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Office for National Statistics Regional Accounts Methodology Guide

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					Office for National Statistics

Regional Accounts
Methodology Guide
A guide to regional gross value added
(GVA), gross disposable house income
(GDHI) and gross fixed capital formation
(GFCF)




                                                               Pete Lee
                                           Office for National Statistics
                                     Email: pete.lee@ons.gsi.gov.uk
Contents
Preface .............................................................................................................3

Chapter 1 Introduction to UK Regional Accounts .....................................4

Chapter 2 Regional Gross Value Added .....................................................7

Chapter 3 Regional Gross Disposable Household Income....................15

Chapter 4 Gross Fixed Capital Formation ................................................28

Annex A – NUTS Regions ...........................................................................32

Annex B – Industry groups .........................................................................39

Annex C – Smoothing process...................................................................40

Glossary/Acronyms .....................................................................................41

Useful publications/web-sites ....................................................................44




                                                                                                                         2
Preface

Objectives

The United Kingdom Regional Accounts are published on the basis of the European System of Accounts
1995 (ESA 95) and the European Union Nomenclature of Territorial Statistics (NUTS) regulation.

This guide is intended to give the user an understanding of what comprises Regional Accounts in the UK,
how regional estimates of gross value added (GVA), gross disposable household income (GDHI) and gross
fixed capital formation (GFCF) are compiled, the different data that feeds into the estimates, and the
concepts that underpin the whole process.

Format

Chapter 1 is an introduction to the UK Regional Accounts and provides an outline of their constituent parts.

Chapters 2-4 form the body of this document and cover the key aggregates which make up the UK
Regional Accounts; GVA, GDHI and GFCF. Each of these chapters is composed of four parts; a definition
of the economic aggregate, background information on publications and legal requirements, an overview of
the main data sources and concepts, and details of the individual components and how these are estimated.

Annexes to the document provide details of the regional and industrial framework underpinning these
estimates, along with further details on methodology.




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Chapter 1 Introduction to
UK Regional Accounts

1.1 What are Regional Accounts?
Regional Accounts are accounts for regions, sub-regions and local areas produced according
to the same concepts and definitions used in the UK National Accounts.
There are considerable practical and conceptual difficulties in compiling for each region the
full set of National Accounts. For example much of government spending is not allocable to
the regions of the UK so that producing regional government sector accounts of any quality is
not feasible. In practice, therefore, attention in the United Kingdom and other European
countries has been paid primarily to a more limited system of Regional Accounts. These have
focused on some key aggregates by industry, namely gross value added (GVA) and gross
fixed capital formation (GFCF) as well as a simplified set of accounts for households, gross
disposable household income (GDHI).


1.2 Regional Geographies
Regional Accounts are produced in accordance with the European System of Accounts (ESA
95) and the European Union Nomenclature of Territorial Statistics (NUTS) regulation. There
are currently three hierarchical NUTS classification structures used within the UK; NUTS1,
NUTS2 and NUTS3.
    •   NUTS1 covers Wales, Scotland, Northern Ireland plus the nine government office
        regions of the United Kingdom. There is a thirteenth region known as Extra-Regio
        which accounts for economic activity that cannot be assigned to any specific region.
        For the UK this consists mainly of offshore oil and gas extraction and the activities
        of UK embassies and forces overseas.
    •   The 37 NUTS2 regions divide the UK into counties, groups of counties or groups of
        local authorities.
    •   The 133 NUTS3 regions divide the UK into individual counties and unitary
        authorities.
Full details of the NUTS structure in the UK are shown in Annex A.




                                                                                           4
1.3 Regional Accounts in the United Kingdom
Accounts for the UK regions are in three parts:-
    •    Regional GVA at current basic prices measured using the income approach (see
         2.3.4) and published at three different industrial, geographical, and component splits.
         [NUTS1 – A31 industry, NUTS2 – A17 industry; NUTS3 – A3 industry]
    •    Regional GDHI at current basic prices is published to the same geographical
         breakdown as GVA but with differing component splits.
    •    Regional GFCF at current basic prices is published only at the NUTS2 level (but can
         be aggregated to the NUTS1 level) with a 17 industry split.
UK Regional Accounts estimates are produced annually in December for GVA and in the
spring for GDHI. Production of regional GFCF has been suspended since 2003 due to
concerns regarding the regional apportionment of the main indicator data source, the Annual
Business Inquiry, part 2 (ABI2). The ONS is currently reviewing how best to resolve this
issue.
No volume measures are currently produced for regional accounts, although work is being
done to produce a volume measure of regional GVA using a production approach (see 2.3.3
and “Allsopp Regional GVA(P) Project: Methods Development of Regional GVA on a
production basis”).


1.4 Data sources
A “top down” approach is used to calculate regional figures, whereby the national aggregate
is allocated to regions using the most appropriate measure of regional activity, or regional
indicator, available. The national total is allocated to the NUTS1 regions, then NUTS2 regions
and finally the NUTS3 regions.
UK totals are consistent with data published in the UK National Accounts (Blue Book).
Industry totals, required for GVA and GFCF, are obtained from UK Supply and Use Tables,
the framework used to calculate UK Gross Domestic Product (GDP) as published in the Blue
Book. Regional GVA for years in which these tables have not been produced are estimated
and published on a provisional basis (see 2.3.6)
Regional indicators are obtained from a number of data sources in line with Eurostat
guidelines and subject to the quality, availability and timeliness of relevant data sources.




                                                                                               5
1.5 Quality
Published Regional Accounts are National Statistics and as such comply with the National
Statistics Code of Practice.
They are compiled following extensive quality assurance of the underlying raw data, in line
with practices in place for National Accounts estimates.




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Chapter 2 Regional Gross
Value Added

2.1 Definition
GVA is the difference between the value of goods and services produced (output) and the cost
of raw materials and other inputs which are used up in production (intermediate
consumption), i.e. the value added by any unit engaged in production. This is calculated gross
of any deductions for depreciation or consumption of fixed capital.
Regional GVA is measured at current basic prices which is:
    •    Gross domestic product (GDP)
    •    less taxes on products
    •    plus subsidies on products.


2.2 Background
2.2.1 Regional GVA and its predecessors have been produced in the UK since 1968. The ONS
currently publishes annual estimates of GVA at NUTS1, 2 and 3 level of geography each
December. The NUTS1 series in its current format starts in 1989, in line with the UK Supply
and Use tables which are a key data source for Regional GVA. NUTS2 and NUTS3 series
start in 1995 as required under ESA 95.
Although earlier estimates exist, they are based on different accounting concepts and
geographical classifications, so that it is not possible to directly compare the estimates from
1968 to date.
2.2.2 The production of regional GVA is a legal requirement under ESA 95 and informs
regional funding decisions taken by the European Union. The requirements are to produce
regional GVA:
    •    annually,
    •    at current basic prices for T-2 (T being the current year),
    •    by A17 industry group at the NUTS2 level,




                                                                                             7
    •    by A3 industry for NUTS3 regions.
From 2006 data onwards, to be published in 2008, the requirement will be for A6 level
industry group GVA for NUTS2 and NUTS3 regions.


2.3 Data Sources and Concepts
2.3.1 Numerous data sources are used in the calculation of regional GVA and its components.
These comprise both survey and administrative data which conform as far as possible to those
recommended in “Regional Accounts Methods”, a guideline document published by Eurostat,
and represent the most appropriate data sources available.


2.3.2 GVA can be measured using either the production or the income approaches. The
availability of data of sufficient quality has been the driving factor behind the decision over
which approach to use and the income approach is the one currently adopted by the ONS.
However, work is being undertaken to develop a production measure.


2.3.3 The production approach involves measuring the value of output of goods and services
produced and removing the value of goods and services used up in the production process.


2.3.4 The income approach involves adding up all the income earned by resident individuals
or corporations in the production of goods and services. This excludes transfer payments such
as state benefits (e.g. child benefit and the state retirement pension) which represent a
redistribution of incomes previously earned and therefore do not add anything to current
economic activity.


2.3.5 The main components of income based GVA are:
    •    Compensation of employees
    •    Gross operating surplus (sum of: mixed income [income from self-employment],
         gross trading profits and surpluses, non-market capital consumption, rental income,
         less holding gains, less Financial Intermediation Services Indirectly Measured -
         generally referred to as FISIM)
    •    Taxes (less subsidies) on production




                                                                                             8
Table 2.1 UK GVA by component of income, 2004
Component of income based GVA                 £ million
Compensation of employees                      648,717
Mixed income                                   100,924
Gross trading profits and surpluses            216,684
Non-market capital consumption                  13,596
Rental income                                  104,653
Holding gains                                    -7,098
FISIM                                           -50,165
Taxes less subsidies on production              16,854
GVA                                           1,044,165
Source: UK National Accounts Blue Book 2006



2.3.6 A “top down” approach is used to calculate regional figures, whereby the national
aggregate is allocated to regions using the most appropriate regional indicator available. The
national total is allocated to the NUTS1 regions, then NUTS2 regions and finally the NUTS3
regions.
The national accounts control totals (consistent with the latest UK National Accounts Blue
Book publication) used to constrain the regional GVA estimates are broken down by
component of income and industry. Industry totals are obtained from UK supply and use
tables, the framework used to calculate UK Gross Domestic Product (GDP) as published in
the Blue Book. Regional GVA for years in which these tables have not been produced are
estimated and published on a provisional basis and will be subject to significant revisions
following the compilation of the relevant supply and use tables.
Blue Book 2007 was reduced in scope from previous years and included the experimental
dataset 'Gross value added at current basic prices'. As these estimates only relate to total GVA
by industry, the component detail necessary to produce regional estimates were calculated
using a forecasting model which constrained the available industry data to the published
national accounts income components.


