Introduction

Spotlight on Quality: Assuring Confidence in Business Investment Statistics

1.1 As a result of the UK’s departure from the EU, Eurostat no longer provides external assurance of the UK’s economic statistics. As such, we recognise that stakeholders, and the public, need additional assurance, specifically on the quality and independence of economic statistics.

1.2 We are delivering a series of quality-focused assessments to provide this enhanced assurance, using a new assessment framework that focuses more intensively on the quality of economic statistics. The assessment framework will be developed further as the Spotlight on Quality programme progresses.

1.3 This assessment is the latest in our Spotlight on Quality series. The quality framework examines four key areas to evaluate the quality of statistics: whether the statistics are produced using suitable data sources; whether appropriate methods are used; whether transparent quality assurance is provided; and whether the statistics are sufficiently prioritised and resourced proportionately to their use. We also consider the international comparability of the statistics and whether the statistics meet the quality needs of users and are not misleading.

1.4 We have selected the Business Investment statistics for this assessment because these statistics:

• • contribute to estimates of Gross Domestic Product (GDP)
  • are used to make important decisions on monetary and fiscal policies in the UK as they are used in the Bank of England’s Monetary Policy Report

Business Investment statistics and their relationship with Gross Fixed Capital Formation (GFCF) and Gross Domestic Product (GDP)

1.5 ONS’s Business Investment (BI) statistics provide estimates of net capital expenditure by businesses in the UK, excluding expenditure on dwellings, costs associated with the transfer of ownership of non-produced assets and capital expenditure by government. BI statistics offer a short-term indicator of business investment activity in the UK.

1.6 Gross Fixed Capital Formation (GFCF) is the estimate of net capital expenditure on fixed assets by both the public and private sectors. BI statistics are produced as a component of GFCF, accounting for approximately half of the total GFCF estimate.

1.7 GFCF is an internationally recognised concept and can be used to make comparisons between OECD countries. GFCF is produced following the European System of Accounts 2010, ensuring that ONS produces consistent, comparable, reliable and up-to-date statistics in line with other national statistical institutes. ONS publications of BI estimates also include GFCF estimates at a broad-sector level and asset type for the whole economy.

1.8 BI statistics are a crucial component of GDP, encompassing spending by businesses on assets such as machinery, buildings and technology. These statistics are included in the expenditure approach to measuring GDP. Since 2018, BI has accounted for 10% of GDP on average.

1.9 Accurate and comprehensive BI data from ONS help to ensure that GDP reflects the true level of economic activity within the economy, providing important insights for economic policy and business planning.

How ONS produces BI estimates

1.10 BI statistics are compiled from sample-based surveys and administrative sources covering UK businesses. The primary source of data, accounting for roughly 80% of the estimate, is the Quarterly Acquisitions and Disposals of Capital Assets Survey (QCAS). Conducted by ONS, the QCAS surveys approximately 24,500 businesses selected directly from the Inter-Departmental Business Register. In 2015, ONS redesigned the QCAS, using the Quarterly Survey of Capital Expenditure as a basis. ONS made several improvements to the QCAS to meet international standards and enhance respondent understanding.

1.11 ONS supplements the QCAS data with administrative data sources, including tax records, company accounts and other government databases, such as data from HM Revenue and Customs (HMRC) on aircraft and from the Department for Environment, Food and Rural Affairs. These sources provide additional detail and cross-validation for the survey data.

Uses of BI statistics

1.12 Business Investment statistics are essential for multiple stakeholders, including policymakers, economists and business leaders. HM Treasury and the Bank of England use BI statistics to inform decisions on fiscal and monetary policy. The Office for Budget Responsibility uses these statistics as an input for economic forecasting. These statistics help business leaders and investors reach informed decisions about capital allocation, strategic planning and market analysis.

1.13 BI statistics are important for assessing productivity improvements, technological advancements and sector-specific developments, which in turn shape industrial policies and investment strategies.

1.14 Since BI estimates are also used in estimating the expenditure measure of GDP, and are produced according to the national accounts framework, they are subject to the National Accounts Revisions Policy. BI estimates are also subject to adjustments arising from balancing the three approaches to measuring GDP: expenditure, production and income. GDP might adjust BI estimates to account for quality concerns about a specific part of the data. These adjustments are made after consultation with data experts and are included in GDP releases.