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.
To bring Business Investment into line with the standard national accounts publication timetable, the March Q4 2013 Business Investment publication date is being moved from Wednesday 26 March to Friday 28 March 2014, while the June Q1 2014 Business Investment publication date is being moved from Thursday 26 June 2014 to Friday 27 June 2014. This is in line with other related outputs which are now also being published on these revised dates.
To allow sufficient time to prepare for the major changes in Blue Book 2014, ONS has also decided to change the approach to Business Investment in Q2 2014. In accordance with the policy for Quarterly National Accounts Q2 2014, only the output-based estimate of GDP will be published on 15 August 2014. Business Investment Q2 2014, and the other income and expenditure components of GDP, will not be published until 30 September 2014.
The Office for National Statistics (ONS) are hosting two seminars on 5 March, in Queen Elizabeth II Conference Centre, Westminster, London.
Please book a place by 28 February 2014, places are limited.
Time: 1030 to 1230hrs
This seminar will provide an opportunity for attendees to discuss the evaluation and explanation of Blue Book 2013 changes to the estimation of gross fixed capital formation. This will include a focus on: increased volatility, price evolution and the recent weakness in gross fixed capital formation and business investment. Looking forward to Blue Book 2014 the seminar will also include planned changes to the treatment of inventories, research and development, and weapons.
Time: 1400 to 1600hrs
This seminar will provide attendees with an opportunity to discuss ONS Retail Sales methods and the latest estimates, including the seasonal adjustment of internet sales. Attendees will also be given opportunity to comment on the draft Retail Sales work plan.
To facilitate a good discussion at these seminars ONS welcomes attendance from a broad range of users.
To receive further information on these seminars or to book a place please contact: email@example.com
In 2013, ONS 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:
Explaining UK Investment Estimates; past, present and future to be published March 2014.
These developments are part of the programme of continuous improvement to the UK National Accounts.
The largest component of the data collected to produce estimates of GFCF and business investment comes from ONS' Quarterly Capital Expenditure Inquiry. Large capital expenditure tends to be reported later in the data collection period than smaller expenditure. This means that larger expenditures are often included in the revised (month 3) results, but are not available in the provisional (month 2) results, leading to a tendency of upwards revisions in the later estimates for business investment and GFCF. Following investigation of the impact of this effect, ONS has introduced an adjustment in this provisional release to correct for this bias.
In this release, the bias adjustment to business investment, and hence GFCF, is £1.0 billion in current prices.
This release presents revised estimates of GFCF and its asset and sector breakdowns from the first quarter of 2013.
Provisional estimates are subject to revision because:
a higher response rate from surveys, such as the Quarterly Survey of Capital Expenditure, is achieved, which improves the quality of the later estimates;
forecast data are replaced with actual data, for example in the general government estimates; and
seasonal adjustment factors are re-estimated every quarter. Seasonal adjustment factors may be revised due to the addition of the latest quarter’s estimate, and because of revisions to the unadjusted data.
A table of the provisional (month 2) and revised (month 3) response rates for the Quarterly Survey of Capital Expenditure is presented in Section 4 of the Background Notes.
Estimates of business investment published in this release are of net investment, that is, the value of capital expenditure on acquisitions of assets less the proceeds received from disposals. It has been suggested that net investment was relatively weak through 2012 and 2013, compared with the growth in other sectors of the economy.
However, it should be noted that in 2012 and 2013, growth in the acquisition of assets has been relatively strong. The net level investment has been weaker, because it has been offset by increasing disposals of assets. These grew more strongly than acquisitions in 2012, and remain at a high level in 2013 (Table 1).
The primary data source for estimates of business investment is the Quarterly Capital Expenditure Inquiry (Capex). This survey, with a sample size of 27,500, collects data from businesses on capital expenditure on acquisitions of assets and on the proceeds from disposals. Disposals include the sale of assets to another business or institutional sector (which will be recorded as their acquisitions), scrapping of assets, or sale to non-UK companies. The survey does not collect information about the final destination of disposals.
Analysis of the Capex acquisitions and disposals data are benchmarked to the annual totals of the Annual Business Survey, Figures 1- 3 show that:
the level of acquisitions fell between 2008 and 2009 and then stayed below the level seen between 2007 and 2008. Acquisitions then increased in 2012 and 2013;
disposals of assets were relatively low between 2009 and 2011, but these too have increased in 2012 and 2013, with particularly strong growth in 2012; and
these higher levels of disposals mean that, although acquisitions have been rising, net capital expenditure has not been increasing as strongly as acquisitions.
Net business investment tracks net Capex well (Figure 4). Business investment includes contributions from data sources in addition to Capex, such as the Annual Business Survey, public corporations, estimates of investment in artistic originals and investment in aircraft. Business investment is also consistent with the National Accounts, and estimates include supply-use balancing, and GDP balancing adjustments, which Capex data do not. However, despite these differences, the contribution of the Capex disposals data has a clear impact on net business investment.
A comparison of net investment and acquisitions would only be possible if the relationship between acquisitions and disposals was constant over time. As can be seen in Figure 1, this is not the case.