2.3.7 The headline (smoothed) regional GVA series is calculated using a five period moving
average. This is calculated to reduce year on year volatility caused by sampling and non-



                                                                                              9
sampling errors in the data sources. The headline and unadjusted (raw) series are both
published on the National Statistics website.


2.3.8 NUTS1 GVA data are produced on both a residence basis (allocated to where people
live) and a workplace basis (allocated to where people work), the latter being required to
comply with ESA 95. It is currently assumed that the regions of London, East and South East
are the only regions where net commuting has a significant impact on regional GVA.


2.3.9 The methodology used to compile NUTS2 and NUTS3 data generally mirrors the
methodology used for NUTS1. Differences occur where data sources are not available below
the NUTS1 level, as well as for the industry level at which the data is aggregated.
NUTS2 data are constrained to the NUTS1 workplace based data, and NUTS3 constrained to
NUTS2 totals.


2.4 Components


Compensation of Employees (CoE)
2.4.1 Compensation of employees is the biggest component of income-based GVA and
represents the total remuneration payable to employees in cash or in kind, including the value
of social contributions payable by the employer. CoE for the majority of industries is
apportioned to the regions using a regional indicator obtained by multiplying numbers of
employees by average earnings on an industry by industry basis.
This differs from the CoE component of GDHI (see 3.4.1.7)


2.4.2 Employment data are taken from the Short-term Employer Surveys (STES), the Annual
Business Inquiry (ABI) 1, the Defence Analytical Services Agency (DASA), the Labour
Force Survey (LFS) and the Department for the Environment and Rural Affairs (Defra).
Average earnings data are taken from the Annual Survey of Hours and Earnings (ASHE).
Her Majesty’s Revenue and Customs (HMRC) Pay As You Earn (PAYE) data are used to
constrain the CoE of non-military employees to the NUTS1 regions, except for the CoE
provided by Defra. PAYE data is also used to calculate the adjustment for the commuter
effect between London, the South East and the East of England.


2.4.3 An adjustment is made to apportion some CoE to Extra-Regio, which takes account of



                                                                                           10
armed forces based overseas, and offshore mining. This is calculated using armed forces
employment data from DASA and ABI1 data on employment in the oil and gas industry. A
further adjustment is made to take account of unpaid days resulting from strikes.
Manufacturing CoE is allocated to region using ABI2 CoE data.


Taxes (less subsidies) on production
2.4.4 Taxes on production are taxes levied by the government or by institutions of the
European Union, relating to the production and import of goods and services, the employment
of labour, or the ownership or use of land, buildings or other assets in production (National
Accounts Concepts, Sources and Methods p289). Examples are national non-domestic rates,
motor vehicle duty relating to vehicles used in production and taxes paid to regulatory bodies.
The majority of tax data are allocated to regions and industries using numbers of employees
as an indicator. Some regional administrative data are used such as national non-domestic
rates from Communities and Local Government (CLG) and numbers of vehicles from the
Driver and Vehicle Licensing Agency (DVLA).


2.4.5 Subsidies on production are unrequited payments made by general government or the
European Union to enterprises. They include subsidies to farmers for land set-aside, as well as
government incentives to promote research and development.
Subsidies on production are allocated to region using estimated regional gross trading profits
and surpluses.


Mixed income
2.4.6 Mixed income represents income generated by sole traders and is a mixture of CoE and
the return to the business owner as entrepreneur. The majority of this is allocated to regions
using self-employment data from HMRC.
Estimates of profits from ABI2 are used to allocate manufacturing mixed income to the
regions and regional self-employment income data from the Department for the Environment,
Farming and Rural Affairs (Defra) are used for the agricultural industry.


Gross trading profits and surpluses
2.4.7 Gross trading profits of partnerships are allocated to the regions using self-employment
income from HMRC and Defra.



                                                                                            11
2.4.8 Gross trading profits of other corporations (GTPOC), i.e. non partnerships, are allocated
to regions using the wages and salaries data calculated for regional CoE, and estimates of
profits from ABI2 for the manufacturing industry.
Profits from the extraction of offshore oil and gas are calculated as a residual by deducting
onshore oil profits, obtained from the Department for Business Enterprise and Regulatory
Reform (BERR), from the total profits of the oil and gas extraction industry. This is then
allocated to Extra-Regio.


2.4.9 Gross trading surpluses of public corporations are allocated to regions using the regional
allocation of GTPOC.


Rental income
2.4.10 Rental income of local authorities relates to rental income from the provision of
housing services. Regional figures are obtained from CLG, the Scottish Executive and the
National Assembly for Wales. Northern Ireland’s local authorities have no rental income, the
Northern Ireland Housing Executive being classified as a public corporation.


2.4.11 Rental income of central government was accrued through property owned by Crown
Estate Commissioners (CEC) for years to 1995 and regional data were obtained from their
annual reports. However CEC was reclassified in 1995 to the public corporations sector so
that the figure for central government is now zero.


2.4.12 With the exception of the agriculture industry, rental income of financial and non-
financial corporations is allocated to the regions using the regional allocation of national non-
domestic rates for England, Scotland and Wales, as well as Northern Ireland business rates.
Estimates for the agriculture industry are calculated from rent data supplied by Defra.


2.4.13 Rental income of households and non profit institutions serving households (NPISH)
includes estimates of household income resulting from the private renting of dwellings. It also
includes an imputed value for rental incomes of owner-occupiers to cover the rental value of
their properties. Regional estimates are calculated using estimates of average property prices
by region from the Land Registry, Registers of Scotland and Northern Ireland Valuations of
Land Agency. These are multiplied by regional dwelling stock obtained from CLG, the



                                                                                              12
National Assembly for Wales, the Scottish Executive and the Department of Finance and
Personnel Northern Ireland.


2.4.14 Rental income of PCs accounts for approximately 0.1 per cent of GVA. The total is
allocated to the regions using various indicators. PCs based in one region will have the rental
income allocated to that region. Population data are used to allocate data where PCs are
present in more than one region.          Rental income by region of the Crown Estate
Commissioners is calculated using estimates of the amount of property owned by the CEC.


Non-Market Capital Consumption (NMCC)
2.4.15 Consumption of fixed capital, or depreciation, is included in the profits of market
bodies, in order to generate gross profits (i.e. gross of deductions for capital consumption) for
inclusion in the final GVA estimates. However there are a number of non-market bodies in
local and central government, as well as in the NPISH sector, which do not generate a profit
or surplus but do consume capital, and this needs to be added back into the accounts.


2.4.16 Various industry specific regional indicators are used to apportion national NMCC,
namely; numbers of UK armed forces, capital expenditure on universities, numbers of hospital
beds, expenditure on roads by region, employment numbers, and numbers of civil servants.


Holding gains
2.4.17 Holding gains or losses are defined as “profit or loss obtained by virtue of the changing
price of assets being held. Holding gains or losses may arise from either physical or financial
assets.” (National Accounts Concepts, Sources and Methods, p 624)
Any profit or loss made from the changing value of assets being held does not represent value
added from the production process and must therefore be removed from estimates of profits.


2.4.18 Holding gains made in the household and NPISH sectors are allocated to the regions
using the regional allocation of mixed income, while those made in the corporations sector are
regionalised using gross trading profit/surplus by region. Regional holding gains for the
agriculture industry are calculated using data on holding gains supplied by Defra.


Financial Intermediation Services Indirectly Measured (FISIM)



                                                                                              13
2.4.19 FISIM is defined as the imputed charge for the output of many financial intermediation
services paid for not by charges, but by an interest rate differential. (National Accounts
Concepts, Sources and Methods, p 623)


2.4.20 UK GVA currently excludes FISIM via an adjustment. This is allocated to region using
the wages and salaries in the financial intermediation industry and is then subtracted at an all
industry level from regional GVA.
A change in methodology will result from the full implementation of FISIM in the UK
National Accounts.




                                                                                             14
Chapter 3 Regional Gross
Disposable Household
Income

3.1. Definition
Gross disposable household income (GDHI) is the amount of money that individuals (i.e. the
household sector) have available for spending or saving. This is money left after expenditure
associated with income, e.g. taxes and social contributions, property ownership and provision
for future pension income. It is calculated gross of any deductions for capital consumption.


