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Capital Stock, Capital Consumption - Update on progress to reinstate estimates This product is designated as National Statistics

Released: 17 January 2013 Download PDF

Abstract

This article provides an update on progress to re-instate capital stocks and consumption of fixed capital estimates as well as the plans to bring consistency between the consumption of fixed capital estimates and the final Gross Fixed Capital Formation (GFCF) estimates.

Purpose

This article provides an update on progress to re-instate capital stocks and consumption of fixed capital estimates as well as the plans to bring consistency between the consumption of fixed capital estimates and the final Gross Fixed Capital Formation (GFCF) estimates.

Background

·         Gross capital stock represents the value of all fixed assets in the economy that are still in use, such as machinery, dwellings and vehicles, at the actual or current purchasers’ prices for new assets of the same type, irrespective of the age of the assets.

·         The consumption of fixed capital is the change in value of fixed assets in the economy over the reporting period due to physical deterioration, normal obsolescence or normal accidental damage.

·         Net capital stock is the sum of the written-down values of all the fixed assets still in use; it can also be described as the difference between gross capital stock and consumption of fixed capital.

ONS published annual estimates of capital stocks and consumption of fixed capital up until 2009 after which the estimates were suspended. The estimates for subsequent years have not been published due to quality issues.

Between 2009 and 2010, a number of changes took place to the production of capital stocks and consumption of fixed capital:

·         The Standard Industrial Classification (SIC) was updated from SIC2003 to SIC2007.

·         Statistical production was transferred to a new computer system.

·         The base year was changed for the chained volume measures.

 

When ONS examined the outputs after these changes, they were not of sufficient quality for publication. In particular there was concern over the patterns in the data at industry and asset levels due to the change from SIC2003 to SIC2007. This resulted in the initial delay and subsequent suspension of the annual bulletin.

 ONS published a statement regarding the delay to capital stocks and consumption of fixed capital on its website in March 2012; this is available from the link in the ‘further information’ section.

Progress update

ONS has been analysing the issues affecting the underlying capital stock data which prevented publication in March 2012. The detailed breakdown of industries and assets on a SIC2007 basis varies greatly from the previous SIC2003 basis. There is a series break in 1997 (the first year of national accounts central system processing) which has led to processing issues. This is due to post-1997 data having already been collected on/converted to a SIC2007 basis and pre-1997 data being on a SIC2003 basis. ONS has allocated resources to this issue and is in the process of creating a consistent time series of industries and assets based on the SIC2007 classification.

 The consumption of fixed capital estimates are required in early 2013 for the Blue Book 2013 (BB13) production process. For BB13, ONS will therefore continue to use an alternative method, forecasting based on previous estimates, to produce estimates for consumption of fixed capital.

 It is anticipated, however, that by September 2013 ONS will publish, after BB13, revised estimates of capital stock and the consumption of fixed capital.

The Consumption of Fixed Capital Loop

This section explains how ONS plans to re-introduce a process for Blue Book 2014 that was previously used in the compilation of consumption of fixed capital estimates.

 The consumption of fixed capital loop is a process that brings consistency between the consumption of fixed capital estimates and the final GFCF estimates.

 GFCF estimates, as well as being published in their own right, are used as inputs in the Perpetual Inventory Method (PIM) to generate estimates of the consumption of fixed capital. GFCF estimates however can be adjusted following the annual balancing exercise within national accounts. This leads to inconsistencies between the GFCF data and the PIM derived consumption of fixed capital estimates when the adjusted data are not fed back through the PIM. 

For Blue Book 2014, the adjusted GFCF estimates will be used in the PIM to produce capital stock and consumption of fixed capital estimates. Figure 1 below shows the flows of the GFCF data in the consumption of fixed capital loop.

Figure 1 – The consumption of fixed capital loop

Key to letters:

A.    GFCF data, excluding balancing adjustments, are used in the annual balancing exercise.

B.    The PIM model is run using the GFCF data as described in step A.

C.   The PIM model’s output feeds into non-market sector estimates of gross operating surplus and final consumption of local government, central government and non-profit institutions serving households (NPISHs).

D.   Non-market estimates contribute to the annual balancing exercise.

E.    Gross Domestic Product (GDP) is balanced via Supply and Use Tables, producing new GFCF data, inclusive of balancing adjustments.

F.    The PIM model is then re-run using the final, balanced, estimates of GFCF.

G.   This in turn generates new estimates of consumption of fixed capital for local government, central government and NPISHs.

H.   GDP is then re-run to reflect the revised estimates of gross operating surplus and final consumption of local government, central government and NPISHs.

What estimates are currently available?

The latest gross and net capital stocks data are available by sector, industry (using SIC2003 classification) and asset up to 2009 at both current prices and chained volume measures (CVM) with a 2006 base year. These data are available by using the link below to the ‘former releases’.

The 2012 Blue Book publication contains forecasted estimates of the consumption of fixed capital by sector up to 2011.

Further information

You can find previous links concerning this release via the statement and the announcement released during March 2012.

Capital stock, Capital consumption current release, Blue Book 2012 and the Capital stock, Capital consumption former releases are available on the ONS website.

The latest Quality Report (88.9 Kb Pdf) is available on the ONS website

Available on the UK Statistics Authority website as report 234 is the 'Statistics on UK Business Investment and Capital Stocks' assessment report.

Background notes

  1. 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

Supporting information

Glossary

For further information please contact
Wesley Harris Gross Capital Formation Branch Office for National Statistics E-mail: gcf@ons.gsi.gov.uk Telephone: (+44) 01633 455250

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