Economic Forum - 16 May 2022

Economic Forum
16 May 2022
@ONSfocus #economicforum slido #571430

Deputy Chief Economist
Office for National Statistics
Economic Forum
Ed Palmer

Agenda
09:30 – 09:35 Welcome and introduction – Ed Palmer (Chair), Deputy Chief
Economist, ONS
09:35 – 09:50 State of the UK Economy – Grant Fitzner, Chief Economist, ONS
09:50 – 10:05 Looking beyond GDP and providing insights on climate change –
Ian Townsend and Richard Heys
10:05 – 10:20 Experimental regional gross fixed capital formation (GFCF)
estimates by asset type: 1997 to 2020 – Laura Garcia Blasco and
Michael Becker
10:20 – 10:40 Q & A
10:40 – 10:45 Closing remarks
@ONSfocus slido #571430
#economicforum

Chief Economist and Director of
Macroeconomic Statistics and Analysis
@GrantFitzner
State of the UK Economy
May 2022
Grant Fitzner

Economic growth slowed in February & March
Source: ONS – Monthly GDP Source: OECD and ONS first quarterly estimate
-1
0
1
2
3
Mar
2021
May
2021
Jul 2021 Sep
2021
Nov
2021
Jan 2022 Mar
2022
Services
Production
Construction
GDP
Percentage
points
Contributions to Monthly GDP, UK Q1 2022 GDP vs pre-pandemic (Q4 2019) levels
-1% 0% 1% 2% 3%
Germany
Italy
United Kingdom
France
Canada
United States

Business investment remains subdued
UK Gross fixed capital formation and business investment, chained volume (100= Q1 1997)

Goods imports higher, exports relatively flat
UK good exports, excluding precious metals
UK goods imports, excluding precious metals
£0bn
£5bn
£10bn
£15bn
£20bn
£25bn
£30bn
Mar-19 Sep-19 Mar-20 Sep-20 Mar-21 Sep-21 Mar-22
EU exit
deadlines
End of EU
transition period
Import data
collection
changes
£0bn
£5bn
£10bn
£15bn
£20bn
£25bn
£30bn
Mar-19 Sep-19 Mar-20 Sep-20 Mar-21 Sep-21 Mar-22
Coronavirus Pandemic EU Non-EU
Export data
collection
changes
End of EU
transition period
EU exit
deadlines
Source: ONS – UK Trade

Inflation remains well above historical averages
Source: ONS – Producer prices, Consumer prices
-2%
-1%
0%
1%
2%
3%
4%
5%
6%
7%
Jan-
06
Oct-
07
Jul-09 Apr-
11
Jan-
13
Oct-
14
Jul-16 Apr-
18
Jan-
20
Oct-
21
2nd Decile 9th Decile
Source: ONS – Household costs indices
-10%
-5%
0%
5%
10%
15%
20%
2010
JAN
2012
JAN
2014
JAN
2016
JAN
2018
JAN
2020
JAN
2022
JAN
CPI PPI (input)
CPI experienced by high and low income households
UK consumer and producer prices, annual change

Business and consumer responses to inflation
0% 10% 20% 30% 40% 50% 60%
Other
Request change to mortgage
Take up employment
Borrow money
Ask for help from family or…
Ask for a pay increase in…
Look for a higher-paid job
Work longer hours
Use existing savings
Save less each month
Household plans to fund cost of higher inflation
Businesses passing price increases onto customers
Source: ONS Business Insights & Conditions Survey Source: NMG Consulting, Bank of England survey
0% 10% 20% 30% 40% 50% 60% 70% 80%
All
Services
Construction
Production
Early March 2022 Early April 2022 Late April 2022

Lower business turnover, consumer confidence
-50
-40
-30
-20
-10
0
10
20
01/1985 01/1991 01/1997 01/2003 01/2009 01/2015 01/2021
Source: GfK Consumer confidence barometer
UK confidence nearing 2020 pandemic lows
Net change in business turnover expectations,
April 2022
Source: ONS Business Insights & Conditions Survey
-8% -6% -4% -2% 0%
Production Construction
Services All businesses