3.2. Background
3.2.1 The economy can be divided into sectors by grouping together institutional units
according to their characteristics. The household sector comprises all individuals in an
economy, i.e. people living in traditional households as well as those living in institutions,
such as retirement homes and prisons.
The main activity of households is as consumers, however they can engage in any kind of
economic activity. Households supply labour to enterprises and can also run their own
economic units in the form of unincorporated enterprises (sole traders).


3.2.2 For the purpose of these accounts households are merged with the non-profit institutions
serving households (NPISH) sector. This mainly comprises charities and universities
supplying products and services to the household sector, either for free, or at prices that are
not economically significant.
NPISH institutions receive their principal resources from voluntary contributions from
households as well as payments made by the government.


3.2.3 The production of regional GDHI is a legal requirement of the European Commission
and the methods and data used are consistent with the guidance set out in ESA 95. Current




                                                                                               15
price GDHI estimates and components are supplied to Eurostat at the NUTS2 level. These
data are not directly used to inform funding decisions but may support arguments in the
debate about the relative welfare of regions across the UK and the EU area.


3.2.4 Regional GDHI estimates are published annually for the period 1995 to T-2 years (T
being the year of publication) and consistent with the previous year’s UK National Accounts
(the Blue Book). Component level detail is published at the NUTS2 level and time series for
the balances of primary and secondary incomes are published for NUTS3 regions.
Earlier estimates are available (back to 1984) but these are not consistent with the current
series since they are based on the European System of Accounts 1979 (ESA 79) instead of
ESA 95 and use different geographical classifications.


3.2.5 The headline, or smoothed, GVA series is calculated using a five period moving
average. This is calculated to reduce year on year volatility caused by sampling and non-
sampling errors in the data sources. The headline and unadjusted series are both published on
the National Statistics website.


3.3 Data sources and concepts
3.3.1 Numerous data sources are used in the production of regional GDHI to estimate the
distribution of income across the United Kingdom. These comprise both survey and
administrative data which conform as far as possible to those recommended in ‘Regional
Accounts Methods’, a guideline document published by Eurostat, and represent the most
appropriate data sources available.


3.3.2 Incomes, or resources, of the household sector are classified as either Primary or
Secondary. Primary incomes are received as the result of individuals’ participation in the
production process, e.g. as employees providing labour or through the ownership of assets
and/or from self-employment. Secondary incomes are received as the result of redistribution
of income, e.g. pensions and benefits.


3.3.3 Outgoings, or uses, of the household sector are also classified as either Primary or
Secondary. Primary uses consist of property income paid, i.e. rent on land and interest paid on
mortgages and other borrowing. Secondary uses are mainly non-discretionary payments, i.e.
taxes and social contributions to National Insurance.



                                                                                            16
3.3.4 Household disposable income is defined as the sum of the balances of primary and
secondary incomes (resources less uses) and represents the amount available to the household
sector for spending on consumption or saving.


3.3.5 A ‘top-down’ approach is used for the production of regional GDHI estimates, whereby
the national aggregate is allocated to regions using a regional indicator. Estimates are
produced at NUTS3 level and aggregated up to obtain NUTS2 and NUTS1 level estimates.
These estimates are on a residence basis, i.e. incomes of individuals are allocated to the region
in which they live.


3.3.6 Headline GDHI is calculated using a five-year moving average (see Annex C). These
adjusted series remove some year on year volatility due to sampling and non-sampling errors
in the data sources. The unadjusted series are also provided on the National Statistics website.


3. 4 Components


3.4.1 Primary Resources
3.4.1.1 Primary incomes and uses are those arising as part of the production process or
through the ownership of assets required for production. The allocation of primary income
account (table 4.1) comprises primary incomes and outgoings and shows the income received
by households for their role in the production process, as well as property income (rent on
land, dividends and interest) received and paid.




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Table 3.1 Allocation of primary income account UK, 2005
 Resources                                      £ million
 Operating surplus                                78,441
 Mixed income                                     76,112
 Compensation of Employees                       684,692
 Property income                                 144,425


 Uses
 Property income                                  72,066


 Balance of primary incomes                      911,604

 Source: UK National Accounts, Blue Book 2006



Operating Surplus & Mixed Income
3.4.1.2 Due to their relatively small size, regional estimates of operating surplus and mixed
income are aggregated for publication, although they are derived separately.


3.4.1.3 The operating surplus appearing in the household sector account relates, by definition,
to the household sector’s rental income from buildings, including the imputed rental of owner
occupied dwellings. Imputed rental values the amount owner-occupiers would have to pay for
the service of living in their homes if someone else owned them. In effect, it assumes that
owner occupiers are the producers of housing services which they consume themselves. It is
not related to mortgage repayments.


3.4.1.4 The national operating surplus total is allocated across NUTS3 regions using estimates
of owner occupiers dwelling values in each area. The imputed rental estimates are derived
from dwellings price and stock of dwellings data supplied by other government departments
and agencies, e.g. Land Registry, CLG. The data for Scotland are obtained at Scottish council
level and require conversion to Local Authority Unit 1 level (LAU1, formerly known as
NUTS4).


3.4.1.5 Mixed income of the household sector mainly comprises income from self-
employment and is allocated to regions using data on self-employment income from HMRC.



                                                                                            18
These data are consistent with those used to produce mixed income estimates within regional
GVA.


3.4.1.6 The remainder of mixed income comprises rental income from private dwellings. This
is compiled using the value of dwellings as derived for the compilation of regional operating
surplus.


Compensation of employees
3.4.1.7 The CoE component of GDHI is the remuneration, in cash or in kind, received by
employees in the household sector from employers as payment for the services of labour. It is
the largest single component of income received by the household sector, 55 per cent in 2005.
This differs from the CoE component of GVA since it includes:
    •      wages and salaries paid to UK residents abroad
    •      (less) wages and salaries paid to non-residents in the UK


3.4.1.8 Wages and salaries include remuneration for regular activity, together with payments
for overtime and bonuses, and also various allowances for housing, cost of living and
transport to and from work, but exclude ‘expense payments’. These figures are gross of
deductions for income tax and employees’ social contributions.


3.4.1.9 Annual data from a one per cent sample of the PAYE administered by HMRC are used
as the main indicator in the compilation of regional wages and salaries and employers’ social
contributions estimates received by UK mainland employees. These are consistent with the
data used to produce regional GVA.
Comparisons with data series from alternative sources, including the Labour Force Survey
(LFS) and the Annual Survey of Hours and Earnings (ASHE), are made in order to quality
assure the PAYE data.


3.4.1.10 Wages and salaries of UK residents abroad are compiled using staff budget and
labour force information from the Foreign and Commonwealth Office (FCO) and the Defence
Analytical Service Agency (DASA).
UK residents who are embassy staff stationed overseas, or are forces personnel (either
uniformed or civilian) stationed overseas, are part of the household accounts, and are assigned



                                                                                            19
to the Extra-Regio geographic area.


3.4.1.11 Employers’ social contributions relate to contributions payable by employers to
social security and privately funded social insurance schemes. The contributions provide
employees with entitlement to social benefits, for example for sickness, accident, redundancy
and retirement. Although the contributions are paid, actually or notionally, directly to a fund,
they are part of compensation of employees. Subsequently, in the secondary distribution
account, these amounts are treated as payments by the household sector into the funds, which
are in the financial corporations and general government sectors. (See 3.4.4.6)


3.4.1.12 Employers’ contributions to National Insurance are closely linked to wages and
salaries. Estimates are derived using regional PAYE data on the contributions made by
employers, from HMRC. Employers’ contributions to funds other than National Insurance are
compiled mainly using employment data from the Labour Force Survey.


3.4.1.13 Employers’ imputed social contributions represent payments to unfunded schemes.
These correspond to benefits paid to employees from employers’ own current resources,
rather than from a fund to which they would have made contributions. The main examples of
such schemes are those operating within central government for civil servants, NHS
employees, the armed forces and teachers. The amounts to be imputed should be equal to
what would be needed to meet the entitlement were a funded scheme to be used. In the
regional household income account this item is estimated with regards to employment figures
in the public sector and the national total.


Property Income received
3.4.1.14 Property income received relates to income from the ownership of financial assets
and tangible non-produced assets. It is split into four main components; interest, distributed
income of corporations, property income attributed to insurance policyholders and rent on
land. Regional indicator data are obtained from HMRC’s Survey of Personal Incomes, which
produces data on personal, partnership and investment income at the NUTS3 level.


3.4.1.15 Interest covers receipts of households related to, for example, holdings of British
government securities and national savings, as well as bank and building society deposits.
National estimates, generally, are based on the levels of interest-bearing assets held by the



                                                                                             20
household sector, and relevant rates of interest.


3.4.1.16 Distributed income of corporations comprises two sub-components, namely
dividends and withdrawals of income from quasi-corporations. The latter reflects income
withdrawn from the profits of partnerships for personal use.


