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 (400 Kb Excel sheet) .
The article GDP continuous improvement: summary of improvements to the estimation of gross fixed capital formation in the UK National Accounts summarises the upcoming improvements to the estimation of gross fixed capital formation (GFCF), and its key component, business investment. These developments are part of the programme of continuous improvement to the UK National Accounts, which are produced by the Office for National Statistics (ONS). The purpose of the article is to give an overview of planned improvements and a timetable for the releases on which the changes will have an impact. A fuller description of the methodological changes and their impact on GFCF and business investment estimates will be published in June 2013, following completion of quality assurance procedures.
In order to:
allow time to complete quality assurance of the new production system;
review and improve the way the data are published to better meet user needs; and
avoid the introduction of revisions to the detailed business investment series due to the implementation of methodological changes between the publication of the provisional and revised results,
it is unfortunately necessary to withdraw publication of the statistical bulletin Business Investment, provisional results: Quarter 1, 2013 on 23 May 2013. ONS apologises for any inconvenience this may cause.
The updated business investment figures in this release continue to show a mixed performance across the UK. Seasonally-adjusted business investment in the final two quarters of 2012 was weak, contracting by 0.8% in the final quarter after growth of 0.2% in the third quarter. On an annual basis, business investment increased by 0.8% in the final quarter compared with the same quarter of 2011. Total business investment in 2012 grew by 4.9% – after growing by 3.1% in 2011 – showing a gradual expansion of business investment activity following the economic downturn.
These data suggest that the majority of growth of business investment in 2012 compared with 2011 was from non-manufacturing industries. The value of business investment in manufacturing in 2012 remained similar to the value in 2011, whereas all non-manufacturing industries increased investment over this period with the exception of distribution services and other services. The difference between manufacturing and non-manufacturing industry investment may be reflecting the mixed economic performance of the UK economy in 2012 and ongoing uncertainty around future economic developments in the UK and overseas.
Economic sentiment started to improve towards the end of 2012 after being broadly flat earlier in the year. Overall economic sentiment in the UK was higher in the final three months of the year than in any of the preceding nine months according to Eurostat. Economic sentiment in the UK also compared favourably with the larger European countries. At the industry level, retail sentiment was positive in the final three months of 2012, while construction and household consumer confidence were each on a slight upward trend towards the end of the year despite remaining negative overall. Industrial confidence remained weak throughout the year.
The Bank of England’s Credit Conditions Survey notes that credit availability to firms of all sizes increased substantially through the final two quarters of 2012. Despite a possible cautious rise in demand for credit from firms, signs of any easing of credit constraints feeding through to business investment are less clear. This could suggest that overall economic conditions – as reflected by the sentiment indicators – rather than constraints related to credit availability continue to weigh on business investment decisions at the end of 2012.
Revisions in this release arise from:
the review of the seasonal adjustment model carried out for the Business Investment Q4 2012, provisional results. Here, the addition of the Q4 2012 data called into question the seasonal adjustment model, which led to an immediate and urgent review. The conclusion from this review was that the seasonal adjustment model had to be updated. Seasonal adjustment was reviewed again and further improved for these revised results. For the sector series this has had an impact on the estimates for periods from Q1 2011 (the span now open for revision);
new responses to the Capital Expenditure Inquiry that were published in the Q4 2012 (month 2) provisional results, improving the provisional estimates, due to higher response rates;
additional data on public corporations gross fixed capital formation became available in Q4 2012 causing revisions from Q1 2011 (the span now open for revision).
Users should also be aware of the ongoing programme of development of the National Accounts systems, which will lead to further improvements in the methods for estimating business investment gross fixed capital formation. A full update of the seasonal adjustment will be undertaken when the updated methods are introduced. A summary of the upcoming improvements, together with a timetable for the releases in which the changes will have an impact are presented in the article: GDP continuous improvement: summary of improvements to the estimation of gross fixed capital formation in the UK National Accounts.
Note: on 1 January 2011 a change was made to the zero-rating of VAT on qualifying aircraft. This may have contributed to the high level of aircraft imports for Q4 2010 and the low level of aircraft imports for Q1 2011. More information on this is available in section 5 of the background notes under 'Further information on methodology'.
