Index of Services, UK: October 2017

Monthly movements in output for the services industries: distribution, hotels and restaurants; transport, storage and communication; business services and finance; and government and other services.

This is not the latest release. View latest release

This is an accredited national statistic.

Contact:
Email Mark Stephens

Release date:
22 December 2017

Next release:
26 January 2018

1. Main points

  • This is the first Index of Services release to incorporate Value Added Tax (VAT), using data from 469,440 businesses across 35 industries.

  • In the three months to October 2017, services output increased by 0.3% compared with the three months ending July 2017.

  • Retail trade made the largest contribution to the three-month on three-month growth, contributing 0.06 percentage points.

  • The Index of Services increased by 0.2% between September and October 2017.

  • Employment activities, wholesale trade and owned or leased real estate made the largest contributions at industry level to the month-on-month increase, each contributing 0.04 percentage points.

  • In the three months to October 2017, services output increased by 1.3% compared with the three months ending October 2016; this growth is at its lowest since the three months ending October 2013.

  • This release contains revisions from January 2016.

Back to table of contents

2. Things you need to know about this release

The monthly Index of Services (IoS) provides a timely indicator of growth in the output of the services industries and is the largest contributor to the output approach to the measurement of gross domestic product (GDP), accounting for 79.3% of UK GDP in 2015. Also published today (22 December 2017) is the Quarterly national accounts: July to September 2017.

The IoS measures the UK output in: distribution, hotels and restaurants; transport, storage and communication; business services and finance; and government and other services. These data are used to produce seasonally adjusted estimates of output at chained volume measures (removing the effect of inflation). Unless otherwise stated, all estimates included in this release are based on seasonally adjusted data.

This release is the first time Value Added Tax (VAT) data will be used in the IoS publication. These have been used to supplement data from the Monthly Business Survey (MBS) from January 2016 to June 2017. VAT data have been introduced across 35 services industries for small- and medium-sized businesses. Further information on the use of VAT data can be found in section 9.

The IoS is an important economic indicator and one of the earliest short-term measures of economic activity. It is used in the compilation of the national accounts and widely used by private and public sector institutions, particularly by the Bank of England and Her Majesty’s Treasury to assist in informed decision and policy-making.

Data relating to the retail industry are broadly comparable with Retail sales, Great Britain: October 2017, published on 16 November 2017.

This October 2017 release contains revisions from January 2016. This means that we have incorporated additional data since this period. The use of VAT data as another data source has created revisions across the period where VAT turnover is now being implemented, from January 2016 to June 2017. Revisions can also be made for a variety of other reasons up to October 2017, the most common include:

  • 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

This revisions period is consistent with the National Accounts Revisions Policy.

The UK Index of Services has been designated by the UK Statistics Authority as National Statistics, in accordance with the Statistics and Registration Service Act 2007 and signifying compliance with the Code of Practice for Official Statistics.

Back to table of contents

3. Index of Services (IoS) main figures

Table 1 shows data for the Index of Services (IoS) and each of the main components for October 2017.

Back to table of contents

4. Three-month on three-month services growth slows in October 2017

Figure 1 shows the three-month on three-month Index of Services (IoS) growth rates from January 2012.

The three-month on three-month growth reached a 2017 high of 0.5% in July and August 2017; this growth has now slowed in the following months. Services output increased by 0.3% in the three months ending October 2017 when compared with the three months ending July 2017. Figure 2 shows the contributions to growth from the four main IoS components.

The business services and finance sector is responsible for the majority of growth in the three months to October 2017. This component increased by 0.6% contributing 0.27 percentage points. The industry with the largest contribution to growth in this sector was financial service activities increasing by 1.0%, contributing 0.05 percentage points. Additionally, employment activities and activities of head offices both contributed 0.04 percentage points. They increased by 3.3% and 2.1% respectively.

Two of the other three main IoS sectors also increased. Government and other services increased by 0.2%, contributing 0.06 percentage points. The industries with the largest contribution to positive growth in this sector were education and human health activities. They both increased by 0.5% and contributed 0.04 percentage points.

Distribution, hotels and restaurants increased by 0.1%, contributing 0.01 percentage points. Within this sector, retail trade was the industry with the largest contribution to the positive growth, increasing by 0.9% and contributing 0.06 percentage points. Please see the Retail sales, Great Britain: October 2017 release for more information. Offsetting this growth were food and beverage services and accommodation. They decreased by 1.1% and 1.8% respectively, contributing negative 0.03 and 0.02 percentage points respectively.

While the other three main components increased, the transport, storage and communications sector fell by 0.1%, contributing negative 0.01 percentage points. Publishing activities was the industry contributing most to this fall, decreasing by 4.6% and contributing negative 0.04 percentage points. This industry has seen a general decline in 2017, which is reflected in the industry’s largest businesses. The largest positive contribution for this sector came from computer programming, which increased by 0.8%, contributing 0.03 percentage points.

Back to table of contents

5. Month-on-month services growth increased in October 2017

Services output increased by 0.2% in October 2017 following flat growth in September 2017.

Figure 3 shows the Index of Services (IoS) month-on-month growth rates since January 2015 and Figure 4 shows the month-on-month contributions of each of the main IoS components for October 2017.