3.4.1.17 Property income attributed to insurance policyholders reflects the treatment of
insurance technical reserves as belonging to the policyholders in the various institutional
sectors. The income from investment gains made on insurance funds is not directly accessible
by individuals (i.e. the household sector), but does technically belong to them as owners and
holders of insurance policies. The reserves of insurance companies are invested in order to
earn income. Much of this income eventually flows to policyholders so it is regarded as being
“owned” by them.


3.4.1.18 Compilation of regional estimates for this component takes the difference between
life assurance and pensions into account. It assumes for both parts that individuals with a
higher income invest more in life assurance, so that incomes are used as the regional
indicator. For the pension part only the earnings in the private sector are used as indicator to
derive regional estimates. This is based on the assumption that public sector employees invest
in government sector pension schemes, which are of the “unfunded” or “notionally funded”
type


3.4.1.19 Rent contributed less than 0.1 per cent to total property income received by the
household and NPISH sector in 2005. It is the part of property income relating to returns from
the ownership of land (not buildings) and sub-soil assets and mainly represents receipts of rent
from farming land. Population is used to apportion rent to regions.


3.4.2 Primary Uses


Property Income paid
3.4.2.1 Property income paid comprises two sub components, namely interest paid on
mortgages and other borrowings and rent on land.




                                                                                             21
3.4.2.2 Households pay interest principally in respect of loans for house purchases and other
lending by banks and other financial intermediaries. As with interest received, estimates of
payments are based on the levels of interest-bearing liabilities held by the household sector,
and the relevant rates of interest.
Regional indicators for the liabilities are obtained from Census information on mortgages and
owner occupiers, as well as the value of dwellings. The Expenditure and Food Survey (EFS)
provides regional expenditure on interest.


3.4.2.3 As is the case with rent received by households, rent paid relates largely to agricultural
land and represents a very small proportion of total property income paid, 0.3 per cent in
2005.


3.4.3 Secondary Resources
3.4.3.1 The allocation of secondary income account, table 4.2, shows how primary incomes
are redistributed through the payment of taxes, social contributions and receipts of benefits,
and net current transfers.


Table 3.2 Secondary distribution of income account UK, 2005
 Resources                                                 £ million

 Imputed social contributions                                    500
 Social benefits other than social transfers in kind        213,708
 Other current transfers                                     54,958


 Uses
 Current taxes on income, wealth etc                        159,400
 Social contributions                                       187,600
 Social benefits other than social transfers in kind             994
 Other current transfers                                     31,861


 Balance of secondary incomes                              -110,689

 Source: UK National Accounts Blue Book 2006




                                                                                               22
Imputed Social Contributions
3.4.3.2 Imputed social contributions are those paid directly by employers to their current
employees and/or former employees, as well as other eligible persons. Payments are made to
the entitled individual without involving a social security fund, insurance enterprise,
autonomous pension fund or the like.
Population at the NUTS3 level is used as the indicator to apportion the UK total across
regions.


Social benefits other than social transfers in kind
3.4.3.3 These exclude reimbursements from social security funds for households to purchase
goods and services, and are divided into four sub-components; social security benefits in cash,
privately funded benefits, unfunded social benefits and social assistance in cash.


3.4.3.4 Social security benefits in cash comprise cash benefits received by households from
social security funds. These include National Insurance fund benefits such as State pensions,
Widows’ Allowance, Incapacity Benefit, Maternity Benefit and Statutory Maternity Pay, as
well as Redundancy fund benefit and Social fund benefit. Administrative data obtained from
the Northern Ireland Statistics Research Agency (NISRA), the Department for Work and
Pensions (DWP) and other government departments, are used to apportion UK totals to
regions.


3.4.3.5 Privately funded benefits are receipts by the household sector from privately funded
and related social insurance schemes and the national figure is calculated using data from
insurance companies and pension funds. Regional indicator data are provided by private
pension income obtained from HMRC’s Survey of Personal Income (SPI).


3.4.3.6 The majority of unfunded social benefits are paid for by local and central government
to employees. The government runs unfunded schemes such as the Civil Service, National
Health Service and Armed Forces pension schemes. Another kind of unfunded scheme pays
employees absent from work due to illness. Unfunded schemes are already accounted for in
employers’ social contributions. Labour market data on public sector employees are used to
apportion UK totals to regions.




                                                                                            23
3.4.3.7 Social assistance benefits in cash, provided by government and the NPISH sector to
households, are not made under specific social security schemes. Local governments provide
funding for rent rebates and allowances, student grants and other transfers. Rent rebates and
allowances make up the majority of local governments social assistance expenditure, 90 per
cent in 2005. Regional indicator data are obtained from DWP which compiles information on
rent rebates and allowances by local council.


3.4.3.8 Central government provide social assistance to the household sector in the form of
income support, income tax credits, child benefit, war pensions and allowances, care
allowances, disability benefits, and non-contributory job seekers’ allowance. Regional
indicator data are obtained from the government bodies which administer these benefits,
namely DWP, HMRC and the Northern Ireland Executive.
Where no regional administrative data are available population data are used.


3.4.3.9 The NPISH sector provides a relatively small amount of social assistance at less than
£0.5 billion in 2005 (Blue Book 2006). There are three broad types of NPISH, namely
academic institutions, associations that mainly provide benefits to their members (e.g. trades
unions) and bodies which serve the interest of the public other than their members (e.g.
charities, aid and relief organisations).


3.4.3.10 Regional indicator data for Income Support and other benefits administered by DWP
agencies are obtained from DWP. Income tax credit (Child and Working tax credit) and Child
benefit are administered for the whole of the UK by HMRC, which provides the regional
breakdown of these figures.
For benefits where no regional breakdown is available, regional population data are used.


Other current transfers
3.4.3.11 Other current transfers include non-life insurance claims, which correspond with net
non-life insurance premiums on the uses side of the allocation of secondary income account.
No reliable data source has been identified to provide regional information of claims paid out
by insurance companies to the household sector so estimates are derived using insurance
premiums data (see 3.4.4.11).


3.4.3.12 Miscellaneous current transfers consist of a variety of transfers to the household



                                                                                            24
sector from the Rest of the World (e.g. gifts), NPISH (e.g. grants), and central government.
Population data are used as an indicator to regionalise the national total.


3.4.4 Secondary Uses


Current taxes
3.4.4.1 Current taxes are compulsory, unrequited payments made by the household sector to
the government sector and are sub-divided into taxes on income and other taxes.


3.4.4.2 Taxes on income include income taxes, as well as taxes on profits and capital gains. In
respect of the household sector, the main components are personal income taxes, taxes on
unincorporated enterprises, taxes on capital gains and taxes on winnings from gambling and
lotteries. PAYE data from HMRC on income taxes paid are used as an indicator to assign the
national total. Apart from compensation of employees this is the only other component in the
household accounts where Extra-Regio estimates are derived.


3.4.4.3 Other taxes include motor vehicle excise duty, council tax and payments by
households to obtain certain licences. National totals, obtained from central and local
government accounts, are regionalised using CLG data on council taxes, numbers of cars per
region from the Department for Transport (DfT) and ONS population data.


Social contributions/Social benefits
3.4.4.4 Social benefits paid and social contributions made by the household sector are grouped
together in the regional GDHI publication. Social contributions are made by individuals to
social insurance schemes, e.g. pensions, to make provisions for social benefits. The payments,
which can be actual or imputed, may be made by employers on behalf of their employees, or
by employees, the self-employed and the non-employed, on their own behalf. They may also
be compulsory or voluntary.


3.4.4.5 Actual (as opposed to imputed) social contributions comprise three sub-components
which are described below; employers’ actual social contributions, employees’ actual social
contributions and social contributions by the self-/non-employed.




                                                                                            25
3.4.4.6 Employers’ actual social contributions are payments made by employers on behalf of
employees to social security funds and privately funded social insurance schemes. They are
regarded as part of compensation of employees in the allocation of primary income account,
where they are a resource of the household sector and consequently these regional figures are
the same in both accounts (see 3.4.1.11)


3.4.4.7 Employees’ actual social contributions are those paid by employees to social security
funds and privately funded social insurance schemes. Contributions made to the National
Insurance fund by the UK mainland workforce are regionalised using HMRC PAYE data,
while private sector earnings data are used to regionalise contributions to funded pension
schemes.
Regional figures for contributions to government unfunded pension schemes are calculated
using regional labour market data on the workforce of the public sector.


3.4.4.8 Social contributions by self-employed and non-employed persons cover only National
Insurance costs paid by self-employed and non-employed persons. The income of sole traders
from HMRC is used as indicator to regionalise the national total.


3.4.4.9 Imputed social contributions are payments to unfunded social benefits schemes made
by employers on behalf of employees, which represent a secondary use, as well as part of
compensation of employees (see 3.4.1.12-13)


Other current transfers
3.4.4.10 Other current transfers on the uses side of the allocation of secondary income account
are sub-divided into non-life insurance premiums and miscellaneous current transfers.


