Assessment of statistics on Profitability of UK Companies and Gross Operating Surplus of non-financial corporations
We have completed our quality-focused assessment of your statistics on Profitability of UK companies and Gross Operating Surplus of UK private non-financial corporations (GOS). This is the second assessment we have carried out in our Spotlight on Quality: Assuring Confidence in Economic Statistics programme, which aims to provide enhanced assurance of the UK’s economic statistics.
GOS statistics are used by the Bank of England’s Financial Policy Committee to monitor cyclical systemic security risk, as defined in the Capital Buffers and Macro-prudential Measures Regulation (2014). These statistics also feature in the Bank’s financial stability reports. The Office for Budget Responsibility uses Profitability of UK companies statistics to produce its profit forecasts, and they are used by the Chancellor of the Exchequer to set fiscal policy. Other government departments such as HM Treasury also use these statistics for monitoring economic performance.
Our assessment found many strengths in the statistics. For example, ONS is one of only a few National Statistical Institutes that produces Profitability and GOS statistics directly. Many countries derive these statistics as a residual balancing item of the GDP income approach.
We have identified five requirements to improve the quality of Profitability of UK companies and GOS statistics (see Annex). Most important among these is that ONS needs to better understand whether the data sources used to compile the estimates are of sufficient quality. Additionally, ONS needs to better communicate to users its understanding of the methods and data sources used, along with any limitations and uncertainties in the statistics.
ONS has agreed to publish a development plan by January 2024, that includes its priorities for improving these statistics. To reassure to users about its understanding of the sources and methods used to produce the statistics, ONS should make significant progress on requirements 1, 2 and 3 by June 2024 and complete the remaining requirements (4 and 5) by December 2024. Implementing these actions will ensure that the statistics continue to meet the highest standards of the Code of Practice for Statistics.
It is good that ONS has started to make progress towards fulfilling these requirements by engaging with HM Revenue and Customs, the main data supplier in compiling GOS estimates, to discuss how estimates of Gross Trading Profits are compiled and the treatment of public corporations. ONS has also published revised Quality and Methodology Information and the GOS growth rates including and excluding balancing adjustments.
We recognise that many of the messages from our report may also apply to other economic statistics within the National Accounts. We therefore encourage you to consider how the findings and recommendations in this report apply to other economic statistics so that the benefits from our assessment and engagement with the Private Non-Financial Corporations team can be maximised. To promote trustworthiness and provide reassurances to other economic statistics users about quality, we consider that it could be helpful if you published information about which of the relevant actions you would look to apply to improve other economic statistics.
We thank you and your team for engaging with us during our assessment. And please do not hesitate to get in touch if you would like to discuss any aspects of this letter and accompanying report.
I am copying this letter to Liz McKeown, Director of Economic Statistics Production & Analysis; Rebecca Richmond, Deputy Director Financial Sector Accounts and Corporations Division; Pete Lee, Assistant Deputy Director, Financial Sector Accounts and Corporations Division; and Frank Donnarumma, Head of Private Non-financial Corporation Statistics.