Total GFCF rose by an estimated £1.3 billion (2.4%) compared with the previous quarter. Business investment rose by an estimated £0.8 billion between Q3 2013 and Q4 2013, to stand at £31.8 billion.
|Most recent quarter on previous quarter||Most recent quarter on a year earlier||Most recent level1|
|Private sector dwellings||-0.5||8.9||12,211|
|Private sector transfer costs||5.1||15.4||3,065|
|Public corporations dwellings||-2.7||10.7||732|
|Public corporations transfer costs||12.6||23.0||-107|
Growth in investment between Q3 2013 and Q4 2013 was broad based, with increases in four of the five assets. The largest increase was in other new buildings and structures, which rose by £0.5 billion (2.5%).
|Most recent quarter on previous quarter||Most recent quarter on a year earlier||Most recent level1|
|Other new buildings and structures||2.5||7.9||22,000|
|Other machinery and equipment, inc. cultivated assets||4.1||23.1||10,672|
|Intangible fixed assets||1.4||-4.7||8,127|
ONS also publishes additional analyses of GFCF, business investment, and the Quarterly Survey of Capital Expenditure which have been created in response to ad hoc user requests. This is available to download for free from the ONS website. Below is a list of the most recent ad hoc requests, together with a link to the web pages from which they can be downloaded. Enquiries about ad hoc requests may be made to firstname.lastname@example.org.
A time series (1997 to 2013) of the estimates from the Quarterly Survey of Capital Expenditure broken down by major industry (section level) and major asset type.
Quarterly Survey on Capital Expenditure time series, benchmarked to the Annual Business Survey annual totals. For more information on these data, please read the README section.
These estimates are experimental industry and asset breakdowns of business investment, which covers investment in plant and other machinery, transport equipment, intangible assets and buildings and other structures, by the private sector and public corporations. We requested feedback from users on the GFCF industry breakdowns published as an ad hoc dataset in August 2013. We have acted on the feedback we received to: i) improve our pro rata approach, using a methodology more suitable for series which may contain both positive and negative values; and ii) to improve how assets are assigned to industries. This has significantly improved the series presented here over the GFCF breakdowns, however, these estimates still remain experimental. More information on the methods and caveats can be found in the README section of the dataset.
Gross Fixed Capital Formation 2013 Q3 data for private sector new dwellings and private sector improvements to dwellings. Both series are provided in current price seasonally adjusted format and in chained volume measure seasonally adjusted format.
Gross Fixed Capital Formation 2013 Q3 data for total Business Investment and General Government, excluding British Nuclear Fuels (BNFL) in 2005 Q2. The series are provided in current price and chained volume measures, not seasonally adjusted and seasonally adjusted format.
Gross Fixed Capital Formation 2013 Q3 data for total GFCF industry split for purchased software, own-account software, mineral exploration and artistic originals. This series is provided in current price, not seasonally adjusted.
Quarterly estimates from the Quarterly Survey of Capital Expenditure: net expenditure (gross fixed capital formation), current prices, not seasonally adjusted. These estimates are the key data source for the Q3 2013 revised Business Investment release published on Friday 20 December 2013.
A time series (1997 - 2013) of estimates from the Quarterly Survey of Capital Expenditure broken down into acquisitions and disposals by major asset type
A time series (1997 - 2013) of the estimates from the Quarterly Survey of Capital Expenditure broken down by SIC07 2-digit industry.
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. Improvements to the measurement of investment in cinematographic originals have been made 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 month 2 and the quarterly national accounts (QNA) at month 3. It is an estimate of net capital expenditure by both the public and private sectors. Examples of capital expenditure include spending on machinery and plant, transport equipment, software, new dwellings and other buildings, and major improvements to existing 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, and capital expenditure by local and central government.
Business investment estimates are a short term indicator of net 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 Survey of Capital Expenditure
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 Survey of Capital Expenditure. 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 institutional units of the UK 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 corporations, 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 the 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
Estimates of gross fixed capital formation and business investment are produced twice each quarter: an early provisional estimate in month 2 and revised results in month 3. The largest component of the estimates is collected via the Quarterly Survey of Capital Expenditure. This survey collects data on the acquisition and disposal of capital assets from the manufacturing, other production, construction, distribution and other services sectors. Other key sources for gross fixed capital formation includes data returned by local and central government and public corporations, data on construction, and data on new dwellings and artistic originals. Gross fixed capital formation by local and central government, investment in new dwellings and the costs associated with the transfer of non-produced assets (primarily costs associated with the transfer of land and existing buildings) are excluded from the business investment estimates, but included in total gross fixed capital formation. The acquisition and disposal of land and existing buildings, including dwellings, is excluded from both the business investment and gross fixed capital formation estimates.
More information about the Quarterly Survey of Capital Expenditure can be found in the ‘Summary Quality Report for Quarterly Capital Expenditure Inquiry’ (150.9 Kb Pdf) .
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 product based deflators.
Estimates of business investment are predominantly based on the financial data collected through the Quarterly Survey of Capital Expenditure at month two of each quarter (provisional) and month three (revised). GFCF includes additional data from Central and Local Government. Response rates for Quarterly Survey of Capital Expenditure for the current quarter reflect the response rates at the time of publication. Later 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. In this release the earliest period being revised is Q1 2013.
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 the background notes.
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 the United Kingdom National Accounts 2012 (4.78 Mb Pdf) .
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 email: media.relations:ons.gsi.gov.uk. 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' (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 2014.
Next publication: Friday 28 March 2014
Issued by: Office for National Statistics, Government Buildings, Cardiff Road, Newport NP10 8XG
Tel Media Relations Office 0845 6041858
Emergency on-call 07867 906553
Name Louisa Nolan
Tel 01633 455250
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|