3.4.4.11 Non-life insurance premiums are calculated net of the service charges of
administering the scheme. They relate to policies taken out by households on their own
initiative, for their own benefit, and are separate from any employer or government scheme.
Estimates correspond with net non-life insurance claims on the resources side of the
secondary income account (see 3.4.3.11)


3.4.4.12 Non-life insurance premiums are transfers paid mainly to cover property, motor
vehicle and health insurance policies. Property insurance premiums are disaggregated into



                                                                                            26
content and structure insurance premiums, and regional indicators are obtained using income
and dwellings data. These are prorated to household expenditure data on each insurance type
from the EFS before being used to assign the national total of property insurance premiums.
Regional indicators for motor vehicle insurance premiums are derived using vehicle
registration data and population is used for health insurance premiums.


3.4.4.13 Miscellaneous current transfers consist of a variety of current transfers including
payments of court fines, certain government fees and transfers to and from the Rest of the
World. Adult population by region is used to assign the national total.




                                                                                              27
Chapter 4 Gross Fixed
Capital Formation

4.1 Definition
Gross fixed capital formation (GFCF) is the acquisition less disposal of fixed assets and the
improvement of land.
It reflects investment in tangible assets, such as buildings, plant and machinery, and vehicles,
which are used over a number of years for the production of goods and services. It also
includes investment in intangibles, e.g. intellectual property and brand names; valuables, e.g.
precious stones and metals; and costs of transfer of ownership, e.g. estate agency fees


4.2 Background
4.2.1 Regional GFCF, produced on a consistent basis with ESA 95, was published for the first
time in 2003 and covered the years 1995 to 2000. Previously the ONS published estimates of
Gross Domestic Fixed Capital Formation (GDFCF), consistent with ESA 79, for a number of
industries but not the whole economy. This was produced for the Standard Statistical Regions
(SSRs) which are similar, but do not equate to, the NUTS1 regions. GDFCF data are available
back to 1988 but are not comparable with GFCF.


4.2.2 The production of regional GFCF is a legal requirement under ESA 95, the requirement
being to produce current basic price regional GFCF annually for T-2 (T being the current
year) by A17 industry group.
Despite this regional GFCF has not been published since 2003 owing to concerns with the
accuracy of the main indicator data source, regional ABI2 GFCF. The ONS is reviewing how
best to resolve this issue.
Estimates included in the 2003 publication were compiled using the methods described below.


4.3 Data sources and Concepts
4.3.1 Numerous data sources are used in the calculation of regional GFCF. These comprise
both survey and administrative data which conform as far as possible to those suggested in




                                                                                             28
“Regional Accounts Methods”, a guideline document published by Eurostat, and represent the
most appropriate data sources available.


4.3.2 A ‘top down’ approach is used to calculate regional GFCF whereby UK GFCF ‘control’
data are allocated at an industry level to regions using regional indicators. Where possible
regional GFCF is compiled at the NUTS3 level and then aggregated to the NUTS2 level for
publication.


4.3.3 Regional GFCF is compiled on an industry by industry basis and the main regional
indicator used is regional ABI2 net capital expenditure data, used for a number of industries.
Other indicators used are detailed in section 4.4 below.


4.3.4 Some GFCF cannot be allocated to industries. For example new dwellings and
improvements to existing dwellings, the acquisition (and disposal) of valuables and costs
associated with transfer of ownership of fixed assets (transfer costs). In these cases, estimates
of GFCF are shown separately.


4.4 Methods by industry
4.4.1 As regional GFCF is calculated and presented on an industry basis, methods of
calculation are industry specific. The following paragraphs describe the methods used for
each industry component, as well as the dwellings, valuables and transfer cost components.


4.4.2 Industry AB - Agriculture, Forestry and Fishing
Regional GFCF data for Agriculture, Forestry and Fishing are calculated and then aggregated
for publication, using regional indicator data from Defra, the Forestry Commission, the Forest
Service of Northern Ireland and ABI1.
Defra provides regional GFCF of livestock and non-livestock which is used to apportion the
GFCF of the agriculture industry to regions.
The Forestry Commission and the Forest Service of Northern Ireland, publish statistics on the
creation of new woodland, in thousands of hectares. This is only at country level however so
that employment data from ABI1 is required to apportion this to NUTS3 regions.
UK GFCF for the fishing industry is regionalised using employment data from ABI1.




                                                                                              29
4.4.3 Industry C - Oil & Gas Extraction, Mining & Quarrying
Regional GFCF of the onshore and offshore oil and gas extraction industry is calculated using
regional GFCF data from BERR, offshore GFCF being allocated to Extra-Regio. For the other
sections of this industry ABI/2 is the regional indicator used.


4.4.4 Industry D – Manufacturing
ABI2 data are used to calculate regional GFCF for all manufacturing industries. This is
compiled at the sub-section level of SIC (industries DA – DN) and then aggregated to section
level (industry D)


4.4.5 Industry E - Electricity, gas & water supply
GFCF is calculated separately for each of these three industries using regional indicator data
from ABI2 and from the reports of public corporations operating in the water industry in
Scotland. This is then aggregated to section level (industry E).


4.4.6 Industries F (Construction), G (Wholesale & Retail), H (Hotels & Restaurants), K (Real
Estate, Renting and Business Activities) and O (Other services).
The regional GFCF of these industries is calculated using data from ABI2 as the regional
indicator.


4.4.7 Industry I - Transport, Storage & Communication
The regional GFCF of these industries is calculated using ABI2 data as the regional indicator.
This is compiled at the 3 digit level of SIC owing to the availability of sufficiently detailed
national controls.


4.4.8 Industry J - Financial Intermediation
GFCF in the financial intermediation industry is regionalised using employment figures from
ABI1.


4.4.9 Industry L, M and N - Public Administration & Defence, Education and Health and
Social Work
These industries cover the activities of government as well as the activities of some private
sector institutions. GFCF of the latter is regionalised using ABI2 data.
For the 2003 publication, GFCF of the government sectors of these industries was estimated



                                                                                            30
using data calculated as part of the Sub Regional Government Accounts project. A range of
regional indicators from across government were used including; road lengths, local
government expenditure data from the Chartered Institute of Public Finance and Accountancy
(CIPFA), numbers of civil servants, public corporation employees and NHS Trusts data.


4.4.10 Dwellings
GFCF of dwellings is calculated separately for the private, central government, local
government and public corporation sectors.
A mixture of indicators is used for private dwellings, including NUTS1 data from the
Northern Ireland Housing Executive. The Construction Statistics Annual, produced by BERR,
provides data on the value of work on dwellings which can be mapped to NUTS1 areas in
England, Wales and Scotland. The NUTS1 indicator that results is split to NUTS3 regions
using data on completions and starts of private sector housing.


4.4.11 Central government GFCF of dwellings relates largely to Ministry of Defence (MoD)
housing, for which the number of armed forces by region from DASA is the regional
indicator.
GFCF of dwellings by public corporations is estimated at the NUTS3 level using individual
fixed capital formation figures for each public corporation and mapping these to regions.
The regional indicator for local authority GFCF is the housing revenue account which is
provided by CLG.


4.4.12 Valuables and Transfer Costs
The national control for the sum of valuables and transfer costs is allocated to NUTS2 regions
using the GFCF of the regions (defined as the sum of all the industries plus dwellings).




                                                                                            31
Annex A – NUTS Regions
NUTS1 Regions                     NUTS2 Regions
UKC    North East                 UKC1   Tees Valley and Durham
                                  UKC2   Northumberland and Tyne and Wear
UKD    North West                 UKD1   Cumbria
                                  UKD2   Cheshire
                                  UKD3   Greater Manchester
                                  UKD4   Lancashire
                                  UKD5   Merseyside
UKE    Yorkshire and The Humber   UKE1   East Riding and North Lincolnshire
                                  UKE2   North Yorkshire
                                  UKE3   South Yorkshire
                                  UKE4   West Yorkshire
UKF    East Midlands              UKF1   Derbyshire and Nottinghamshire
                                  UKF2   Leicestershire, Rutland and Northamptonshire
                                  UKF3   Lincolnshire
UKG    West Midlands              UKG1   Herefordshire, Worcestershire and Warwickshire
                                  UKG2   Shropshire and Staffordshire
                                  UKG3   West Midlands
UKH    East of England            UKH1   East Anglia
                                  UKH2   Bedfordshire and Hertfordshire
                                  UKH3   Essex
UKI    London                     UKI1   Inner London
                                  UKI2   Outer London
UKJ    South East                 UKJ1   Berkshire, Buckinghamshire and Oxfordshire
                                  UKJ2   Surrey, East and West Sussex
                                  UKJ3   Hampshire and Isle of Wight
                                  UKJ4   Kent
UKK    South West                 UKK1   Gloucester, Wiltshire and North Somerset
                                  UKK2   Dorset and Somerset
                                  UKK3   Cornwall and Isles of Scilly
                                  UKK4   Devon
UKL    Wales                      UKL1   West Wales and The Valleys



