ONS Economic Forum Email:economicforum@ons.uk Twitter:@ONS # ONSeconomy

ONS Economic Forum

Email: economicforum@ons.gov.ukTwitter: @ONS

#ONSeconomyWebsite: http://www.ons.gov.uk/ons/about-ons/get-involved/events/events/economic-forum/index.html

10 July 20141

ONS Economic Forum - Agenda

09.45 Introduction

10.00 NSQR of NA & BoP

10.30 What’s new

10.45 What’s next

11.15 Coffee break

11.45 Recent trends in self-employment

12.30 Close

Introduction

John Pullinger, National Statistician

ONS Economic Forum

10 July 2014

National Statistics Quality Review No 2

National Accounts and the Balance of Payments

Kate BarkerLead ReviewerJuly 10 2014

ONS Economic Forum

Rationale and Terms of Reference

• Commissioned by ONS (not UKSA)• Time elapsed since last review of this type• Terms of reference: - user needs and priorities - basic compilation following Pickford - risks in coverage and collection - existing quality assurance at ONS• Not a review of recent data trends

People and Process

• Statistical lead – Art Ridgeway, ex Stats Can• ONS: Adrian Chesson, Priya Mistry• ONS discussions/UKSA consultation• User consultations – city, academics,

journalists• Messages positive and negative – but also lack

of knowledge about ONS and methods

Previous National Accounts Reviews

• Key: Pickford 88/89; Allsopp 03/04; Caplan 03• Pickford – merger of economic statistics, survey

improvements• Allsopp – improvements to regional data, further

survey recommendations• Caplan - integrated supply/use framework,

common deflators• Some recommendations adopted then reversed• Positive developments on service sector coverage

National Accounts Estimates

• Urgent reinstatement of Purchases Survey or alternative data source

• With SUT at PYP develop double deflation• Adjust more than services industries to bring

output measure into line• Consider ways to reduce workload of

quarterly estimates and annual benchmarking

Other statistical issues

• Work with BoE on Flow of Funds• Support new unit focused on deflation • Improve deflators for GFCF• Improve the IDBR• Improve access to administrative data• Importance of systems constraints

Quality Assurance and Communication

• Users complimentary about response to inquiries/press releases

• Economic Forum and preparation for ESA10• Need to be transparent if QA not adequate• Stronger sign-off procedures for outputs• Consider all users not just key ones• The website.......

Summary

• Work of National Accounts inevitably complex and needs to be continuous focus on methods

• Processes not always well-explained to users• Workload pressures with ESA10 and other

new demands• Overall the National Accounts of a good

standard• Important that improvements not reversed

What’s new

Peter Patterson, Deputy Chief Economic Adviser

ONS Economic Forum

10 July 2014

Output, employment and hours

Contributions to growth in output

Contributions to expenditure growth (1)

1981-1985 1991-1996

Contributions to expenditure growth (2): 2009-2014

Hours and potential hours

Labour market capacity indicators

Net capital stocks

2012 = £1.4 trillion , CVM (2010 reference year)

Capital intensity by industry sector

Capital stocks per employed person

Capital stock and productivity

Growth in capital stock & productivity

Households’ debt-income ratio

Households’ net interest payments

What’s next

Peter Patterson, Deputy Chief Economic AdviserGraeme Walker, Head of National Accounts

ONS Economic Forum

10 July 2014

What’s next

• Johnson review of price statistics (autumn)

• Re-weighting of LFS estimates using 2011 Census data (October) – historic data in September

• Blue Book 2014

Improvements to National Accounts in September 2014

Graeme Walker Head of National Accounts

ONS Economic Forum: 10 July 2014

Outline

• What improvements are being made?• Impact on GDP

• Current price levels• Real GDP growths

• Other impacts• Public Sector Finances• Sector and Financial Accounts• Balance of Payments

• International experience

Improvements

• New international frameworks (ESA 2010, BPM6, MGDD)

