £31.5 billion (3.8%) when compared with the previous quarter.
  • Total manufacturing investment increased by £100 million to £3.3 billion (4.7%) when compared with the previous quarter.
  • Total non-manufacturing investment increased by £1.0 billion to £28.2 billion (3.7%) when compared with the previous quarter.
  • Business investment increased by £1.5 billion (5.1%) when compared with Q3 2011.
  • Compared with Q3 2011, estimates of total manufacturing investment decreased by £100 million (-2.8%); total non-manufacturing investment rose by £1.6 billion (6.1%).
  • Business Investment continues the increase which began in Q2 2011 after being in decline since its peak of £35.6 billion in Q4 2007. Business investment has now recovered 15.7% from its lowest level of £27.2 billion in Q4 2009 to stand at £31.5 billion.

Additional information

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 business investment at current prices and measured in chained volume terms for seasonally and non-seasonally adjusted estimates are available to download in the Business Investment reference tables 1 to 7. (291.5 Kb Excel sheet)

Economic Background

Business investment in Q3 2012 increased by £1.1 billion when compared with the previous quarter and by £1.5 billion compared with the same quarter a year ago. This is the strongest growth in Business investment since Q2 2011 and is a continuation of the general increases, which began in Q2 2011.

In Q3 2012 output increased by 0.9% although some of the strength may be attributed to the recovery from a weak Q2 2012 and the positive effect of hosting the Olympics and Paralympics in Q3 2012. These special events may not have had a direct impact on business investment but are likely to have affected economic sentiment.

Volatile output growth in the last seven quarters has meant that business investment may have been held back from stronger growth. The main reasons for the volatile output growth are the dampened world outlook, the Eurozone debt crisis, special factors such as the Olympics and muted domestic demand.

These factors may have impacted upon business decisions and consequently business investment. The muted business investment can also be seen in the Q3 2012 Private Non-Financial Corporations net lending figure of £9.3 billion up from £7.3 billion in the second quarter (Table K2, Quarterly National Accounts Data tables, Q3 2012). This indicates that businesses continue to hoard cash rather than invest.

Business Investment in detail

Figure 1: Business investment chained volume measures

Reference year 2009=100, seasonally adjusted

£'s millions
Source: Quarterly Survey of Capital Expenditure - Office for National Statistics

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Long run time series of Business Investment

The file below contains a long run of business investment estimates in both current prices and volume.

Long run business investment (36.7 Kb Pdf)

Table 1: Business investment**

 
  Percentage change £million
  Most recent quarter on a year earlier Most recent quarter on previous quarter Most recent level *
Total business investment 5.1 3.8 31,519
  Total manufacturing -2.8 4.7 3,303
  Total non-manufacturing 6.1 3.7 28,216

Table source: Office for National Statistics

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Table 1a: Manufacturing

 
  Percentage change £million
  Most recent quarter on a year earlier Most recent quarter on previous quarter Most recent level *
Manufacturing -2.8 4.7 3,303
  Private sector  -2.9 4.7 3,298
  Public Corporations 150 -16.7 5

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The estimated 4.7% (£150 million) increase in manufacturing was attributable to Private Sector investment. The main contributors to this increase were Metal and Metal Goods, which increased by 32.8% (£150 million) and Food, Drink and Tobacco, which increased by 25.0% (£100 million). These increases were partially offset by a decrease in Other Manufacturing of 19.6% (£130 million).

Table 1b: Non-manufacturing**

  Percentage change £million
  Most recent quarter on a year earlier  Most recent quarter on previous quarter Most recent level *
Non-manufacturing 6.1 3.7 28,216
  Private sector 4.3 4.1 27,053
    Other production 33.0 11.6 8,662
    Construction 30.6 4.5 2,392
    Distribution services -3.8 0.1 2,594
    Other services -10.1 0.4 13,405
    Public corporations 81.3 -4.8 1,162
       

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Non-manufacturing was estimated to have increased by 3.7% (£1.0 billion) to £28.2 billion. This is wholly attributable to the 4.1% (£1.1 billion) increase in private sector investment, which was partially offset by a decrease in public corporations investment. The increase in private sector investment was mainly due to Other Production where estimates of Mining and Quarrying increased by £500 million (14.6%) and Electricity, Gas and Water increased £300 million (8.3%). Construction estimates also showed a small increase with a rise of £100 million (4.5%).