                                                                                    32
                         UKL2   East Wales
UKM   Scotland           UKM1   North Eastern Scotland
                         UKM2   Eastern Scotland
                         UKM3   South Western Scotland
                         UKM4   Highlands and Islands
UKN   Northern Ireland   UKN0   Northern Ireland




                                                         33
United Kingdom: NUTS Levels 1 and 2
                                                                                                                                                                                                    Highlands and Islands




                                                                                                  North East Scotland

                                                   Highlands and Islands



                                                       S c o t l a n d                                                                                                                                            London
                                                                                                                                                                                           Outer London



                                                                                                                                                                                            Inner London
                                                                  Eastern Scotland




                                                                                                                                                                                             KEY
                                                               South Western Scotland                                                                                                Nuts Level 1 boundaries
                                                                                                                   North East
                                                                                                                 Northumberland                                                      Nuts Level 2 boundaries
                                                                                                                 and Tyne & Wear
        Northern Ireland
         Northern Ireland                                                                                              Tees Valley &
                                                                                            Cumbria                       Durham


                                                                                                                               Yorkshire &
                                                                                                                               The Humber
                                                                                  North West                                 North Yorkshire
                                                                            (inc Merseyside)
                                                                                                                                                   East Riding &
                                                                                                   Lancashire
                                                                                                                                                   North Lincolnshire
                                                                                                                        West Yorkshire

                                                                                                           Greater
                                                                                Merseyside                Manchester           South Yorkshire

                                                                                                                                                         Lincolnshire
                                                                                                       Cheshire                   Derbyshire &
                                                                                                                                 Nottinghamshire
                                                               West Wales & The Valleys
                                                                                                                                       East Midlands
                                                                                                        Shropshire &
                                                                                                        Staffordshire
                                                                                               West
                                                                                                                                           Leicestershire,
                                                                                              Midlands                                       Rutland &                  East Anglia
                                                                                                                        West
                                                                               East Wales                               Midlands             Northants
                                                                                                                                                                     Eastern
                                                                        Wales                                                      shire
                                                                                                                            cester
                                                                                                                       ,Wor
                                                                                                           ds   h i r e Wa r k s
                                                                                                  re   for            &
                                                                                             He                                                        Bedfordshire &
                                                                                                                                                        Hertfordshire       Essex
                                                                                                                                        Berkshire,
                                                                                                           Gloucestershire,               Bucks
                                                                                                             Wiltshire &               & Oxfordshire
                                                                                                           North Somerset                                    London

                                                                                                                                                                                    Kent
                                                                                                                                   Hampshire &           South East
                                                                                                                                   Isle of Wight
                                                                     South West                                                                        Surrey, East & West Sussex
                                                                                              Dorset & Somerset
                                                                       Devon


                                                        illy
                                                    f Sc
                                                  so
                                           s le
                                        &I
                                 a ll
                              rnw
                            Co
NUTS3 Regions
UKC11   Hartlepool and Stockton-on-Tees
UKC12   South Teesside
UKC13   Darlington
UKC14   Durham CC
UKC21   Northumberland
UKC22   Tyneside
UKC23   Sunderland
UKD11   West Cumbria
UKD12   East Cumbria
UKD21   Halton and Warrington
UKD22   Cheshire CC
UKD31   Greater Manchester South
UKD32   Greater Manchester North
UKD41   Blackburn with Darwen
UKD42   Blackpool
UKD43   Lancashire CC
UKD51   East Merseyside
UKD52   Liverpool
UKD53   Sefton
UKD54   Wirral
UKE11   Kingston upon Hull, City of
UKE12   East Riding of Yorkshire
UKE13   North and North East Lincolnshire
UKE21   York
UKE22   North Yorkshire CC
UKE31   Barnsley, Doncaster and Rotherham
UKE32   Sheffield
UKE41   Bradford
UKE42   Leeds
UKE43   Calderdale, Kirklees and Wakefield
UKF11   Derby
UKF12   East Derbyshire



                                             34
UKF13   South and West Derbyshire
UKF14   Nottingham
UKF15   North Nottinghamshire
UKF16   South Nottinghamshire
UKF21   Leicester
UKF22   Leicestershire CC and Rutland
UKF23   Northamptonshire
UKF30   Lincolnshire
UKG11   Herefordshire, County of
UKG12   Worcestershire
UKG13   Warwickshire
UKG21   Telford and Wrekin
UKG22   Shropshire CC
UKG23   Stoke-on-Trent
UKG24   Staffordshire CC
UKG31   Birmingham
UKG32   Solihull
UKG33   Coventry
UKG34   Dudley and Sandwell
UKG35   Walsall and Wolverhampton
UKH11   Peterborough
UKH12   Cambridgeshire CC
UKH13   Norfolk
UKH14   Suffolk
UKH21   Luton
UKH22   Bedfordshire CC
UKH23   Hertfordshire
UKH31   Southend-on-Sea
UKH32   Thurrock
UKH33   Essex CC
UKI11   Inner London - West
UKI12   Inner London - East




                                        35
UKI21   Outer London - East and North East
UKI22   Outer London - South
UKI23   Outer London - West and North West
UKJ11   Berkshire
UKJ12   Milton Keynes
UKJ13   Buckinghamshire CC
UKJ14   Oxfordshire
UKJ21   Brighton and Hove
UKJ22   East Sussex CC
UKJ23   Surrey
UKJ24   West Sussex
UKJ31   Portsmouth
UKJ32   Southampton
UKJ33   Hampshire CC
UKJ34   Isle of Wight
UKJ41   Medway
UKJ42   Kent CC
UKK11   Bristol, City of
UKK12   North and North East Somerset, South Gloucestershire
UKK13   Gloucestershire
UKK14   Swindon
UKK15   Wiltshire CC
UKK21   Bournemouth and Poole
UKK22   Dorset CC
UKK23   Somerset
UKK30   Cornwall and Isles of Scilly
UKK41   Plymouth
UKK42   Torbay
UKK43   Devon CC
UKL11   Isle of Anglesey
UKL12   Gwynedd
UKL13   Conwy and Denbighshire
UKL14   South West Wales




                                                               36
UKL15   Central Valleys
UKL16   Gwent Valleys
UKL17   Bridgend and Neath Port Talbot
UKL18   Swansea
UKL21   Monmouthshire and Newport
UKL22   Cardiff and Vale of Glamorgan
UKL23   Flintshire and Wrexham
UKL24   Powys
UKM11   Aberdeen City, Aberdeenshire and North East Moray
UKM21   Angus and Dundee City
UKM22   Clackmannanshire and Fife
UKM23   East Lothian and Midlothian
UKM24   Scottish Borders
UKM25   Edinburgh, City of
UKM26   Falkirk
UKM27   Perth and Kinross and Stirling
UKM28   West Lothian
UKM31   East and West Dunbartonshire and Helensburgh &
        Lomond
UKM32   Dumfries & Galloway
UKM33   East Ayrshire and North Ayrshire Mainland
UKM34   Glasgow City
UKM35   Inverclyde, East Renfrewshire and Renfrewshire
UKM36   North Lanarkshire
UKM37   South Ayrshire
UKM38   South Lanarkshire
UKM41   Caithness & Sutherland and Ross & Cromarty
UKM42   Inverness & Nairn and Moray, Badenoch & Strathspey
UKM43   Lochaber, Skye & Lochalsh and Argyll and the Islands
UKM44   Eilean Siar (Western Isles)
UKM45   Orkney Islands
UKM46   Shetland Islands




                                                               37
UKN01   Belfast
UKN02   Outer Belfast
UKN03   East of Northern Ireland
UKN04   North of Northern Ireland
UKN05   West and South of Northern Ireland




                                             38
United Kingdom: NUTS Levels 3
                                                                                                                                                                                                                                                                                  Shetland Islands
                                                                                                               Orkney Islands




                         Eilean Siar (Western Isles)
                                                                         Caithness and Sutherland
                                                                          and Ross and Cromarty




                                                                             Inverness and Nairn and Moray,                   Aberdeen City,
                                                                                  Badenoch and Strath                         Aberdeenshire
                                                                                                                        and North East Moray

