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Statistical bulletin: MQ5: Investment by Insurance Companies, Pension Funds and Trusts, Q4 2011 This product is designated as National Statistics

Key points

  • Total net investment is estimated to have been £20 billion in the fourth quarter of 2011, nearly £7 billion higher than the third quarter figure, but a similar level to the first two quarters of 2011.
  • In 2011 as a whole, total net investment is estimated to have been £72 billion. This is very similar to the 2010 level.
  • There was net disinvestment by long-term insurance companies in 2011. Provisionally, this will be the first year this has occurred in a series going back to 1963.

Overview

This release contains quarterly net investment data arising from financial transactions (investments) made by insurance companies, self-administered pension funds, investment trusts, unit trusts and property unit trusts. Quarterly balance sheet data for short-term assets and liabilities are also reported. Income and expenditure data for insurance companies and self-administered pension funds are also reported quarterly. All data are reported on a current price basis.

In addition, every third quarter release contains annual balance sheet data for all sectors, providing information on the market value of assets and liabilities. Annual income and expenditure data for insurance companies are also reported at this time.

User engagement

We are constantly aiming to improve this release and its associated commentary. We would welcome any feedback you might have; please contact us via email: financial.inquiries@ons.gsi.gov.uk or telephone David Matthews on +44 (0)1633 455756.

As a result of recent user enquiries, a new data table (D) has been made available, which displays information on investment in UK land, existing buildings and new construction work by the institutional groups covered by this release.

Net investment by asset type

The total assets of the businesses covered by this release were valued at around £3,000 billion at the end of 2010, the latest period for which results are available. On average in each quarter of 2011, these businesses acquired and disposed of nearly £400 billion of assets. Net investment is the difference between these substantial levels of acquisitions and disposals and can therefore be volatile.

Net investment is estimated to have been £72 billion in 2011; that is, an average of £18 billion a quarter. Individual quarters in the year, including the fourth quarter figure of £20 billion, were not appreciably different from this average. The annual total was very close to the figure for 2010, although investment remains below the levels of around £90 billion reported a year immediately before the 2008 financial crisis and in 2009.

Within this total, short-term assets (those maturing within one year of their originating date) showed a rebuilding in 2011, following three years of slight falls. Short-term assets investment can be affected by the level of net inflows into the businesses concerned (premiums or contributions for example) and by the relative attractiveness of other investments, both in the returns they may potentially generate and in their perceived risk.

The yield on British government sterling securities (Gilts) has tended to fall and, although this investment is effectively risk-free, the returns on it may cause fund managers to switch into or out of Gilts, taking or putting funds elsewhere. Net investment in Gilts by the institutions covered by this release, at £4 billion in 2011 as a whole, was pretty flat. This was in contrast to 2010 when there was net investment of £29 billion, a record in current price terms in a series going back to 1984.

The last survey of these businesses' balance sheets, for the end of 2010, showed that for the first time the value of overseas ordinary shares held by these institutions then exceeded the value of UK ordinary shares. This trend may have continued during 2011 (though we would need the revaluation data that are implicit in the balance sheet survey to be sure). In both 2011 as a whole and in every quarter of it, there was negative net investment in UK corporate securities and positive investment in overseas securities.

Investment in 'Other assets', which includes mutual fund investment, has been positive for a long period and remained so in the fourth quarter and in 2011 as a whole. As suggested in the last release, net investment under this heading has in recent years shown a tendency to be higher in the second half of the year than the first, and this was also the pattern for 2011.

 

Net investment by asset type

£ billion
  Short- term assets British government sterling securities UK corporate securities Overseas securities Other assets Total
2006 25.1 19.4 -16.6 33.4 23.1 84.5
2007 41.1 -0.4 -16.5 44.2 20.9 89.4
2008 -4.8 -19.6 7.4 15.3 27.3 25.5
2009 -4.2 13.9 9.1 43.3 31.3 93.5
2010 -7.6 29.2 -18.5 24.8 43.2 71.1
2011p  17.7 3.8  -16.6  31.9  35.1  71.9
             
