The Index of Services is estimated to have increased by 2.7% in May 2015 compared with May 2014. All of the 4 main components of the services industries increased in the most recent month compared with the same month a year ago
The largest contributions came from: business services and finance, which contributed 1.2 percentage points to total growth; and distribution, hotels and restaurants, which contributed 0.8 percentage points to total growth
The latest Index of Services estimates show that output increased by 0.3% between April 2015 and May 2015, following an increase of 0.2% between March 2015 and April 2015
The figures within this release are estimates and are on a seasonally adjusted basis. The earliest period open for revision in this release is April 2015
About the IoS
The monthly IoS provides a timely indicator of growth in the output of the services industries. The IoS is an important economic indicator and shares exactly the same industry coverage as the corresponding quarterly series within UK gross domestic product (GDP). The primary purpose of the IoS is to produce a short-term measure of the output of the services industries within the UK economy and show the monthly movements in the gross value added (GVA) of the service industries (2007 Standard Industrial Classification (SIC 2007) sections G to T).
The 4 main components of the services industries are:
distribution, hotels and restaurants
transport, storage and communication
business services and finance
government and other services
The IoS is the largest contributor to the output approach to the measurement of GDP, accounting for 78.4% of UK GDP in 2011.
All data in this bulletin are seasonally adjusted estimates and have had the effect of price changes removed (in other words, the data are deflated). Further information on some of the main concepts (including seasonal adjustment and deflation) underlying the estimates can be found in background note 9.
The quality of the IoS
The IoS is published around 8 weeks after the end of the reference month. There is no simple way of measuring the accuracy of the IoS, that is, the extent to which the estimate measures the underlying “true” value of the output growth (of the services industries) in the UK for a particular period. All estimates, by definition, are subject to statistical uncertainty and for many well-established statistics the Office for National Statistics (ONS) measures and publishes the sampling error associated with the estimate, using this as an indicator of accuracy. However, as IoS is constructed from a wide variety of data sources, some of which are not based on random samples, we don’t publish a measure of the sampling error associated with the IoS.
Reliability is one dimension of measuring accuracy, using evidence from analyses of revisions to assess the closeness of early estimates to subsequent estimated values. Revisions are an inevitable consequence of the trade-off between timeliness and accuracy. Figures for the most recent months are provisional and subject to revision in light of:
late responses to surveys and administrative sources
forecasts being replaced by actual data
revisions to seasonal adjustment factors, which are re-estimated every month and reviewed annually
Revisions to the IoS are typically small (around 0.1 to 0.2 percentage points), with the frequency of upward and downward revisions broadly equal. More information on the most recent revisions analysis can be found in the component analysis section and in background note 14.
It should be noted that care should be taken when using the month-on-month growth rates, due to their volatility (background note 8).
Further information on the quality of the IoS is available in the Quality of the IoS (29 Kb Pdf) report on the Index of Services Methods page on our website. It should be noted that as part of the IoS industry review process, we are continually working on methodological changes to improve the accuracy of the IoS.Back to table of contents
Table 1: Index of Services main information, May 2015
|Index number (2011=100)||Most recent month on a year earlier||Most recent 3 months on a year earlier||Most recent month on previous month||Most recent 3 months on previous 3 months|
|Index of services||109.7||2.7||2.8||0.3||0.4|
|Source: Office for National Statistics|
Download this table Table 1: Index of Services main information, May 2015.xls (26.1 kB)
The Index of Services (IoS) measures the quantity of output from all UK services industries, which account for more than three-quarters of the output approach to the measurement of gross domestic product. Index values are presently referenced to 2011 so that the average for 2011 is equal to 100. Therefore, an index value of 110 would indicate that output is 10% higher than the average for 2011.
As seen in Figure 1, the IoS increased by 2.7% in May 2015 compared with May 2014. In order of their contribution to growth (listed in reference table IOS1):
business services and finance increased by 3.1%
distribution, hotels and restaurants increased by 4.2%
transport, storage and communication increased by 3.7%
government and other services increased by 0.5%
Further detail on these movements can be found in the component analysis section.
Between April 2015 and May 2015, as seen in Figure 2, the IoS increased by 0.3%.
Out of the 4 main components of the services industries, 3 increased in the most recent month compared with the previous month. In order of their contribution to growth (listed in reference table IOS1):
business services and finance increased by 0.5%
transport, storage and communication increased by 0.4%
government and other services increased by 0.1%
In contrast, distribution, hotels and restaurants decreased by 0.2%.
More detail on individual components can be found in the IOSCOMP tables in the data section of this bulletin. The tables also provide information on the growth for the 3 months ending in May 2015 compared with the previous 3 months and compared with the 3 months ending May 2014.