The file below contains a long run time series of business investment estimates in both current prices and volume.
|Most recent quarter on a year earlier||Most recent quarter on previous quarter||Most recent level **|
|Total business investment||0.8||-0.8||30,930|
|Most recent quarter on a year earlier||Most recent quarter on previous quarter||Most recent level **|
Business investment in manufacturing was little changed in Q4 2012, remaining at around £3.2 billion, a 0.3% increase on the previous quarter, mainly due to private sector investment (which accounts for almost 99% of total manufacturing). The main contributors to this increase were chemicals and manmade fibres, which increased by nearly £75 million (17.8%), food, drink and tobacco, which increased by nearly £70 million (12.7%), and other manufacturing, which increased by just under £65 million (11.4%). These increases were partially offset by a decrease in engineering and vehicles, which fell by nearly £170 million (15.6%).
|Most recent quarter on a year earlier||Most recent quarter on previous quarter||Most recent level **|
Non-manufacturing estimates decreased by nearly £260 million (0.9%) to £27.7 billion. This was mainly due to a decrease of just over £200 million (0.8%) in private sector non-manufacturing and a decrease of nearly £50 million (3.5%) in public corporations investment. The private sector accounts for almost 96.3% of total non-manufacturing. The fall in private sector non-manufacturing was due to decreases of just under £650 million (4.5%) in other services and nearly £400 million (19.0%) in construction. This was partially offset by increases in other production, up £485 million (5.9%) and distribution services, up £361 million (15.2%).
Private sector non-manufacturing investment in other production increased by 36.9% compared with Q4 2011. This sector includes oil and gas exploration and the increase may be partly due to tax relief on income from North Sea gas exploration, which was introduced in 2012.
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.
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 is used in the compilation of the UK National Accounts’ expenditure measure of gross domestic product (GDP). 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.
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.
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
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, that is those units controlled by private individuals or groups, and the public sector, that is 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 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 on 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 on the ‘Summary Quality Report for Quarterly Capital Expenditure Inquiry’. (150.9 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 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 (current price) estimates and adjusting to remove the impact of price changes (968.6 Kb Pdf) using Producer Price Indices.
Estimates for the Business Investment Statistical Bulletin are based on the financial data collected through the Quarterly Capital Expenditure Inquiry at month two of each quarter (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.
|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 adherence with National Accounts revision policy the business investment estimates are revised for specific periods during certain quarters. In line with the revisions policy this month, this publication includes revisions from Q1 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 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 fourth quarter of 2007 to the third 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 for Q2 2013 on 23 August 2013.
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 fourth quarter of 2004 to the third quarter of 2009.
The revisions analysis detailed below does not include the estimates published this quarter.The estimates this quarter will be included in Q1 2013 revised estimates on 27 June 2013.
|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.||-0.8||0.43||1.96|
|Total manufacturing investment growth.||0.3||0.45||2.91|
Using standard statistical tests, none of these revisions are statistically different from zero.
Spreadsheets giving revisions triangles (real time databases) of estimates from 1996, and the calculations behind the averages in both tables can be dowloaded from 'Download data in this release'.
Further information on methodology
Information on the improvements to the estimation of gross fixed capital formation (including business investment) and changes in inventories due to be implemented in 2013 can be found in:
GDP continuous improvement: summary of improvements to the estimation of gross fixed capital formation in the UK National Accounts GDP continuous improvement: summary of improvements to the estimation of changes in inventories in the UK National Accounts
Further information about the UK National Accounts and the programme of continuous improvement can be found at:
National Accounts methodology and articles
Continuous Improvement of Gross Domestic Product: Sources, Methods and Communication
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) .
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. 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.
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 approximately 55.9% of gross fixed capital formation. Total gross fixed capital formation forms 14.6% of gross domestic product as seen in table 1 the latest 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 Corporations (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 firstname.lastname@example.org, 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 email: media.relations:ons.gsi.gov.uk. A list of the names of those given pre-publication access to the contents of this bulletin is also available.
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)
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.
Next publication: Thursday 27 June 2013.
Issued by: Office for National Statistics, Government Buildings, Cardiff Road, Newport NP10 8XG
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: email@example.com
|Louisa Nolan||+44 (0)1633 455250||Office for National Statisticsfirstname.lastname@example.org|