2006 Q1 1.9 5.8 -3.0 5.8 5.3 15.7
          Q2 14.6 2.6 -4.3 9.4 8.4 30.7
          Q3 8.5 4.2 -4.5 7.8 3.6 19.6
          Q4 0.1 6.8 -4.8 10.4 5.9 18.4
             
2007 Q1 1.2 7.9 -3.9 7.4 4.3 16.9
          Q2 11.3 -3.1 -5.0 16.8 1.8 21.8
          Q3 19.2 -5.1 5.2 18.0 6.6 43.9
          Q4 9.4 0.0 -12.8 2.0 8.2 6.8
             
2008 Q1 5.5 -6.6 3.3 3.7 5.2 11.2
          Q2 -0.3 -4.7 -0.1 8.6 8.1 11.6
          Q3 10.6 -2.2 2.8 7.3 3.8 22.2
          Q4 -20.5 -6.1 1.4 -4.3 10.1 -19.5
             
2009 Q1 -0.3 0.8 2.9 4.4 0.0 7.8
          Q2 0.8 3.3 7.3 17.7 8.5 37.7
          Q3 -8.0 8.2 1.7 13.0 8.4 23.3
          Q4 3.3 1.6 -2.8 8.2 14.4 24.8
             
2010 Q1 -1.1 8.6 -8.8 1.9 3.6 4.2
          Q2 -10.8 8.1 0.7 0.4 8.7 7.1
          Q3 -5.4 4.9 -0.2 13.7 16.5 29.5
          Q4 9.7 7.7 -10.3 8.9 14.4 30.4
             
2011 Q1r 10.6 2.6 -5.0 7.3 4.3 19.8
          Q2r 4.4 0.9 -0.5 7.1 6.4 18.3
          Q3r -2.7 -3.0 -1.5 8.1 12.6 13.5
          Q4p  5.5 3.3  -9.7  9.4  11.8  20.4

Table notes:

  1. r = revised data 

    p = provisional data

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Total net investment

Total net investment

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Short-term assets

Short-term assets

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British government sterling securities

British government sterling securities

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UK corporate securities

UK corporate securities

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Overseas securities

Overseas securities

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Other assets

Other assets

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Net investment by institutional group

There was net disinvestment by long-term insurance companies in 2011. Provisionally, this will be the first year this has occurred in a series going back to 1963. Disinvestment is estimated to have occurred in three of the four quarters of 2011, including the fourth quarter.

In contrast, general insurance companies are estimated to have shown net investment in each quarter of 2011. The level of net investment in 2011, at £6 billion, was similar to the levels in the 2007 to 2009 periods and a recovery from the net disinvestment in 2010.

There was net investment by self-administered pension funds in each quarter of 2011 and an estimated net investment of £42 billion for 2011 as a whole. This was a strong figure, and the highest in a current price series going back to 1964.

There was a small net disinvestment by investment trusts in the fourth quarter of 2011, although the trend in the figures continued broadly flat as it has been since the beginning of 2008. Unit trusts and property unit trusts, however, continued to invest in the fourth quarter of 2011 and in the year as a whole. In each of the last three years, net investment by these institutions has been over £40 billion a year.

 

Net investment by institutional group

£ billion
  Insurance companies Self- administered pension funds Trusts   Consolidation adjustment1   Total
    Investment Unit &   property u nit
  Long-term   General
2006 25.0 12.0 23.7 -1.8 34.1 -8.6 84.5
2007 39.5 5.0 13.3 -2.8 32.8 1.7 89.4
2008 17.0 9.4 -20.4 0.3 17.7 1.5 25.5
2009 5.9 4.9 32.9 -0.6 46.8 3.6 93.5
2010 15.6 -3.2 19.7 0.5 44.0 -5.5 71.1
2011p  -11.7  6.0  41.7  0.5  40.3  -4.8  71.9
               
2006 Q1 0.0 3.5 7.0 -0.5 10.0 -4.2 15.7
          Q2 9.7 6.5 4.1 -0.8 12.9 -1.7 30.7
          Q3 5.6 2.3 5.1 -0.6 6.8 0.4 19.6
          Q4 9.8 -0.3 7.5 0.1 4.5 -3.1 18.4
               