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Total services grew by 2.7% between May 2014 and May 2015 and by 0.3% between April 2015 and May 2015.
Historically, the services industries have grown at a faster rate than all other headline industries. While GDP has grown at an average compound annual rate of 2.0% since 1997, services has grown at an average compound annual rate of 2.8% (more information can be found in Gross Domestic Product: Preliminary Estimate - Quarter 2 (Apr to June) 2015. This has led to a continuing re-orientation of the economy towards services, despite productivity in the services industries rising more slowly than in the production industries (and manufacturing in particular) since 1997 (more information can be found in Labour Productivity, Quarter 1 (Jan to Mar) 2015). The higher output growth, therefore, reflects the increasing share of the labour force employed in services, which has grown from 73.0% to 79.0% between 1997 and 2014 (Labour Market Statistics, July 2015, reference table EMP13).
Figure 3 shows the share of gross value added accounted for by services in the UK and in other G7 economies (more information on data for France, Germany, Italy Japan and the USA can be found on the Organisation for Economic Co-operation and Development (OECD) website). In 1997 the share of gross value added accounted for by services in the UK was just under 70%, around the middle of the range relative to the other G7 economies. By 2013, its share had risen to almost 80%, therefore the UK economy has become the most reliant on services among the G7 countries considered.
In addition to strong long-run growth, the services industries were also less affected by the downturn in 2008 than other industries, such as production and construction and subsequently recovered more quickly. The services industries are mainly responsible for the recovery of the economy as a whole, being the only industry grouping to have surpassed its pre-downturn peak.
We have looked at the growth rates of the different industry groupings since 1997 in previous releases of the Index of Services.Back to table of contents
With a weight of 78.4%, the services industries are the largest industrial grouping in the output approach to measuring GDP. The releases for the short-term economic indicators that feed directly into the output approach to measuring GDP include a table detailing growth in the 4 main industrial groupings (Table 2). This will aid understanding of the relationship between the individual short-term releases and GDP output.
In Quarter 2 (Apr to June) 2015, GDP was estimated to have increased by 0.7% compared with the previous quarter. The contribution an industry grouping makes to the GDP quarterly growth is dependent on the quarterly change in that industry grouping and its weight within the output approach to measuring GDP.
Monthly estimates are produced for each industrial grouping except agriculture. The May 2015 estimates for production and construction were published on 7 July 2015 and 10 July 2015 respectively. The gross domestic product preliminary estimate for Quarter 2 (Apr to June) 2015 was published on 28 July 2015, alongside this bulletin.
Table 2: GDP output component tables Quarter 2 (Apr to June) 2015, chained volume measure, seasonally adjusted
|Publication||% of GDP||Release date||Period of GDP||Most recent 3 months on a year earlier||Most recent 3 months on 3 months earlier||Most recent month on the same month a year ago||Most recent month on the previous month|
|Index of Production||14.6||07 Jul||May||1.4||1.0||2.1||0.4|
|Construction output||6.4||10 Jul||May||2.7||-0.4||1.3||-1.3|
|Index of Services||78.4||28 Jul||May||2.8||0.4||2.7||0.3|
|Retail Sales||23 Jul||Jun||4.4||0.7||4.0||-0.2|
|Source: Office for National Statistics|
|1. Q2 is Quarter 2 (Apr to June)|
|2. No data represented by ..|
|3. A minor data labelling error has been corrected in Table 2: GDP output component tables, Quarter 1 (Jan to Mar) 2015. The label Q4 2015 has now been replaced with Q4 2014|
Download this table Table 2: GDP output component tables Quarter 2 (Apr to June) 2015, chained volume measure, seasonally adjusted.xls (57.9 kB)
Table 3: Growth rates and contributions(1) to the Index of Services, May 2015
|Description||% of Services||Month on a year earlier Volume (SA2) (%)||Contribution to services (% points)||Month on month growth Volume (SA) (%)||Contribution to services (% points)|
|Total services industries||100||2.7||2.7||0.3||0.3|
|Distribution, hotels and restaurants||18||4.2||0.8||-0.2||0.0|
|Transport, storage and communication||13||3.7||0.5||0.4||0.1|
|Business services and finance||39||3.1||1.2||0.5||0.2|
|Government and other services||30||0.5||0.2||0.1||0.0|
|Source: Office for National Statistics|
|1. Individual contributions may not sum to the total due to rounding.|
|2. SA = seasonally adjusted|
Download this table Table 3: Growth rates and contributions(1) to the Index of Services, May 2015.xls (55.8 kB)
Distribution, hotels and restaurants
The index of distribution, hotels and restaurants increased by 4.2% in May 2015 compared with May 2014, following an increase of 4.8% in April 2015 compared with the same month a year earlier. The main contributors to the increase were: retail trade, except of motor vehicles and motorcycles, which rose by 4.4%; wholesale and retail trade and repair of motor vehicles and motorcycles, which rose by 7.6%; and accommodation, which rose by 9.4%.
