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Statistical bulletin: Business Investment, Q4 2011 revised results This product is designated as National Statistics

Released: 28 March 2012 Download PDF

Key findings

  • Business investment in seasonally adjusted terms fell by £1.0 (3.3 per cent) billion to £29.7 billion when compared with the previous quarter.
  • Business investment increased by £0.5 billion (1.6 per cent) when compared with the fourth quarter of 2010.
  • Total manufacturing investment fell by £0.1 billion (2.5 per cent) to £3.6 billion when compared with the previous quarter.
  • Total non-manufacturing investment decreased by £0.9 billion (3.4 per cent) to £26.2 billion when compared with the previous quarter.
  • Compared with the fourth quarter of 2010, total manufacturing investment rose by £0.4 billion (13.3 per cent); total non-manufacturing investment rose by less than £0.1 billion (0.2 per cent).

Summary

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 2011 Q4 revised reference table 1 to 7. (343 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’.

Business investment in detail

 

Business investment chained volume measures

Reference year 2008, seasonally adjusted

Business investment Q4 2011 Revised Results
Source: Quarterly Survey of Capital Expenditure - Office for National Statistics

Notes:

  1. 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.

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Business investment

 
Chained volume measures, reference year 2008 seasonally adjusted
  Percentage change   £million
  Most recent quarter on   a year earlier  Most recent quarter on previous quarter   Most recent level
Total business investment 1.6 -3.3   29,741
Total manufacturing 13.3 -2.5   3,556
Total non-manufacturing 0.2 -3.4   26,185
         

Table source: Office for National Statistics

Download table

 

Private sector non-manufacturing

The fall in business investment between the third and fourth quarter of 2011 was driven by private sector non-manufacturing which fell by £1.1 billion (4.3 per cent) to £25.3 billion. This was due to a decrease in other production, down £0.6 billion (9.6 per cent) to £5.9 billion and construction, down £0.6 billion (31.5 per cent) to £1.3 billion.

See reference table 1 for more detail.

The £0.6 billion fall in other production was driven by electricity, gas and water which fell by £0.5 billion to £2.7 billion (15.9 per cent) and agriculture, forestry and fishing, down £0.1 billion (19.0 per cent) to £0.6 billion.

See reference table 6 for more detail.

Private sector manufacturing

Business investment in private sector manufacturing fell by £0.1 billion (2.6 per cent) to £3.6 billion compared with the previous quarter. This was driven by a £0.1 billion (8.1 per cent) fall in engineering & vehicles.

Compared with the fourth quarter of 2010, business investment in private sector manufacturing rose by £0.4 billion (13.3 per cent), driven by an increase in other manufacturing of £0.2 billion (26.3 per cent) and a £0.2 billion (19.7 per cent) rise in engineering & vehicles.

See reference table 3 for more detail.

Economic background

Business investment growth has been positive for most of the last eighteen months, having contracted sharply through the recession. Business investment declined by just over 21 per cent between 2007 and 2009. In 2011, investment had recovered by 11 per cent, which accounts for half the investment which was lost during the three years of decline. However, business investment has again contracted in the fourth quarter of 2011.

The decline in investment during 2008 and 2009 can be attributed to the recession and related falls in output, reduced access to borrowing for investment and a fairly pervasive decline in economic confidence. However, the weakness in business investment that has been seen during 2010 and 2011 can be less easily explained by the same reasons.

The non-financial corporate sector continued to rebuild their balance sheets through 2010 and 2011, whilst the access to and cost of finance improved, particularly for medium and large sized businesses. However, the weakness of business investment suggests that the corporate sector continues to take a cautious stance towards expansion and investment.

This cautious stance is echoed in the relatively limited increases in employment. Since late 2008, the ratio of business investment to private non-financial corporation gross trading profits has come down from over 60 per cent to fewer than 50 per cent. This is current price data and therefore subject to price movements, but is still indicative of the cautious approach that the corporate sector is taking towards investment.