2007 Q1 10.4 -1.7 -1.4 -1.0 9.7 0.8 16.9
          Q2 7.3 -0.1 5.9 -0.2 12.8 -3.9 21.8
          Q3 15.8 1.5 9.0 -0.4 11.1 6.8 43.9
          Q4 5.8 5.3 -0.2 -1.2 -0.9 -2.1 6.8
               
2008 Q1 9.9 0.8 -3.9 0.6 6.5 -2.7 11.2
          Q2 6.8 3.3 0.9 -0.7 3.5 -2.3 11.6
          Q3 11.4 4.5 0.1 0.8 5.1 0.2 22.2
          Q4 -11.1 0.7 -17.6 -0.4 2.6 6.4 -19.5
               
2009 Q1 0.8 1.4 2.6 -0.3 7.9 -4.7 7.8
          Q2 12.2 1.6 13.8 -0.2 11.0 -0.8 37.7
          Q3 1.2 -0.8 8.0 0.1 15.6 -0.8 23.3
          Q4 -8.4 2.7 8.6 -0.2 12.3 9.9 24.8
               
2010 Q1 1.1 -6.5 -0.1 -0.7 7.9 2.4 4.2
          Q2 2.7 0.4 -6.3 0.7 15.2 -5.5 7.1
          Q3 7.4 0.8 15.1 0.0 7.4 -1.1 29.5
          Q4 4.5 2.0 11.0 0.5 13.6 -1.3 30.4
               
2011 Q1r -7.5 0.2 18.6 0.6 7.5 0.4 19.8
          Q2r -1.3 2.2 6.1 0.3 11.5 -0.5 18.3
          Q3r 0.4 1.7 6.3 -0.1 9.3 -4.1 13.5
          Q4p  -3.3  2.0  10.7 -0.4 11.9 -0.5  20.4

Table notes:

  1. The consolidation adjustment is an adjustment to remove inter-sectoral flows between the different types of institutions covered by this statistical bulletin. The adjustment includes (i) investment in authorised unit trust units and investment trust shares by insurance companies, pension funds and trusts and (ii) investment by pension funds in insurance managed funds.

    r = revised data

    p = provisional data   

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Long-term insurance companies

Long-term insurance companies

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General insurance companies

General insurance companies

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Self-administered pension funds

Self-administered pension funds

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Trusts

Trusts

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Income and expenditure by institutional group

Long-term insurance premiums, at £26 billion in the fourth quarter of 2011, were at a very similar level to the other quarters of the year. However, the annual total of premiums fell to £107 billion. This is around 35 per cent (in current price terms) below the high point of 2007.

Back in 2006 and 2007 the value of premiums exceeded the value of claims. This has reversed since. In each of the years 2008 to 2010, the value of claims was around 23 per cent greater than the value of premiums. In 2011, claims amounted to £141 billion against premiums of £107 billion, so that the value of claims was 32 per cent greater than the value of premiums.

For general insurance, premiums were 31 per cent greater than claims in 2011, a very similar ratio to the average for 2009 and 2010.

Contributions to self-administered pension funds were higher in the fourth quarter of 2011 than in the previous quarter. However, over the past few years there seems to have been a tendency for the figures for the first and fourth quarters to be higher than those for the other quarters in the year, and this was the pattern for 2011. Payments in 2011 were 1 per cent greater than in 2010. This is at current prices and therefore implies a reduction in real terms.

 

Income and expenditure by institutional group

£ billion
  Long-term insurance General insurance Self-administered pension funds
    Premiums   Claims   Premiums   Claims Contributions  (net)   Payments
2006 142.0 132.3 40.3 25.5 40.5 39.9
2007 166.2 156.9 36.9 24.3 38.7 39.1
2008 135.1 166.9 41.7 26.1 34.3 41.1
2009 114.6 141.1 39.5 26.4 37.7 44.5
2010 111.2 136.1 34.3 24.8 45.6 48.3
2011p   107.0  141.3  34.8  24.0  43.5  48.8
             