Transport, storage and communication
The index of transport, storage and communication increased by 3.7% in May 2015 compared with May 2014, following an increase of 3.9% in April 2015 compared with the same month a year earlier. The main contributors to the increase were: publishing audiovisual and broadcasting activities, which rose by 8.4%; computer programming, consultancy and related activities, which rose by 3.2%; and land transport, which rose by 3.6%.
Business services and finance
The index of business services and finance increased by 3.1% in May 2015 compared with May 2014, following an increase of 3.0% in April 2015 compared with the same month a year earlier. The main contributors to the increase were: other professional service activities, which rose by 6.2%; administrative and support services activities, which rose by 3.9%; and real estate activities, which rose by 1.6%.
Government and other services
The index of government and other services increased by 0.5% in May 2015 compared with May 2014, following an increase of 0.7% in April 2015 compared with the same month a year earlier. The main contributors to the increase were: human health and social work activities, which rose by 2.1%; activities of households as employers of domestic personnel, which rose by 10.5%; and education, which rose by 0.1%.
The Index of Services (IoS) follows the National Accounts Revisions policy (43.3 Kb Pdf) . Revisions are caused by a number of factors including, but not limited to:
revisions to source data due to late responses
actual data replacing forecast data
revisions to seasonal factors that are re-estimated every period
More information on IoS revisions is available on the Index of Services Methods page.
We produce revisions triangles of services growth to provide users with one indication of the reliability of this main indicator. Statistical tests are performed on the average revision to test if it is statistically significantly different to 0. Further information can be found in background note 15.
In this release of data, the earliest period open to revision is April 2015. The growth rate for April 2015 compared with April 2014 (2.8%) was unrevised. The month-on-month growth rate for April 2015 compared with March 2015 (0.2%) was also unrevised.
Further detail on the revisions to the IoS components can be found in the RIOS1 tables in the data section of this publication.Back to table of contents
According to the UK Standard Industrial Classification 2007 (SIC2007), legal activities (industry 69.1) cover legal representation and the preparation of legal documents such as articles of incorporation, partnership agreements, patents and copyrights as well as other activities of notaries. In 2012, the output of industry 69.1 accounted for 1.4% of nominal gross value added (GVA) while its share of total intermediate consumption was even greater at 1.7% (Gross Domestic Product: Preliminary Estimate - Quarter 2 (Apr to June) 2015 and Input-Output Supply and Use tables, 2014 edition), signalling the industry’s importance to other industries. Between 1997 and 2012 this industry's share of both nominal GVA and intermediate consumption has increased slightly, signalling stronger growth relative to the remainder of the economy.
The performance of the legal activities industry followed closely the performance in the entire services industries between 1990 and 1999. However, in the period prior to the downturn, industry 69.1 grew quicker than the services industry as a whole, rising at an average compound annual growth rate of 8.0% between 2000 and 2007. The downturn impacted the industry severely, with its output contracting by 13.7% between the economy’s peak in Quarter 1 (Jan to Mar) 2008 and the economy’s trough in Quarter 3 (Jul to Sep) 2009 while the services industry as a whole contracted by 3.9% over the same period. In 2010, industry 69.1 started its recovery and in Quarter 1 (Jan to Mar) 2015 was 2.0% above its pre-downturn peak (Quarterly National Accounts, Quarter 1 (Jan to Mar) 2015).
For the vast majority of industries, legal services account for at least some part of an industry’s input into the production process (often referred to as intermediate consumption). In 2012 the intermediate consumption of legal services across the whole economy amounted to over £24 billion. Over 40% of this total could be attributed to just 5 industries, with the largest consumers being public administration and defence and financial services industries (at 12.3% and 9.3% of total intermediate consumption of legal services, respectively) (Input-Output Supply and Use tables, 2014 edition).
Between 1997 and 2012, the share of total intermediate consumption of legal services claimed by these 5 industries (insurance and reinsurance, financial services activities, legal activities, public administration and defence and human health activities) varied. For example, the share of total intermediate consumption of legal services utilised by public administration and defence industries has declined between 1997 and 2012, while it has steadily increased for human health activities industries over the same period. Moreover, the share of total intermediate consumption of legal services claimed by the financial service activities and insurance and reinsurance industries fell between 1997 and 2007 before increasing, with the introduction of additional regulation in these sectors a possible factor.Back to table of contents
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