• Improvements to methods• New data (not relevant for period

up to 2009)

New International Frameworks

• R&D• Weapons• Decommissioning costs• Pensions• BPM6 changes• 10 June articles

Improvements to methods

• Review of Non-Profit Institution serving Households units (NPISH)

• Financial Intermediaries Services Indirectly Measured (FISIM)

• Illegal Activities • New Cars • Own-account construction• Exhaustiveness adjustments• Gross Fixed Capital Formation• Inventories• 29 May articles

Impact on GDP levels (97 to 09)

• Average revision +3.6% (£43 bn)• ESA 2010 +2.0% (£24 bn)• Methods improvement +1.6% (£19 bn)

• Biggest impacts (average)• R&D +£17 bn• NPISH review +£9 bn• Illegal activities +£9 bn• Weapons +£3 bn• Pensions +£3 bn

Revisions to GDP levels

Real GDP annual growths

• Average growth 97-09 still +2.2%• 97-07 still +3.2%• 08-09 stronger than in BB13 but very similar to BB12

• Some changes to path• 99, 01 and 09 are stronger• 00, 04 and 07 are weaker

• Final analysis of downturn requires quarterly path (to be published early September)

• Length of downturn looks to be the same• Depth of downturn looks to be a bit shallower but similar

to BB12

Revisions to Real GDP growths

Annual Real GDP growth rates in various Blue Books

Public Sector Finances

• PSND increased by around £30bn in recent years• all due to the reclassification of network rail to central

government• PSF only change at this stage due to timing of advice from

Eurostat• PSNB generally increased by £2bn - £4bn in recent

years• mainly due to network rail and change in treatment of Local

Authority pension schemes• Pension scheme impact on GDP already described; network

rail is PSF only• Change to treatment of receipts from 3G/4G mobile

phone licence auctions alter the PSNB profile • increase of £22bn in 2000 offset over subsequent years• PSF only change due to timing of advice from Eurostat

Public Sector Finances

• Change to treatment of the Royal Mail Pension Plan transfer also alters the profile of PSNB• increase of £36bn in 2012 offset over subsequent years• current/capital transfers with no impact on GDP

• Weapons/R&D capitalisation switches• spending from current budget to net investment without

changing PSNB (GDP impact already described)

• Changes announced in December/February with detailed article published in June• PSF bulletin now includes detailed estimates of ESA10

impact on deficit and debt

Comparison of PSND measures

Comparison of PSNB measures

Sector and Financial Accounts

• 9 July article• NPISH – uplifts both NPISH and household final

consumption expenditure (as HHs consume NPISH goods and services)

• Changes to the reference rates, removal of interbank FISIM and adjustments to FISIM imports will impact all sectors, especially HH

• Illegal activities will increase HH expenditure, intermediate consumption and mixed income

• Car list prices will reduce HH expenditure by less than £1 billion per year

• Exhaustiveness adjustments impact HH expenditure both positively (fuel) and negatively (gambling and digital TV)

Sector and Financial Accounts (part 2)

• Own account construction increases PNFC and HH fixed capital formation

• R & D impact on gross fixed capital formation will be seen across the sectors

• Weapons systems capitalisation impact will be seen in the government sector

• Pensions – new service charge methods and including funded defined benefit schemes for local government and NPISH increases their expenditure and output

• Detailed impact and changes which only impact on 2010 and later to follow on 12 August

Balance of Payments (BoP)

• Biggest change - measurement basis of direct investment profits for monetary financial instructions changes from an all inclusive (AI) to a current operating performance basis (COP)

• Other changes include: • Revised treatment of non monetary gold

• Introduction of remote gambling

• Revised treatment of goods sent abroad for processing

• Overall impact of BoP changes: • Before financial crisis – improvement in current

account balance

• During the financial crisis – deterioration in current account balance 45

International experience

• Worldwide implementation of SNA 2008 completed for US, Canada and Australia

• Impacts described by ONS for UK GDP are of the same magnitude and direction as those seen across EU member states and worldwide