*Series may not sum to totals due to rounding.

**Explanations on the definitions used in these tables can be found in the ‘Definitions and explanations’ section of this bulletin. 

Background notes

  1. Gross National Inventory - Reservations

    Gross capital formation 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.

  2. 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 2012.

  3. Understanding the data

    Short Guide to Business investment

    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.

    Gross Fixed Capital Formation comprises information from Business Investment; General Government; Dwellings and Existing Buildings and Dwellings for both the public and private sector. Business Investment excludes dwellings and the costs associated with the transfer of ownership of non-produced assets. Gross Fixed Capital Formation is used in the compilation of the UK National Accounts’ expenditure measure of Gross Domestic Product.

    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.

    Business Investment estimates are 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 and estimation for the Quarterly Capital Expenditure Inquiry. This occurs in quarter one and can have an effect on the results published in May.
    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, from the raw data a series is obtained which reflects only 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.

    Sectors

    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-financial corporations,

    • financial corporations,

    • general government,

    • non-profit institutions serving households,

    • households.

    In the case of non-financial and financial sectors these can be further broken down into private sector, those units controlled by private individuals or groups and public sector, those units controlled by the state.

    Non-Manufacturing

    The non-manufacturing industries comprises of industries that do not produce products. The non-manufacturing industries in the bulletin produce or provide 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, health and social work. Other production industries consist of the electricity, gas and water, agriculture, forestry and fisheries and mining and quarrying industries. There is also a small industry entitled other services which comprises of industries not in the industries mentioned previously.

    Use of the data

    Business Investment estimates are used by 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.

  4. Methods

    Details on the Business investment methodology are published in the Summary Quality Report for Business Investment. (128.9 Kb Pdf)  This report describes in detail the intended uses of the statistics 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 and are based primarily on results of the Quarterly Capital Expenditure Inquiry which collects data on the acquisition and disposal of capital assets.

    The private sector estimates exclude expenditure on dwellings.

    The figures 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 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 on the following link -   ‘Summary Quality Report for Quarterly Capital Expenditure Inquiry’. (150.9 Kb Pdf)

    Deflation

    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 results 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 2009=100) are derived by taking the value estimates and adjusting to remove the impact of price changes (968.6 Kb Pdf) using Producer Price Indices.

  5. Quality

    Estimates for the Business Investment Statistical Bulletin are based on the financial data collected through the quarterly Capital Expenditure Inquiry at month two (provisional) and month three (revised). Response rates 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.

    Table 2: Response rates

    At month two (Provisional) At month three (Revised)
    Period Overall response rates (per cent) Questionnaires Period Overall response rates (per cent) Questionnaires
    2011 Q3 76.1 2011 Q3 91.3
      Q4 76.7   Q4 91.3
     2012 Q1 75.7  2012 Q1 91.5
      Q2 74.2 Q2 91.3
    Q3 79.0 Q3 86.4

    Table source: Office for National Statistics

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    National Accounts revisions policy

    In adherence with National Accounts revisions policy, the business investment estimates are revised for specific periods during certain quarters. The current quarter is open for revisions at month 3 as new data becomes available (Quality section) and the time series back to the beginning of the latest open year is available for revisions during month 3 in both June and December.

    National Accounts revision policy is available on the ONS website.

    Revision triangles

    In line with the revision policy used for national accounts this month, this publication includes revisions from the first quarter of 2011.