Earnings growth and industry shortages
Source: ONS Average weekly earnings, Job vacancies, Unemployed persons
Note: Growth for combined industries is weighted according to AWE employment share
A, B, D, E** Agri/Mining/Utilities
C Manufacturing
F Construction
G Wholesale & Retail
H Transport and Storage
I Accommodation and Food
J Info and comms
K, L Finance and Real Estate
M Pro Sci Tech
N Admin and Support
O Public Admin
P Education
Q Health
R, S, T** Arts, Ent/Other
[CELLRANGE]
[CELLRANGE] [CELLRANGE]
[CELLRANGE]
[CELLRANGE]
[CELLRANGE]
[CELLRANGE]
[CELLRANGE]
[CELLRANGE]
[CELLRANGE]
[CELLRANGE]
[CELLRANGE]
[CELLRANGE]
[CELLRANGE]
-4%
-2%
0%
2%
4%
6%
8%
10%
12%
0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 1.6
Annual
growth
in
average
earnings,
3mma
Number of unemployed people per vacancy by industry
Stronger
pay pressure
Size = Employment share
Shortages more likely

Summing up
• Although UK GDP rose 0.8% in Q1, monthly growth has slowed
• More businesses are passing on higher costs to consumers,
while households are planning to run down their savings
• Other headwinds to growth include higher interest rates, weak
consumer confidence and sluggish business investment
• UK goods imports markedly higher, exports remain relatively flat,
• Little sign to date a tight labour market is driving earnings higher
#economicforum

Looking beyond GDP and
providing insights on
climate change
Ian Townsend
Deputy Director – Environment

Looking ‘Beyond GDP’
• Showing UK economic, environmental & social progress
• Three publications, our blog post summarises:
1. Climate change insights, alongside 1st GDP estimate
2. Measuring residence emissions quarterly proposals
3. ‘Beyond GDP’ workplan (to follow)
• Next quarter (Aug): wellbeing focus, dashboard update

Climate change insights
• Latest statistics and analysis from across the GSS
• Office for Statistics Regulation and Commons EAC
• Uses six themes as the climate change statistics Portal
• Pilot – user feedback very welcome
• Future editions: August, November during COP27

(1) Climate & Weather
Average number
of ‘heating
degree days’ in
Q1 2022, 1.3
lower than a
year ago
0
2
4
6
8
10
12
Jan-Mar
2020
Apr-Jun
2020
Jul-Sep
2020
Oct-Dec
2020
Jan-Mar
2021
Apr-Jun
2021
Jul-Sep
2021
Oct-Dec
2021
Jan-Mar
2022
Current Long-term mean
Source: Department for Business, Energy and Industrial Strategy – Energy trends (using Met Office data)
Average heating degree days and long term mean by quarter, Great Britain
Heating degree days

(2) Emissions
All three key
emissions
measures have
generally
followed a
downwards
trend
0
100
200
300
400
500
600
700
800
900
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Carbon footprint emissions Territorial emissions Residence emissions
Source: Department for Business, Energy and Industrial Strategy, Department for Environment, Food and Rural Affairs, Office for National Statistics
Residence, territorial and footprint emissions, UK
Mt CO2e

(3) Drivers
Energy ratio has
continued to fall,
following
volatility due to
the pandemic
Source: Department for Business, Energy and Industrial Strategy – Energy Trends, Office for National Statistics - GDP
Energy ratio, UK
Q1 2016 = 100
75
80
85
90
95
100
105
Quarter 1
2016
Quarter 1
2017
Quarter 1
2018
Quarter 1
2019
Quarter 1
2020
Quarter 1
2021

(4) Impacts
Climate risks:
Over 6 in 10
adults expect
rising UK
temperatures will
directly affect
them by 2030
0 10 20 30 40 50 60 70
None of these
Rising sea-levels
Water supply shortages
Flooding from rainfall
Other extreme weather events
Reduced access to safe and affordable
food
Rising UK temperatures
Source: Office for National Statistics – Opinions and Lifestyle Survey
Percentage of adults selecting what they think (from a list of options)
will directly affect them by 2030, Great Britain
%

(5) Mitigation (1 of 2) 23% of large
businesses
have a climate
strategy, 17%
an emissions
target, & 8%
monitor climate
related risks
0 10 20 30 40 50
None of the above
Not sure
Has a nature or biodiversity strategy
Monitors climate-related risks
Has a net zero or greenhouse gas emissions
target
Has a climate change strategy
Source: Office for National Statistics – Business Insights and Conditions Survey
Environmental actions, large businesses that have not permanently
stopped trading and have reported taking at least one action to
protect the environment, UK, 21 March to 3 April 2022
%