• ONS has already provided more detailed information than most countries

• Most impacts expressed in nominal terms

International Comparisons (Part 2)

Publication Schedule

• 9 July– Summary of impact on Sector and Financial Accounts (SFA) and Balance of Payments, International Comparisons, Layout of Blue Book, Pink Book and UKEA publications

• 23 July - Impact on GDP components of ESA 2010 and non ESA 2010 changes for 1997 – 2009

• 12 August (prov) – Detailed impact on SFA and Balance of Payments

Publication Schedule (part 2)

• Mid/End August - 2010 – 2012 real and nominal GDP annual changes

• Early September – Reminder of all impacts plus quarterly path of real GDP 1997 - 2012

• 30 September – Publication of Quarterly National Accounts and Balance of Payments on ESA 2010/BPM6 basis

• 31 October – Publication of Blue Book and Pink Book 2014

Questions

Email: graeme.walker@ons.gov.uk

ONS Economic Forum

#ONSeconomyWebsite: http://www.ons.gov.uk/ons/about-ons/get-involved/events/events/economic-forum/index.html

10 July 201451

Trends in self-employment

Nick Palmer, Labour Market Statistics

ONS Economic Forum

10 July 2014

Economic Forum 10 July 2014: self-employment

Contents

1.Summary of the recent growth in self-employment – based on headline statistics as published

2.Address some questions and perceptions - using supplementary data from the Labour Force

Survey

Questions related to recent growth in self-employment :

• Post-recession effects or longer-term structural effects ?

• Is it in jobs that drive economic growth ?

• How much of it is part-time/limited hours, (and so low income) ?

• Are people just taking up self-employment in the absence of other opportunities,

• or is this a new generation of young entrepreneurs ?

• To what extent is it more people taking up self-employment and to what extent is it people staying self-employed longer (inflows vs outflows) ?

24,500

24,700

24,900

25,100

25,300

25,500

25,700

25,900

Employment: employees compared with self-employed (000s)

Employees Self employed

-1,000

Employees and self-employed: changes since Q1 2008 (thousands)

Self-employed

Employees etc

Total employment

0 200 400 600 800 1,000

Construction

Professional, scientific & technical activities

Other services

Wholesale, retail & repair of motor vehicles

Administrative & support services

Human health & social work activities

Transport & storage

Agriculture, forestry, fishing, mining, …

Education

Manufacturing

Information & communication

Accommodation and food services

Financial & insurance activities

Real estate activities

Public admin & defence; social security

Self-employed by industry (LFS), thousands

Jan-Mar 2014

Jan-Mar 2013

-50 -25 0 25 50 75 100

Construction

Professional, scientific & technical activities

Other services

Agriculture, forestry, fishing, mining, energy & water

Education

Wholesale, retail & repair of motor vehicles

Administrative & support services

Financial & insurance activities

Transport & storage

Real estate activities

Human health & social work activities

Public admin & defence; social security

Manufacturing

Accommodation and food services

Information & communication

Self-employed by industry (LFS), thousands

Change Q1 2013 to Q1 2014

Change Q1 2008 to Q1 2013

0 200 400 600 800 1,000 1,200

Professionals

Craft and related trades workers

Managers

Service and sales workers

Technicians and associate professionals

Elementary occupations

Plant and machine operators, and assemblers

Skilled agricultural, forestry and fishery workers

Clerical support workers

Self-employed by main occupation group (thousands)

2014Q1

2013Q1

16-24 25-34 35-49 50-64 65+

Employees and Self-employed: age distributions (%), Jan-Mar 2014

Employees Self-Employed

16-24 25-34 35-49 50-64 65+

Self-employed: age distributions (%), Jan-Mar 2008 and Jan-Mar 2014

2008 2014

16-24 25-34 35-49 50-64 65+

Employees: age distributions (%), Jan-Mar 2008 and Jan-Mar 2014

2008 2014

Less than 3 months

3 months but less than 6

1 year but less than 2

2 years but less than 5

20 years or more

Employees and Self-employed by length of time with current employer/self-employed, % distribution, Jan-Mar 2014