Background notes

  1. What’s new?

    This statistical bulletin includes revisions from the first quarter of 2011, in line with estimates published today in the Quarterly National Accounts (QNA).  

    On 23rd February 2012, an article was published entitled "Gross Capital Formation estimates - availability of data from the GCF system". This note outlines the issues faced with the production of these estimates and what work is underway to further develop and improve the outputs.

    As part of the ongoing improvements to data quality, the next Statistical Bulletin published on 24th May 2012 will include a bias adjustment to the provisional estimates of capital expenditure survey data. This bias adjustment will significantly improve month two estimates and reduce the revisions at month three.

    A more detailed explanation of this adjustment will be published as a note on the ONS website in early April.

  2. Code of Practice for Official Statistics

    National Statistics are produced to high professional standards set out in the Code of Practice for Official Statistics . They undergo regular quality assurance reviews to ensure that they meet customer needs. They are produced free from any political interference. © Crown copyright 2011.

  3. Understanding the data

    Short Guide to Business investment

    Business Investment estimates are a short term indicator of capital expenditure by manufacturing and non-manufacturing businesses within the UK, at current prices, 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 (GDP).

    Interpreting the data

    When making comparisons it is recommended that users focus on chained volume, seasonally adjusted estimates as these show underlying trends rather than seasonal movements.

    Business Investment estimates are subject to revision due to:

    • Late responses to the Quarterly Capital Expenditure Inquiry.

    • Revisions to seasonally adjusted factors which are re-estimated every quarter.

    • Annual updating of the IDBR that forms the basis of the sampling for the Quarterly Capital Expenditure Inquiry (usually occurring in quarter 1 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 (i.e. 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.

    Use of the data

    Business Investment estimates are used by ONS National Accounts, and externally by the Bank of England, Her Majesty’s Treasury and the Office for Budgetary Responsibilities, to monitor economic performance and inform monetary and fiscal policy decisions. Business Investment is also used by other government departments, such as the Department for Business Innovation and Skills, the business and research communities, education, the media and general public.

  4. Methods

    Details on the Business investment methodology are published in the Summary Quality Report for Business Investment. (128.9 Kb Pdf)

    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 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’. (150.9 Kb Pdf)

    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 private sector estimates exclude expenditure on dwellings.

    Deflation

    It is common for the value of a group of financial transactions to be measured in several time periods. The values measured will include both the change in the volume sold and the effect of the change of prices over that year. Deflation is the process whereby the effect of price change is removed from a set of values.

    The Business investment results are aggregated and weighted and used to produce chained volume estimates in both seasonally adjusted and non-seasonally adjusted forms (seasonal adjustment estimates and removes seasonal and calendar effects from the estimates to aid interpretation). The chained volume estimates (reference year 2008=100) are derived by taking the value estimates and adjusting to remove the impact of price changes (968.6 Kb Pdf) using Producer Price Indices.

  5. Quality

    Estimates for the Business Investment Statistical Bulletin are based on the financial data collected through the quarterly Capital Expenditure Inquiry at month two (provisional) and month three (revised). Response rates for the current quarter reflect the response rates at the time of publication. Late returns for the previous quarter’s data are included in the month three (revised) results.  Response rates for historical periods are updated to reflect the current level of response at the time of this publication.

    Response rates

    At month two (Provisional)   At month three (Revised)
    Period Overall response rates (per cent) Questionnaires   Period Overall response rates (per cent) Questionnaires
     
     
    2010  Q4 76.3   2010  Q4 87.9
             
    2011 Q1 70.3   2011 Q1 89.8
      Q2 73.1     Q2 90.5
      Q3 77.0     Q3 91.5
      Q4  77.3     Q4                                                               87.2
                      

    Table source: Office for National Statistics

    Download table

    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

    National Accounts revision policy (27.8 Kb Pdf) is available on the ONS website.

    Revision triangles

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

    One indication of the reliability of the key indicators can be obtained by monitoring the size of revisions. The tables below record the size and pattern of revisions, which have occurred over the last five years.