Three of the four main components of the services industries increased during October 2017. In order of their contribution to growth:

  • business services and finance increased by 0.2%, contributing 0.08 percentage points

  • government and other services increased by 0.2%, contributing 0.06 percentage points

  • distribution, hotels and restaurants increased by 0.2%, contributing 0.03 percentage points

  • transport, storage and communication decreased by 0.1%, contributing negative 0.01 percentage points

The industries with the largest contributions to the 0.2% rise in October 2017 were employment activities, wholesale trade and owned or leased real estate. They each contributed 0.04 percentage points and increased by 3.2%, 1.0% and 0.9% respectively.

With an IoS weight of 1.3%, employment activities has three main components:

  • employment placement agencies

  • temporary employment agencies

  • human resources provision

Figure 5 shows the total returned turnover in pounds thousands for employment activities and large businesses for the same industry. Returned turnover for this industry is based on the Monthly Business Survey and is non-seasonally adjusted current price data that hasn’t been deflated. Large businesses for employment activities are defined as businesses with 100 or more employees.

Employment activities has seen steady growth since April 2017, where Easter contributed to a fall. This industry has also seen higher levels in 2017 compared with previous years. Employment placement agencies and temporary employment agencies are the components that have contributed most to the growth since April 2017 and the industry movement is also reflected in the industry’s largest businesses.

Elsewhere, industries offsetting some of the October 2017 growth were motor trade and motion pictures, both contributing negative 0.05 percentage points. Motor trade decreased by 2.2%, a larger than normal fall following new car registrations in September 2017. Motion picture distribution was again the main component causing the movement in motion pictures; the industry fell this month by 5.2%. In light of recent data, we have now reviewed and updated the seasonal adjustment parameters for the motion pictures industry; this has smoothed the monthly profile from January 2016.

An ONS Visual article, Paddington, Star Wars and the rise of the UK film industry, was published on 14 December 2017, giving further insight into the film industry. More, information can also be found on the British Film Institute (BFI) website

Back to table of contents

6. Three-month services growth on a year ago the lowest in four years

Figure 6 shows the three-month on a year ago growth rates since January 2012 and Figure 7 shows the three-month on a year ago contributions of each of the main Index of Services (IoS) components.

In the three months to October 2017, services output increased by 1.3% compared with the three months ending October 2016. This is the third consecutive month where the three-month on a year ago growth increase has weakened. The three-month on a year ago growth is now at its lowest since the three months to October 2013.

Two of the four main components of the services industries are contributing to the slowdown in the three-month on a year ago growth. In the three months to October 2017, the transport, storage and communication sector increased by 1.0% and contributed 0.14 percentage points compared with the three months ending October 2016. In comparison, this sector increased 6.1% and contributed 0.81 percentage points in the three months ending October 2016. Distribution, hotels and restaurants increased by 1.0% and contributed 0.18 percentage points in October 2017. This sector has also seen a slowdown in growth; it increased 5.6% in October 2016, contributing 0.97 percentage points.

Business services and finance’s three-month on a year ago growth has remained constant in 2017 and in October 2017 it increased by 1.7%, contributing 0.72 percentage points. There has been a slight slowdown since the three months to October 2016, where the sector increased 2.2%, contributing 0.93 percentage points.

In contrast with the other three components, government and other services has seen a rise in the three-month on a year ago growth since the start of the year. In October 2017, this sector increased by 0.8%, contributing 0.21 percentage points.

The industries with the largest contribution to the 1.3% three-month on a year ago services rise were:

  • education, which increased by 2.1%, contributing 0.15 percentage points

  • owned or leased real estate, which increased by 3.1%, contributing 0.14 percentage points

  • computer programming, which increased by 4.4%, contributing 0.14 percentage points

  • wholesale trade, which increased by 3.2%, contributing 0.14 percentage points

Back to table of contents

8. What's changed in this release?

This is the first release, along with the Quarterly national accounts: July to September 2017, to use Value Added Tax (VAT) data. This has been used alongside the Monthly Business Survey data in the production of gross domestic product (GDP). Further information on the use of VAT data has been published today in an article, VAT turnover implementation into UK National Accounts: December update.

As a result of this change, we have stopped the publication of Turnover in production and services industries (TOPSI), which is based on the Monthly Business Survey (MBS). Instead, starting from this release, we now publish MBS Turnover in services industries as an additional table accompanying the Index of Services publication.

We have now reviewed and updated the seasonal adjustment parameters for the motion pictures industry. These changes have revised the series and revisions can be seen from January 2016.

Back to table of contents

9. Feedback on this bulletin

We welcome your feedback on this bulletin via our short survey.

Back to table of contents

10. Quality and methodology

The monthly Index of Services (IoS) was developed to provide a timely indicator of growth in the output of services industries, at constant prices for the UK. The IoS is an important component of monthly output (gross domestic product output approach (GDP(O)), representing about 79.3% of UK gross domestic product (GDP) as of 2015. The IoS shares the exact same industry coverage as the corresponding quarterly series within GDP(O).

The Index of Services datasets contain additional material, including:

  • Monthly Business Survey (MBS) response rates (current and historic)

  • IoS and main component indices to four decimal places

  • publication tables

  • revisions triangles

  • lower-level time series data

The Index of Services Quality and Methodology Information report contains important information on:

  • the strengths and limitations of the data and how it compares with related data

  • uses and users of the data

  • how the output was created

  • the quality of the output including the accuracy of the data

Back to table of contents

Contact details for this Statistical bulletin

Mark Stephens
ios.enquiries@ons.gsi.gov.uk
Telephone: +44 (0)1633 456387