2006 Q1 30.7 29.5 10.3 6.1 12.4 9.4
          Q2 34.6 32.9 10.7 5.8 7.8 9.9
          Q3 35.8 34.9 9.8 7.2 8.5 10.3
          Q4 40.9 35.0 9.6 6.4 11.8 10.4
             
2007 Q1 41.3 40.2 7.8 6.2 10.7 9.4
          Q2 45.0 39.4 10.0 5.8 9.2 9.7
          Q3 47.0 37.6 9.4 5.9 8.7 9.7
          Q4 32.8 39.6 9.7 6.4 10.1 10.3
             
2008 Q1 29.6 38.8 11.6 6.9 10.1 9.8
          Q2 40.8 41.1 10.1 6.5 8.2 10.1
          Q3 36.1 39.9 10.1 6.1 7.8 10.5
          Q4 28.6 47.1 9.9 6.7 8.2 10.7
             
2009 Q1 27.0 32.6 9.7 6.8 10.2 10.3
          Q2 28.0 27.9 10.8 6.5 7.7 11.2
          Q3 29.5 35.4 10.0 6.5 8.1 11.4
          Q4 30.1 45.1 9.0 6.6 11.7 11.6
             
2010 Q1 29.3 38.3 7.9 5.9 11.9 12.0
          Q2 29.0 33.2 9.0 5.9 11.5 12.2
          Q3 23.1 30.3 8.8 6.2 10.3 12.1
          Q4 29.8 34.3 8.6 6.7 11.9 12.0
             
2011 Q1r 26.6 36.9 8.7 6.3 12.4 11.8
          Q2r 28.2 34.5 9.4 6.0 9.8 12.5
          Q3r 26.0 31.6 8.6 5.8 9.5 12.4
          Q4p          26.2 38.3 8.1  5.9  11.8 12.1

Table notes:

  1. r = revised data 

    p = provisional data

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Long-term insurance companies' premiums and claims

Long-term insurance companies' premiums and claims

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General insurance companies' premiums and claims

General insurance companies' premiums and claims

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Self-administered pension funds' contributions and payments

Self-administered pension funds' contributions and payments

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Background notes

  1. Institutional groups

    Insurance companies
    These are active in both life insurance and non-life (general) insurance and they also conduct pension business on behalf of companies and individuals. Long-term business (mainly life insurance and pensions) has an emphasis on the spreading of risks over time, whereas general business is mainly concerned with the spreading of risks between persons and organisations.

    Besides consisting largely of life insurance, long-term business also includes occupational and individual pension business. Pension business includes both insured funds and insurance managed funds. Insured funds belong to pension schemes where the schemes' trustees hold, as a sole asset, an insurance policy contract or an annuity contract. All the schemes' assets are held in one insurance company and have a guaranteed level of return. Fully insured funds are excluded from the self-administered pension funds survey. Insurance managed funds are also included in the self-administered pension funds statistics.

    The figures for long-term funds include items relating to shareholders' funds in respect of pure life companies. For other companies these items are consolidated into the figures for general funds.

    Self-administered pension funds
    The data relate to the self-administered pension and superannuation funds of the private sector and to the funded, self-administered schemes of local authorities and employees previously employed in the nationalised industries. The main superannuation arrangements in central government are unfunded and these are excluded from the statistics. Fully insured funds are also excluded but their activity is included in figures for insurance companies' long-term business. A self-administered pension scheme is defined as an occupational pension scheme with units invested in one or more managed schemes or unit trusts. The trustees of these types of schemes can employ either an in-house fund manager to make the day-to-day investment decisions or they can opt to use an external manager to manage the investment.

    Investment trusts
    The figures cover investment trusts recognized as such by HM Revenue & Customs for tax purposes and some unrecognized trusts. Investment trusts companies acquire financial assets with money subscribed by shareholders or borrowed in the form of loan capital. They are not trusts in the legal sense, but are limited companies with two special characteristics: their assets consist of securities (mainly ordinary shares) and they are debarred by their articles of association from distributing capital gains as dividends. Shares of investment trusts are traded on the Stock Exchange and increasingly can be bought direct from the company.

