1. Main points

  • Today (26 September 2018) we have published experimental regional estimates of household spending across the whole UK for the first time, aimed at showing users what is possible; the production of these estimates has involved making some very broad assumptions using currently available data sources, some of which have limited sample sizes, and so strong caution is advised when interpreting the findings.

  • Over the next few years, we aim to identify and introduce new data sources that will allow us to improve the quality of these experimental figures and further understand how changes in sampling and the assumptions made can affect the results; we will use these initial results to consult with users on how best we can develop them in the future.

  • London had the highest national expenditure per person in 2016, at £24,545, mainly driven by the higher housing costs in and around the capital; the lowest spending per person in 2016 was seen in the West Midlands, at £15,276.

  • In terms of growth in spending per person between 2015 and 2016, the North East had the greatest increase, at 8.1%; this growth was seen across a wide range of goods and services, with the strongest growth seen in the household goods and services, and clothing and footwear categories.

  • The lowest growth in spending per person between 2015 and 2016 was seen in Northern Ireland, at negative 0.4%, the only country or region to see a fall in spending per person in this period.

  • The households’ saving ratio is the percentage of total resources left after all spending has occurred; it varies considerably across the countries and regions of the UK, with saving in London and the West Midlands being the highest in 2016, at 14.5% and 12.8% respectively.

  • The lowest levels of saving in 2016 were seen in the South West, at 1.5%, followed by Northern Ireland and Wales, at 2.5% and 2.6% respectively; these figures compare with a UK average saving ratio of 6.9%.

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2. Introduction

With increased devolution of powers to local and combined authorities within the UK, the need for statistics to monitor and inform policy at a regional level has also been increasing to an unprecedented level. Users of regional statistics have been telling us for years that they need more and better data, and the recent review of economic statistics by Sir Charles Bean recommended that more should be done to provide statistics for smaller areas within the UK.

We have responded to this need by setting up a Devolution Project, with around a dozen separate work streams designed to develop and provide the statistics needed by regional and local users. The project is funded until 2020 and includes plans to deliver many new and improved statistics, details of which can be found in the Economic Statistics and Analysis Strategy and in an article describing the aims of the project.

One of these work streams is to develop a regional measure of household final consumption expenditure, hereafter referred to as household expenditure or by the abbreviation HFCE. There are many user needs that can be met through this development, including:

  • information on the spending habits of householders, allowing better planning of facilities and infrastructure by local government

  • improved investment planning by businesses providing goods and services

  • expansion of the household account at a regional level, allowing the derivation of the saving ratio for subnational areas (a useful indicator of prosperity)

  • completion of the European Union’s European System of Accounts 2010: ESA 2010 regional transmission tables (including all voluntary requirements), making the UK fully compliant with the regulation

At a regional level, we currently measure the income and outgoings of households only as far as gross disposable household income (GDHI). That measures the primary income components, such as wages and salaries and property income, and the secondary distribution of income, such as the effect of taxes on income and social benefits. GDHI is a measure of the amount of money people in households have available for spending or saving.

Regional household expenditure takes this to the next stage by measuring how much money people in households spend on each of a range of commodities. Once all spending is accounted for, we are left with a measure of saving.

Although these experimental estimates are the first regional measures produced on a consistent basis across the whole UK, the devolved administrations of Scotland and Northern Ireland have been independently compiling and publishing estimates of household expenditure for their respective countries for several years. While our estimates are still in an early stage of development, you are advised to give more credence to the official Scottish and Irish estimates.

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3. Conceptual framework

In the UK National Accounts, household final consumption expenditure (HFCE) is measured using an approach known as the domestic concept, whereby all money spent in the UK on a particular commodity is measured, regardless of who is doing the spending. It therefore includes spending by foreign visitors, but it excludes spending abroad by UK residents on holiday or business.

The total spent on all commodities in the UK is then adjusted to remove the spending by foreign visitors and add the spending by UK residents abroad to give a total for all spending by UK residents, which is known as the national concept. This adjustment is only done at a total level, not for each commodity separately.

When we come to regional measures, the approach used in the national accounts runs into a problem. Using the domestic concept, we can measure the amount spent in each region. But if we only adjust that figure to account for international spending, we will not take into account spending by residents of one region in another region of the UK. When you consider that every time you spend money in a place other than your home town you are effectively spending “abroad” at a regional level, you can imagine how big a problem this can be.

To overcome this we have to measure regional spending using both the domestic and the national concepts. We therefore measure all the spending that takes place in a region, regardless of where the person spending comes from, and we measure separately all the spending by the residents of a region, regardless of where they are when the spending takes place. We still need to account for international spending, and for this we also need to break down that spending into commodities.

An unexpected by-product of this approach is that having the two independent measures allows us to estimate the net inter-regional spending (or trade) flow for each region from the difference between the two measures (at least for the households sector). This is quite a bonus, since until now it has always been considered impractical to attempt to measure inter-regional trade.

In the tables published with this article, you can find our estimates of this net spending between regions, calculated as domestic expenditure minus foreign spending in the UK, minus national expenditure, plus spending abroad by UK residents.

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4. Coverage and classification

Geography

The geographic areas for which we provide regional statistics are based on the Nomenclature of Units for Territorial Statistics (NUTS), a classification of geographic areas used across the European Union to provide a consistent framework for regional accounts. The NUTS areas are updated every three years to reflect changes to administrative boundaries and react to variations in population growth. The latest set of NUTS areas came into effect on 1 January 2018.

For the UK, the NUTS areas are currently:

  • NUTS1: Scotland, Wales, Northern Ireland and nine English regions
  • NUTS2: 41 sub-regions – mostly groups of counties and unitary authorities
  • NUTS3: 179 local areas – mostly single counties and unitary authorities

In addition, we are trying to be more responsive to emerging and changing user needs for statistics relating to different geographic areas. In recent years, the establishment of local enterprise partnerships (LEPs) across England and combined authorities covering city regions has increased the demand for more flexible geographic statistics.

Where possible we now try to provide figures for the 400 local authority districts of the UK in addition to the NUTS areas. Most of the new areas can be constructed by aggregating local authorities together, so this provides a framework that can be used to widen the scope of regional estimates and meet a lot more user needs.

Commodities

The classification we use for the various goods and services that people spend their money on is called the Classification of Individual Consumption by Purpose (COICOP). The classification has three levels: divisions (two digit); groups (three digit); and classes (four digit).

The UK National Accounts presents figures for all three levels across most of the commodities, but for regional accounts the limitations of the data sources we have available mean that we would need to stretch the data rather thinly to achieve such a detailed breakdown, and the quality of results could be adversely affected by this. Therefore, we have chosen to provide mostly a group-level breakdown, with the exceptions being for education, where only a division-level measure is provided even for the UK as a whole, and for some groups where the classes are sufficiently distinct and the data available are deemed good enough to support the extra detail.

Table 1 shows the commodity breakdown we have chosen to produce at a regional level.