    One indication of the reliability of the key indicators can be obtained by monitoring the size of revisions. The tables below record the size and pattern of revisions, which have occurred over the last five years. Please note that these indicators only report summary measures for revisions. The revised data may itself be subject to sampling or other sources of error. A statistical test has been applied to the average revision to find out if it is statistically significant different from zero. An asterisk (*) shows if the test is significant. Details about this revisions material can be found in the document 'Revisions information in ONS First Releases' (244.6 Kb Pdf)

    Table 3 shows the revision between the month 2 and month 3 estimates of growth in total business investment and total manufacturing investment. The analysis of revisions uses estimates from the third quarter of 2007 to the second quarter of 2012. 

    The revisions analysis detailed below does not include the estimates published this quarter. The estimates this quarter will be included in the next provisional publication (month 2).

    Table 3: Revisions to month 2 estimates of business investment and total manufacturing investment growth

    Growth in latest provisional estimate (per cent) Revisions between the month 2 and month 3 estimates.
    Average over the last five years Average over the last five years without regard to sign (average absolute revision)
    Total business investment 3.7 *1.40 *1.96
    Total manufacturing  1.4 0.00 2.42
         

    Table source: Office for National Statistics

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    Table 4 shows the revisions between the month 3 estimates of growth in business investment and total manufacturing investment and the equivalent estimates published three years later. The table covers revised estimates of business investment and total manufacturing investment from the third quarter of 2004 to the second quarter of 2009.

    The revisions analysis detailed below does not include the estimates published this quarter.The estimates this quarter will be included in the next revised publication (month 3).

    Table 4: Revisions to month 3 estimates of growth in business investment and total manufacturing investment

    Growth in latest revised estimate (per cent) Revisions between the first month 3 publication and estimates three years later.
    Average over the last five years Average over the last five years without regard to sign (average absolute revision)
    Total business investment growth. 3.8 0.72 1.85
    Total manufacturing investment growth. 4.7 0.64 2.72

    Table source: Office for National Statistics

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    Spreadsheets giving revisions triangles (real time databases) of estimates for 1996, and the calculations behind the averages in both tables can be dowloaded from 'Download data in this release'.

  6. Relevant links

    British Nuclear Fuels plc (BNFL)

    In April 2005 nuclear reactors were transferred from British Nuclear Fuels plc (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. A more detailed explanation about the transfer can be found in the December 2006 Business Investment release. (414.3 Kb Pdf)

    International Business Investment comparisons

    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 approximately 55.9 per cent of Gross Fixed Capital Formation. Total Gross Fixed Capital Formation forms 14.6 per cent of GDP as seen in table 1 the latest United Kingdom National Accounts 2012.

    Aircraft Imports

    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 2010 quarter four and the low level of aircraft imports for 2011 quarter one. The level of investment can be seen within private sector, non-manufacturing other services on reference table 1, and subsequently transport and communication on reference table 6.

  7. Publication policy

    Details of the policy governing the release of new data are available from the Media Relations Office. Also available is a list of the names of those given pre-publication access (40.3 Kb Pdf) to the contents of this bulletin.

  8. Accessing data

    The business investment statistical bulletin and time series datasets are available to download free from the National Statistics website at 9.30am on the day of publication.

    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 are available in the article published on 25 August 2011, 'New series identifiers for GDP(O), IoS and IoP and GCF'. (35.4 Kb Pdf)

  9. Next publication: Wednesday 27 February 2013.

    Issued by: Office for National Statistics, Government Buildings, Cardiff Road, Newport. NP10 8XG

    Website: www.statistics.gov.uk

    Twitter: www.twitter.com/statisticsONS

  10. 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: media.relations@ons.gsi.gov.uk

Statistical contacts

Name Phone Department Email
Stuart Deneen +44 (0)1633 455250 Office for National Statistics gcf@ons.gsi.gov.uk
Get all the tables for this publication in the data section of this publication .
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