    Unit trusts
    The data covers unit trusts authorised by the Financial Services Authority under the terms of the Financial Services Act 1986. The statistics include open ended investment companies but they do not cover other unitised collective investment schemes (e.g. unauthorised funds run on unit trust lines by, for example, securities firms and merchant banks, designed primarily for the use of institutional investors) or those based offshore (Channel Islands, Bermuda etc.) or in other EU Member States. Unit trusts are set up under trust deeds, the trustee usually being a bank or insurance company. The funds in the trusts are managed not by the trustees, but by independent management companies. Units representing a share in the trusts’ assets can be bought from the managers or resold to them at any time.

    Property unit trusts
    The statistics aim to cover all UK property unit trusts authorised under the terms of the Financial Services Act 1986. The trusts are not allowed to promote themselves to the general public and participation is generally restricted to pension funds and charities. Property unit trusts invest predominantly in freehold or leasehold commercial property, yet may hold a small proportion of their investments in the securities of property companies. Their assets are held in the name of a trustee and are managed on a co-operative basis by a separate committee (elected by the unit holders) or company.

  2. Basic quality information

    A Quality and Methodology Information (QMI) report (270.2 Kb Pdf) can be found on the ONS website. The aims of the QMI report are to provide users with a greater understanding of ONS's statistics, their quality and the methods that are used to create them.

  3. Uses of data

    The primary use of data from the insurance companies, pension funds and trusts surveys is in the Financial and Sector Accounts and the compilation of Gross Domestic Product (GDP) estimates within the UK National Accounts and the Balance of Payments. There are numerous other users within and outside government who use the data to produce various financial analyses and to inform policy decisions. Such users include:

  4. Revisions

    Quarterly
    The first three quarters of 2011 have been revised, partly as a result of late questionnaires being received and partly as a result of disaggregate data revisions. In the first quarter of 2011, net investment has been revised from £18.9 billion to £19.8 billion, in the second quarter from £14.0 billion to £18.3 billion and in the third quarter from £16.1 billion to £13.5 billion.

    Revisions to data provide one indication of the reliability of key indicators. The table below shows summary information on the size and direction of the revisions made to the data over a five year period. A statistical test has been applied to the average revision to find out if it is statistically significantly different from zero. An asterisk (*) shows that the test is significant. The table covers estimates of combined total net investment first published from June 2004 (for 2004 Q1) to March 2009 (2008 Q4).

    Revisions between first publication and estimates three years later

    £ billion
        Value in  latest  period   Average  revision over  the last 5 years Average revision over  the last 5 years  without regard to sign
    Total net investment 20.4 0.6 5.3

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    A spreadsheet is available giving a revisions triangle (135 Kb Excel sheet) of estimates from 1996 to date and the calculations behind the averages in the table.

    Annual
    The introduction of the annual results with the third quarter figures each year leads to revisions, both to income and expenditure and to transactions in assets. For income and expenditure these are due to the incorporation of the annual insurance survey results which are based on larger samples and also, generally, audited accounts. For transactions data, they are due to problems with misreporting by companies in the quarterly series that are identified as part of the quality assurance of the annual data.

    For each set of surveys (for example; the quarterly survey into pension funds transactions in financial assets and the quarterly survey into pension funds income and expenditure) there is a common sample, but each survey is conducted independently, resulting in different response rates; the forms are sometimes completed by different people within the business; and there is limited linkage within the existing systems between surveys at the individual respondent level. Therefore, there can be discrepancies at an aggregate level between the numbers emerging from the income and expenditure survey and the transactions survey. The set of annual surveys includes balance sheet data from the three sectors and this allows the figures to be aligned so that income and expenditure, transactions and the balance sheet are consistent. The alignment process assumes that the transactions data are the weakest of the three strands of information and therefore take the necessary adjustment. This has been confirmed by contact with respondents when figures have been queried.

    The following table shows the average absolute values and revisions (without regard to sign), over the last five years (2006 to 2010), arising from the take-on of the annual survey results.