                                                            Lochaber, Skye and
                                                               Locash and                                                     Angus and
                                                           Argyll and the Islands                                             Dundee City                                                                                                      Outer London                  Outer London - E & NE
                                                                                                                                                                                                                                                - W & NW                 Inner London
                                                                                         Perth and Kinross
 1. Clackmannanshire and Fife                                                               and Stirling                                                                                                                                                       Inner London - East
                                                                                                                                                                                                                                                                   - West
 2. East and West Dunbartonshire,                                                                                                 1
    Helensburgh and Lomond
                                                                                2                                                                     East Lothian
 3. Glasgow City                                                                                                                                      and Midlothian                                                                                                    Outer London - South
                                                                                                          Falkirk
 4. Inverclyde, East Renfrewshire                                                                              West 7
                                                                                     4        3           6 Lothian
    and Renfrewshire
 5. East Ayrshire and North                                                          5                South
   Ayrshire Mainland                                                                                Lanarkshire
                                                                                                                      Scottish Borders, The
 6. North Lanarkshire
 7. Edinburgh, City of                                                      South
                                                                                                                                                                                                                   10. Sunderland
                                                                           Ayrshire                                                                   Northumberland
                                               eland                                      Dumfries and Galloway                                                                                                    11. Hartlepool & Stockton
                                         ern Ir
                                   o rth
                           th of N                East of                                                                                                                      Tyneside                            12. South Teeside
                       Nor                  Northern Ireland                                                                                                                      10                               13. Darlington
                                                    8
                  West & South of                   9                                                                                                            Durham CC
                                                                                                                   West                                                                    11
                  Northern Ireland                                                                                                                                                                  12
                                                8                                                                 Cumbria             East Cumbria                                  13                                                                              22. City of Kingston upon Hull
                                                                                                                                                                                                                                                                    23. North & North East Lincolnshire

                                                                                                                                                                         North Yorkshire CC                                                                         24. Barnsley, Doncaster & Rotherham
                                                                                                                                                                                                                                                                    25. Calderdale, Kirklees & Wakefield
                           8. Outer Belfast                                                                                                                                                                                                                         26. Sheffield
                                                                                                                                                                                                 York          East Riding
                           9. Belfast                                                                                                                                                                          of Yorkshire                                         27. East Derbyshire
                                                                                                                                                                     B
                                                                                                                                                                     B
                                                                                                                                                                     Bra




                                                                                                                             14
                                                                                                                                Lancashire CC                                     Leeds
                                                                                                                                                                        d
                                                                                                                                                                        d
                                                                                                                                                                        dfo




 14. Blackpool                                                                                                                                                                                                                22                                    28. Derby
                                                                                                                                                                           r
                                                                                                                                                                           rd
                                                                                                                                                                           r




                                                                                                                                                     16                  25
 15. Sefton                                                                                                                                                                                                          23                                             29. Nottingham
                                                                                                                             15                        17
 16. Blackburn with Darwen                                                                                                                                                                     24                                                                   30. South Nottinghamshire
                                                                                                                                           20              18
                                                                                                                        W




                                                                                                                                                                                                             ire




                                                                                                                                  21
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                                                                                                                                                19                                  26
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                                                                                                                                                                     Sou erbysh




 17. Gt Manchester North                                                    Isle of Anglesey                                                                                                                                                                        31. Leicester City
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                                                                                                                                                                                                       North
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 18. Gt Manchester South                                                                                                                                                                 27
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                                                                                                                                                                                                                                                                    32. Peterborough
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                                                                                                                                                                           &
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                                                                                                                                                                           &W e




                                                                                                          Conwy &                      Cheshire CC
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                                                                                                                                                                                                                      Lincolnshire
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 19. Halton & Warrington                                                                                 Denbighshire
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                                                                                                                           e
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                                                                                                                                                                33
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 20. East Merseyside                                                                                                                                                                            29
                                                                                                                                      m
                                                                                                                                      m
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                                                                                                  Gwynedd                                                                            28                30
 21. Liverpool                                                                                                                                            Staffordshire CC
                                                                                                                                                     34                                  Leicestershire CC                                               Norfolk
                                                                                                                                                                                                 31                            32
                                                                                                                                                                 35
 33. Stoke-on-Trent                                                                                                                                                                           & Rutland
                                                                                                                                  Shropshire CC                  36 37
 34. The Wrekin                                                                                                                                                                                                   ire
                                                                                                                                                                                                               nsh Cambridgeshire CC
                                                                                                                                                                            38 39

 35. Walsall & Wolverhampton                                                                                                                     Worcestershire                                             pto
                                                                                                                                                                                                          am                                                  Suffolk
                                                                                                                                                                        Warwickshire                   rth                                                                            39. Bedfordshire CC
 36. Dudley & Sandwell                                                                                          Powys         Herefordshire                                                          No
                                                                                                                                                                                                              40      39
                                                                                                                                                                                                                                                                                      40. Milton Keynes
 37. Birmingham                                                            South West Wales
                                                                                                                                                                                                     Bu
                                                                                                                                                                                                      u
                                                                                                                                                                                                      uck




                                                                                                                                                                                                                          41                                                          41. Luton
 38. Coventry
                                                                                                                                                                                                         iiing




                                                                                                                                                     Gloucestershire                                                                          Essex CC
                                                                                                                                                                                                                        Hertfordshire                                                 42. Southend-on-Sea
                                                                                                                                                                                                              h
                                                                                                                                                                                                              h
                                                                                                                                                                                                              ham




 38. Solihull                                                                                                                         49                                            Oxfordshire
                                                                                                                        48
                                                                                                  ns e           47
                                                                                                  a




                                                                                                                                                                                                                 shiii




                                                                                                          45                                                                                                                                                                          43. Thurrock
                                                                                         S wa
                                                                                                                                                                           S wind




                                                                                                                                                                                                                      r
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                                                                                                                                                                                                                                                         42
                                                                                                                                                                                                                         CC
                                                                                                                                                                                                                         C
                                                                                                                                                                                                                         C




                                                                                                                                                                                                                               See inset       43                                     44. Medway Towns
                                                                                                                                                                              o
 45. Bridgend & Neath Port Talbot                                                                                  46                           51                                         Berkshire                                                44
                                                                                                                                           50
 46. Cardiff and The Vale of Glamorgan
                                                                                                                                                                Wiltshire CC                                             Surrey
 47. Central Valleys                                                                                                                                                                 Hampshire CC                                                    Kent CC

 48. Gwent Valleys                                                                                                      Somerset
                                                                                                                                                                                                                   West Sussex           East Sussex CC
 49. Monmouthshire & Newport                                                                                                                                                              56
                                                                                                                                                 Dorset CC                                                                          58
 50. N & NE Somerset, South Gloucestershire                                                   Devon CC
                                                                                                                                                                      54                                  57
 51. City of Bristol                                                                                                                                                                        55

                                                        Cornwall & Isles of Scilly
                                                                                         52                      53
                                                                                                                                      52. Plymouth                                        56. Southampton
                                                                                                                                      53. Torbay                                          57. Portsmouth
                                                                                                                                      54. Bournemouth & Poole                             58. Brighton & Hove
                                                                                                                                      55. Isle of Wight
 Annex B – Industry groups
Industries                                                                 A31 A17 A6 A3
Agriculture                                                                A01   A   1   1
Forestry                                                                   A02   A   2   1
Fishing                                                                    B     B   2   1
Oil and gas extraction                                                     CA    C   2   2
Other mining and quarrying                                                 CB    C   2   2
Manufacture of foods, beverages and tobacco                                DA    D   2   2
Manufacture of textiles and textile products                               DB    D   2   2
Manufacture of leather and leather products                                DC    D   2   2
Manufacture of wood and wood products                                      DD    D   2   2
Manufacture of paper and paper products                                    DE    D   2   2
Manufacture of coke products, refined petroleum products and nuclear fuel DF     D   2   2
Manufacture of chemicals and chemical products                             DG    D   2   2
Manufacture of rubber and plastic products                                 DH    D   2   2
Manufacture of other and plastic mineral products                          DI    D   2   2
Manufacture of basic metals and fabricated metal products                  DJ    D   2   2
Manufacture of machinery and equipment not elsewhere classified            DK    D   2   2
Manufacture of electrical and optical equipment                            DL    D   2   2
Manufacture of transport equipment                                         DM    D   2   2
Manufacturing not elsewhere classified                                     DN    D   2   2
Electricity, gas and water supply                                          E     E   2   2
Construction                                                               F     F   3   2
Wholesale and retail trade, repair of motor vehicles and household goods   G     G   4   3
Hotels and restaurants                                                     H     H   4   3
Transport, storage and communication                                       I     I   4   3
Financial intermediation                                                   J     J   5   3
Real estate, renting and business activities                               K     K   5   3
Public administration and defence                                          L     L   6   3
Education                                                                  M     M   6   3
Health and social work                                                     N     N   6   3
Other activities                                                           O     O   6   3
Persons employed by private households                                     P     P   6   3



                                                                                             39
Annex C – Smoothing process
Unsmoothed time series show volatility, created by sampling and non-sampling errors. A five year
weighted average is used to remove this volatility and produce smoothed time series for both regional GVA
and GDHI. These are published as “headline” series alongside unsmoothed or “raw” series for both
aggregates.



Regional GVA is smoothed by component and by industry at the NUTS1 level. These smoothed NUTS1
estimates are then used as controls for the NUTS2 and NUTS3 estimates.

Regional GDHI is smoothed by component at the NUTS3 level.



Smoothing is carried out by calculating a moving average using the weights shown in the following table.