    Please note that these indicators only report summary measures for revisions. The revised data may itself be subject to sampling or other sources of error. A statistical test has been applied to the average revision to find out if it is statistically significant different from zero. An asterisk (*) shows if the test is significant. Details about this revisions material can be found in the document 'Revisions information in ONS First Releases' (244.6 Kb Pdf)

    Table 3 below 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 2006 to the third quarter of 2011.

    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).

    Revisions to month 2 estimates of business investment and total manufacturing investment growth.

      Growth in latest provisional estimate (per cent) Revisions between the month 2 and month 3 estimates of business investment and total manufacturing investment growth.
    Average over the last five years Average over the last five years without regard to sign (average absolute revision)
    Total business investment -5.6 *1.32 *1.74
    Total manufacturing  -2.4 0.42 2.75
     

    Table source: Office for National Statistics

    Table notes:

    1. * Statistical tests produced evidence that the mean revision is significantly different from zero.

      Quarterly, Chained volume measure, Seasonally adjusted.

    Download table

    Table 4 below 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 2003 to the third quarter of 2008.

    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).

    Revisions to month 3 estimates of growth in business investment and total manufacturing investment.

      Growth in latest revised estimate (per cent) Revisions between the first month 3 publication and estimates three years later.
    Average over the last five years Average over the last five years without regard to sign (average absolute revision)
    Total business investment growth. -3.3 0.22 1.87
    Total manufacturing investment growth. -2.5 0.04 3.15

    Table source: Office for National Statistics

    Table notes:

    1. Quarterly, Chained volume measure, Seasonally adjusted.

    Download table

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

  6. Relevant links

    British Nuclear Fuels plc (BNFL)

    In April 2005 nuclear reactors were transferred from British Nuclear Fuels plc (BNFL) to the Nuclear Decommissioning Authority (NDA). BNFL is classified as a public corporation in National Accounts and the NDA as a central government body. The capital formation estimates in this release reflect this transfer from the public corporations manufacturing category.

    The value of the transfer was -£15.6 billion. The negative value reflects the fact that the reactors are at the end of their productive lives and have large decommissioning and clean-up liabilities. A more detailed explanation about the transfer can be found in the December 2006 Business Investment Release. (414.3 Kb Pdf)

    Aircraft Imports

    On 1 January 2011 a change was made to the zero-rating of VAT on qualifying aircraft. More information on this can be found on the HMRC website. This may have contributed to the high level of aircraft imports for 2010 quarter four and the low level of aircraft imports for 2011 quarter one. The level of investment can be seen within private sector, non-manufacturing other services on reference table 1, and subsequently transport and communication on reference table 6.

    Blue Book 2011

    A note describing the improvements to gross capital formation estimates for Blue Book 2011 (including a change in the timeseries identifiers used) is available on the ONS website.

  7. Publication policy

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

  8. Accessing data

    The Business Investment Statistical Bulletin and Time Series datasets are available to download free from the National Statistics website at 9.30 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. (32.8 Kb Pdf)

    The Business Investment Statistical Bulletin conforms to the standards set out in the UK Statistics Authority Code of Practice.

    Time series used in this Bulletin and Time Series datasets carry unique identifiers for ease of use. More information on these identifiers are available in the article published on 25 August 2011, 'New series identifiers for GDP(O), IoS and IoP and GCF'. (35.4 Kb Pdf)

  9. Statistical contact:

    Name: Stuart Deneen

    Tel: 01633 455250

    Email: gcf@ons.gov.uk

  10. Details of the policy governing the release of new data are available by visiting www.statisticsauthority.gov.uk/assessment/code-of-practice/index.html or from the Media Relations Office email: media.relations@ons.gsi.gov.uk

Statistical contacts

Name Phone Department Email
Stuart Deneen +44 (0)1633 455250 Gross Capital Formation branch GCF@ons.gsi.gov.uk
Get all the tables for this publication in the data section of this publication .
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