Employees Self-employed

Less than 3 months

1 year but less than 2

20 years or more

Self-employed by length of time self-employed, thousands

Jan-Mar 2012 Jan-Mar 2013 Jan-Mar 2014

Less than 6 Hours 6 up to 15 hours 16 up to 30 hours 31 up to 45 hours Over 45 hours

Usual weekly hours: % distribution, self-employed compared with employees, Jan-Mar 2014

Employees Self-employed

Jan-Mar 2007 Jan-Mar 2008 Jan-Mar 2009 Jan-Mar 2010 Jan-Mar 2011 Jan-Mar 2012 Jan-Mar 2013 Jan-Mar 2014

Usual weekly hours: self-employed

31 up to 45 hours

Over 45 hours

16 up to 30 hours

6 up to 15 hours

Less than 6 Hours

2007Q1 2007Q4 2008Q3 2009Q2 2010Q1 2010Q4 2011Q3 2012Q2 2013Q1 2013Q4

Self-employed by whether has employees or not,Q1 2007 to Q1 2014 (thousands)

Total self-employed

Self-employed persons without employees (own-account workers)

Self-employed persons with employees (employers)

Summary/Conclusions

Recent strong growth in self-employment:

• reflects a mixture of post-recession effects and longer-term structural changes

•broadly based in terms of industries/occupations and working patterns

•partly reflects ageing workforce generally • and older profile when compared with employees

•mostly among the longer established / little evidence of increase in “stop-gaps”

•dominated by long-term self-employed – implying lower outflows

•“entrepreneurship“/business growth: continues to be just a small factor

Self-employment income

• Mixed income = National Accounts measure of the income of unincorporated enterprises owned by members of households – part of GDP(I).

• Work by the owner or members of their family cannot be distinguished from the owner's profits as entrepreneur.

• Mixed income for the household sector is calculated as profits + rental income – holding gains.

Mixed income - compilation

Profits and rental• Rental = income earned through ownership of

buildings • Annual data source is HMRC data based on self-

assessment form – data for 2012/13 will be in BB14• Series extended for later periods using growth in

labour market indicators - LFS self employment, average weekly earnings (AWE)

Holding gains• Gains and losses accrued to owners of assets and

liabilities purely as a result of holding them over time.• Data supplied as part of estimation of gross capital

formation 71

Output of the self-employed

• ONS Interdepartmental Business Register (IDBR) used as sampling frame for the Annual Business Survey

• Register includes all UK businesses registered for either value added tax (VAT) or pay as you earn (PAYE)

• But missing units include self-employed, businesses not registered for VAT/PAYE, businesses without employees, etc.

• To overcome this issue, IDBR under-coverage adjustments are made as part of annual Supply and Use balancing process

• An adjustment factor is applied to estimates of market sector output and intermediate consumption at the UK SIC (2007) class level

• Adjustment factors vary by industry; based on periodic analysis using additional data from HMRC – last formally updated for Blue Book 2006

Experimental estimates of productivity of self-employed

• No direct information is collected on the output of employees or the self-employed

• Income approach is used to apportion output, utilising development work from the sectional unit labour costs system. Income weights are defined as (COE+GOS)/GDP(Y) for employees, and one minus this (= mixed income/GDP(Y)) for the self-employed

• These income weights are consistent with those implied in the national accounts, and are applied to indices of GVA to derive synthetic GVA indices for employees and the self-employed separately

• System utilises new hours estimates developed to meet ESA requirements, with split between employees and the self-employed

• Estimates are non-seasonally adjusted, and presented as four-quarter moving averages, based on 2010=100

Productivity of Employees and Self-Employed4 Quarter Moving Average

Productivity of Employees and Self-Employed - Construction4 Quarter Moving Average

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