    Average values and revisions (2006 to 2010)

     
    £ billion
      Average absolute values Average absolute revisions
    Long-term insurance companies  
         Total income 205.5 13.7
         Total expenditure 198.7 7.0
         Net Investment 20.6 13.4
         
    General insurance companies  
         Total income 47.7 3.5
         Total expenditure 45.9 3.4
         Net Investment 5.6 3.8
         
    Self-administered pension funds  
         Net Investment 13.8 8.3
         
    Total net investment 72.8 12.0
        

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  5. Response rates

    The figures in this release are based on a system of quarterly and annual surveys collecting data on income and expenditure, transactions in financial assets and the balance sheet in separate surveys.

    Overall response rate by survey

    4th Quarter 2011 %
    Transactions    
         Long-term insurance companies 90
         General insurance companies 88
         Self-administered pension funds 87
         Unit trusts   86
         Investment trusts 94
         Property unit trusts 100
         
    Income and expenditure  
         Long-term insurance companies 88
         General insurance companies 86
         Self-administered pension funds 86
         
    2010 Annual   %
         
    Balance sheet    
         Long-term insurance companies 99
         General insurance companies 96
         Self-administered pension funds 92
         
    Income and expenditure  
         Long-term insurance companies 100
         General insurance companies 98
         
    Assets and liabilities  
         Unit trusts   91
         Investment trusts 98
         Property unit trusts 100

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  6. General information

    These points should be noted when examining data tables:

    • Total pension contributions made to funded schemes cannot be derived by summing pension premiums from table 2.4 and contributions from table 4.3. To do so would result in double counting since pension business premiums in table 2.4 include any premiums (including transfers) received from self-administered pension funds and any transfers within the long-term insurance sector. More information on this and on other work undertaken to improve pension statistics as part of the 2002 pension contributions statistics review can be found on the ONS website. These pages include a discussion note on how insurance companies have been recording pension transactions in the surveys used as a source for this release and on improvements made to the survey questionnaires from the first quarter of 2004 to prevent mis-reporting.

    • Certificates of deposits issued by overseas banks are included in short-term assets overseas.

    • An increase in borrowing is indicated by a positive figure, a decrease by a negative figure.

    • Total net investment for long-term funds includes investment by self-administered pension funds in insured funds.

    • Loans to parent authority by local authority funds are included with UK local authority securities.

    • The consolidation adjustment is an adjustment to remove inter-sectoral flows between the different types of financial institution covered by this release. It has been calculated by identifying and calculating totals for net investment in mutual funds such as authorised unit trust units, investment trust securities and insurance managed funds by the institutions.

    • Figures in tables denominated in £ billion may not add up because of rounding.

    • As of the first quarter of 2011, within table B, new annual series identifiers for total asset holdings reported by insurance companies and self-administered pension funds have been introduced (RKBI, RKBY and RYIR), which reflect the more comprehensive data collected by the annual surveys rather than the less detailed quarterlies. The data are now consistent with those appearing in tables 2.3, 3.3 and 4.2. These changes required a new series to be created for total asset holdings covering all the sectors (KI2V). There was also a knock on effect to table A, where new identifiers were needed to ensure the correct data for the following series continued to be reported: other assets (KI2W), net inflow to life insurance and pension funds (KI2X) and other residual (KI2Y).

    • As of the fourth quarter of 2011, to help meet user needs, a new data table (D) has been made available, which displays information on investment in UK land, existing buildings and new construction work by the institutional groups covered by this release. To avoid disclosure of confidential data it might be necessary, on occasions, to suppress data for certain series.

  7. Release policy

    Details of the policy governing the release of new data are available from the Media Relations Office.

    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.

    You may use or re-use this information (not including logos) free of charge in any format or medium, under the terms of the Open Government Licence, write to the Information Policy Team, The National Archives, Kew, London TW9 4DU, or email: psi@nationalarchives.gsi.gov.uk

    These National Statistics are produced to high professional standards and released according to the arrangements approved by the UK Statistics Authority.

  8. Definitions and symbols used

    r revised data
    p provisional data
    † data have been revised since the last edition; the period marked is the earliest to have been revised.
    .. not available
    - nil or less than £0.5m

  9. Disclosure

    It is sometimes necessary to suppress figures for certain items in order to avoid disclosing investment activity by individual institutions. In these cases the figures are usually combined with those for another item and this will be indicated in the tables by means of a footnote.

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  11. 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
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