This Bulletin includes commentary on the data set in addition to relevant graphs and tables. Accompanying background notes provide information on coverage, quality reporting, revisions and publication policy.
Business investment estimates are a short term indicator of capital expenditure by manufacturing and non-manufacturing businesses within the UK. Capital expenditure is defined as the spending on physical assets such as buildings and machinery. More details on capital expenditure are available in section ‘4.Methods’, of the background notes, under ‘Composition of the data’.
Detailed estimates of business investment at current prices and measured in chain volume terms for seasonally and non-seasonally adjusted estimates are available to download in the Business investment 2012 Q2 revised reference table 1 to 7. (295.5 Kb Excel sheet)
Definitions found within this bulletin are explained in more detail within the background notes: Section ‘3. Understanding the data’, under ‘Definitions and explanations’.
Note: On 1 January 2011, a change was made to the zero-rating of VAT on qualifying aircraft. More information on this is available in the background notes under point '6. Relevant links'. 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.
|Chained volume measures, reference year 2009 seasonally adjusted|
|Percentage change||Most recent level|
|Most recent quarter on a year earlier||Most recent quarter on previous quarter|
|Total business investment||3.1||0.9||30,149|
Business investment between the first quarter of 2012 and the second quarter of 2012 saw a decrease in private sector non-manufacturing of £0.1 billion to £25.8 billion (-0.2 per cent). This decrease in non-manufacturing was in other services, down £1.0 billion to £13.5 billion (-7.2 per cent). The fall in other services was offset by an increase in distribution services, up £0.5 billion (22.3 per cent) and construction, up £0.3 billion (19.6 per cent). See reference table 1 for more detail.
The £1.0 billion fall in other services saw decreases in transportation and storage, which fell by £0.7 billion to £2.6 billion (-20.0 per cent), hotels & restaurants, which fell by £0.2 billion to £0.9 billion (-21.8 per cent) and health & social work, which fell by £0.2 billion to £0.7 billion (-21.2 per cent). See reference table 6 for more detail.
Compared with the second quarter of 2011, business investment in private sector non-manufacturing rose by £0.5 billion (2.0 per cent). This reflected a rise of £1.7 billion in other production (28.7 per cent), which was offset by a fall of £1.4 billion in other services (-9.2 per cent). See reference table 1 for more detail.
Business investment in private sector manufacturing rose by £0.2 billion to £3.1 billion (5.8 per cent) when compared with the previous quarter. There was an increase of £0.1 billion in engineering & vehicles (12.3 per cent) and an increase of £0.1 billion in chemicals & man-made fibres (21.8 per cent). See reference table 3 for more detail.
Compared with the second quarter of 2011, business investment in private sector manufacturing fell by 1.5 per cent, with falls in other manufacturing of £0.2 billion (-24.1 per cent) and food, drink and tobacco of £0.2 billion (-29.6 per cent). See reference table 3 for more detail.
Business investment in the second quarter increased by £0.3 billion when compared to the previous quarter and £0.9 billion compared to the same quarter a year ago. Both figures have been revised up from initial estimates of a £0.5 billion fall in business investment on both the previous quarter and same quarter a year ago.
The upward revision in business investment was supported by an overall improvement in GDP (Gross Domestic Product) for the second quarter. GDP was revised by 0.3 percentage points to 0.4 per cent between the first and third estimate, due to additional information contained in important surveys and administrative sources that only became available later in the quarterly round. Despite the upward revisions in business investment and GDP for the second quarter, the overall economic picture remains subdued.
The figures indicate that businesses are suffering from muted domestic demand due to the fragile position of households and low consumer confidence, and internationally partly due the continuation of the Eurozone debt crisis. Businesses are also seeing a reduction in profit margins, as input prices have been increasing at a faster rate than output prices and businesses seem to be undertaking defensive strategies involving cost cutting rather than increasing capital spending; consequently business investment has been subdued.
The independent Office for Budget Responsibility (OBR) reduced its growth forecast for UK business investment in 2012 to an increase of 0.7 per cent down from 7.7 per cent last November.
Gross National Inventory - Reservations
1. 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.
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.
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, constant prices and seasonally adjusted estimates. 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 for the Quarterly Capital Expenditure Inquiry (usually occurring in quarter one and having most 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): 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 is 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:
general government non-profit institutions serving 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.
Use of the data
Business Investment estimates are used by Office for National Statistics (ONS) 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)
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 per cent 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’. (287.8 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.
|At month two (Provisional)||At month three (Revised)|
|Period||Overall response rates (per cent) Questionnaires||Period||Overall response rates (per cent) Questionnaires|
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.
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.
Summary quality report
A Summary Quality Report (128.9 Kb Pdf) for this Statistical Bulletin can be found on the ONS website. 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.
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 (27.8 Kb Pdf) is available on the ONS website.
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 second quarter of 2007 to the first 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).
|Quarterly, Chained volume measure, Seasonally adjusted|
|Average over the last five years||Revisions between the month 2 and month 3 estimates of business investment and total manufacturing investment growth|
|Growth in latest provisional estimate (per cent)||Average over the last five years without regard to sign (average absolute revision)|
|Total business investment||-1.5||*1.25||*1.85|
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 second quarter of 2004 to the first 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).
|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||0.9||0.45||1.65|
|Total manufacturing investment growth||5.9||0.34||2.42|
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'.
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 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.
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 (38.8 Kb Pdf) to the contents of this bulletin.
The Business Investment Statistical Bulletin and Time Series datasets are available to download free from the ONS website at 9.30 am on the day of publication. ONS allows a list of agreed officials to have access to data 24 hours before publication, which is available on the Business Investment release page.
The Business Investment Statistical Bulletin conforms to the standards set out in the National Statistics 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)
Next publication: Tuesday 27 November 2012
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
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