          1         2        3       4        5     6    ----    N-4     N-3     N-2      N-1         N
1       11/27     11/27     5/27      -       -     -             -       -       -        -          -
2       7/27      10/27     7/27    3/27      -     -             -       -       -        -          -
3        1/9       2/9      3/9     2/9      1/9    -             -       -       -        -          -
4         -        1/9      2/9     3/9      2/9   1/9            -       -       -        -          -
----
N-2                                                              1/9     2/9     3/9     2/9       1/9
N-1                                                               --     3/27   7/27    10/27     7/27
N                                                                 --      --    5/27    11/27     11/27

The table shows how to convert raw data into smoothed data by taking proportions of raw data from a
number of years and adding these together.

For example in 2006 the GVA for 1989 (Year 1) to 2004 (Year N) was published at the NUTS1 level. The
smoothed figure for 1989 was equal to:

(11/27 x (1989 raw value)) + (11/27 x (1990 raw value)) + (5/27 x (1991 raw value))

Once smoothed, the data is re-constrained to the UK National Accounts totals.




                                                                                                          40
Glossary/Acronyms
Annual Business Inquiry (ABI)
A business survey carried out by the ONS. Part 1 collects employment data, while part 2 collects financial
information including GVA, net capital expenditure and CoE. A regional apportionment model is used to
obtain NUTS1, 2 and 3 level data.
Annual Survey of Hours and Earnings (ASHE)
An ONS survey that provides regional information about the levels, distribution and make-up of earnings
and hours worked for employees in all industries and occupations.
Basic prices
Basic prices are the preferred method of valuing output and value added. They reflect the amount received
by the producer for a unit of goods or services excluding any taxes on products and including any subsidies
on products. This price includes only taxes on production (for example business rates) and excludes any
subsidies on production (for example agricultural set-aside).
Blue Book
The Blue Book is the ONS' key annual publication for national statistics and provides detailed estimates of
national product, income and expenditure for the UK. It covers value added by industry, full accounts by
sector - including financial and non-financial corporations, central and local government and households -
and capital formation.
The Department for Business Enterprise and Regulatory Reform (BERR)
Capital consumption
The estimated amount of capital resources used up in the process of production in any period.
The Chartered Institute of Public Finance and Accountancy (CIPFA)
Communities and Local Government (CLG)
Compensation of Employees (CoE) – see 2.4.1
Constant price
Constant price figures express value using the average prices of a selected year, known as the base year.
Constant price series can be used to show how the quantity or volume of goods has changed and are often
referred to as volume measures.
Crown Estate Commissioners (CEC)
Current price
Current price figures measure value of transactions in the prices relating to the period being measured.
Defence Analytical Services Agency (DASA)
Department of Finance and Personnel Northern Ireland (DFPNI)
Department for Transport (DfT)
Depreciation – see capital consumption
European system of accounts (ESA)
Expenditure and Food Survey (EFS)
The EFS is an ONS survey of household expenditure, food consumption and income
Extra-Regio
This accounts for economic activity that cannot be assigned to any specific region. For the UK this consists
of offshore oil and gas extraction and the activities of UK embassies and forces overseas
Financial Intermediation Services Indirectly Measured (FISIM) – see 2.4.19
Gross domestic household income (GDHI) – see 3.1
Gross domestic product (GDP)
A measure of the value of goods and services produced in the UK before providing for capital
consumption. It is equal to gross value added at basic prices plus taxes less subsidies on products.
Alternatively, it is equal to the sum of total final domestic consumption expenditures plus exports less
imports of goods and services.




                                                                                                         41
Gross fixed capital formation (GFCF) – see 4.1
Gross operating surplus (GOS) – see 2.3.5
Gross trading profits/surplus
Profits of privately owned corporations and surpluses of local authorities, central government bodies and
public corporations, gross of deductions for capital consumption.
Gross value added (GVA)
This is a measure of the contribution to Gross Domestic Product (GDP) made by an individual producer,
industry or sector. The gross value added generated by any unit engaged in production activity can be
calculated as the residual of the units’ total output less intermediate consumption, or as the sum of the
factor incomes generated by the production process. Net value added is shown after deducting capital
consumption.
Headline series –see 2.3.7
Her Majesty’s Revenue and Customs (HMRC)
Holding gains – see 2.4.17
Income approach – see 2.3.4
Imputed rent – see 2.4.13 & 3.4.1.3
Intangible asset
An asset that has no physical properties, e.g. computer software and literary or artistic originals.
Intermediate consumption
This represents industries’ purchases of goods and services to be used up in the production process
(excluding any goods purchased for resale without any further processing) adjusted for changes in
inventories of materials and fuels.
Labour Force Survey (LFS)
A quarterly ONS survey of UK households which collects information on respondents’ personal
circumstances and labour market availability
Mixed income (MI) – see 2.4.6
National Assembly for Wales (NAW)
New Earnings Survey (NES) – (see ASHE)
Non-market capital consumption (NMCC) – see 2.4.15
Non-profit institutions serving households (NPISH)
Non-profit institutions serving households include organisations such as charities, universities, churches,
trade unions and members’ clubs. NPISH institutions receive their principal resources from voluntary
contributions from households as well as payments made by the government
Nomenclature of units for territorial statistics (NUTS)
This was created by the European Office for Statistics (Eurostat) as a single hierarchical classification of
spatial units used for statistical production across the European Union. At the top of the hierarchy are the
individual member states of the EU: below that are levels 1 to 3 – see appendix A
Northern Ireland Housing Executive (NIHE)
Northern Ireland Statistics and Research Agency (NISRA)
Output
This is the value of goods and services together with work-in-progress produced. It is equal to the value of
sales plus any increase, less any decrease, in the value of inventories of finished products and work in
progress. Output is thus measured after deducting holding gains. The outputs of the distribution and service
trades industries are calculated net of the value of goods bought for resale without further processing.
Pay as you earn (PAYE)
Income tax withheld from employees’ wages and paid directly to the government by the employer.
Primary income/resource – see 3.3.2
Primary use – see 3.3.3
Production approach – see 2.3.3
Property income – see 3.3.3




                                                                                                         42
Public corporations
These are public trading bodies that have a substantial degree of financial independence from the public
authority, central or local government that created them.
Raw series – see 2.3.7
Rental income – see 2.4.10 – 2.4.14
Regional indicator
A measure of economic activity by region
Residence basis – see 2.3.8
Secondary income/resource – see 3.3.2
Secondary use – see 3.3.3
Short -term Turnover and Employment Survey (STES)
An ONS business survey which collects data on turnover and employees
Smoothed series – see Headline series
Sole trader
A business owned and controlled by one person
Standard Industrial Classification (SIC)
This is the industrial classification applied to the collection and publication of a wide range of economic
and industrial statistics. The current version is SIC (2003), based on NACE Rev 1 which is the statistical
classification of economic activities for the EU.
Standard statistical region (SSR)
SSRs are similar but do not equate to NUTS1 regions. The latter is used for the production of Regional
Accounts in the UK
Subsidies on production
These are subsidies based on the levels of productive activity, for example, numbers employed.
Subsidies on products
These are subsidies based on a quantity or value of goods or services sold.
Supply and use table
Supply and use tables show the total availability (supply) of individual products (goods and services) by
industry, for use in the economy from both domestic production and imports. (National Accounts Concepts,
Sources and Methods, p265)
Survey of Personal Incomes (SPI)
Survey based on information held by HMRC tax offices on people who are liable to tax. It is carried out
annually and covers all income liable for tax.
Tangible asset
An asset such as a building or piece of equipment that has physical properties
Taxes on production
These are taxes paid by producers, for example business rates, motor vehicle duties and regulatory fees,
which are levied according to production, and do not depend on the profitability or otherwise of a company.
Taxes on products
These taxes are defined as product-specific taxes, for example value added tax, excise duties, air passenger
tax, insurance premium tax and import duties and are based on the volume or value of production sold.
Top down approach – see 1.4
Workplace basis – see 2.3.8




                                                                                                         43
Useful publications/web-sites

“Allsopp Regional GVA(P) Project: Methods Development of Regional GVA on a production basis”:
www.statistics.gov.uk/about/data/development/allsopp/downloads/RegionalGVAMethods.pdf

ESA 95: http://circa.europa.eu/irc/dsis/nfaccount/info/data/esa95/en/een00sum.htm

‘Modernising the UK’s National Accounts’; Jon Beadle, ONS

National Accounts Concepts, Sources and Methods:
www.statistics.gov.uk/downloads/theme_economy/Concepts_Sources_&_Methods.pdf

National Statistics Code of Practice: http://www.statistics.gov.uk/about_ns/cop/default.asp

‘Regional Accounts Methods: Gross value added and gross fixed capital formation by activity’; Eurostat

Regional Accounts publications: http://www.statistics.gov.uk/StatBase/Product.asp?vlnk=7359.

United Kingdom National Accounts – The Blue Book:
http://www.statistics.gov.uk/StatBase/Product.asp?vlnk=1143




                                                                                                         44

				
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