(5) Mitigation (2 of 2) Top two business
actions to reduce
emissions =
switching to LED
bulbs and
adjusting heating
& cooling
systems
0 5 10 15 20 25 30 35 40
No actions have been taken to…
Not sure
Installing your own renewable…
Introducing a cycle to work scheme
Installing charging points
Insulating your buildings
Electrifying your vehicle fleet
Installing a smart meter
Going paperless
Adjusting heating and cooling systems
Switching to LED bulbs
Source: Office for National Statistics – Business Insights and Conditions Survey
Actions to reduce carbon emissions, businesses not permanently
stopped trading, UK, 21 March to 3 April 2022
%

(6) Adaptation
Conifers
accounted for
55% of new
planting area
in 2020-21
0
2
4
6
8
10
12
14
16
2016-17 2017-18 2018-19 2019-20 2020-21
Conifers Broadleaves
Source: Forestry Statistics 2021 (Forest Research) from underlying statistics from the Forestry Commission, Forestry England, Scottish Forestry,
Forestry and Land Scotland, Welsh Government, Forest Service, grant schemes
New planting by forest type, UK
Thousand hectares

Quarterly residence emissions accounts
• Framework to estimate UK residence
basis emissions on a quarterly basis
• More research to identify most
appropriate predictors
• User feedback will inform this work
• Subject to this, publish late 2022

Beyond GDP – Inclusive
Income Measures
Richard Heys
Productivity and Research Partnerships

What’s GDP doing ‘right’ & ‘wrong’?
Definitive
Timely Gross, not net – depreciation of
assets excluded
SNA increasingly dated, so arguably not a
great measure of the market economy
GDP
is a good measure
of the economy, but
not of economic
wellbeing
Excludes key components beyond
the economy
Increasingly challenged by complicated
ownership (e.g. atmosphere, data)
Internally consistent methods and
scope
Explainable
#economicforum

Measures of progress
• Different users want different progress measures
• Single metric, e.g. GDP – simplicity
• Wider dashboards, e.g. SDGs, NWB – complex
• No agreement on a multi-dimensional single metric
• Dasgupta Review – inclusive wealth, missing capitals
• UN Secretary-General (2022) - ‘Our Common Agenda’
• Improved distributional data, multi-measure dashboards
• New composite ‘single-index’ measures to complement GDP
#economicforum

National Accounts – economic
activity within the production
boundary
Environmental Satellite
Accounts – economic value of
the natural world, including
natural capitals
Household Satellite Accounts –
economic activity within the
household without participating in
economic markets
Beyond GDP: The Recycling Principle
Human Capital Satellite
Accounts – economic
value of human skills and
knowledge
Quality
Adjusted
Public
Services
Expanded
Intangible
Asset
(IPPs)
Definition
Unpaid
House-
hold
Services
Natural
Capital
Flow of
Benefits
Human
Capital
Investment
Free
Digital
Products
Included
in paper
Included
in paper
Included
in paper
Partially
included
in paper
Not
included
in paper
Not
included
in paper
#economicforum

Beyond GDP: Complementary inclusive income
measures
The ‘Spectrum’ model from, adapted from Heys, Martin, and Mkandawire (2019)
GDP Minus
Current
GDP
Expanded
GDP
Welfare
Minus
Welfare
Well-being
Market sector
GDP
Gross
Domestic
Product
(GDP)
Gross Inclusive
Income (GII)
= GDP plus public sector
quality adjustment and
value added outside the
current asset and
production boundary
Net Inclusive Income (NII)
= GII minus the
depreciation of relevant
capitals (including those
outside the current asset
boundary)
Democratic Inclusive
Income (DII)
= NII adjusted for
democratic income /
distribution
Pluralistic dashboard
capturing economic
and social impacts on
quality of life.
#economicforum

Progression through Spectrum from Market
GVA to Net Inclusive Income (NII)
UK, £billions, Current Prices, 2016
NII – relative component scales
#economicforum

Comparing NII,
GDP & NNDI
#economicforum

Subnational Statistics Development,
Experimental regional
gross fixed capital
formation (GFCF) estimates
by asset type: 1997 to 2020
Laura Garcia Blasco and
Michael Becker

What is capital? Why it matters?
Capital Others
Labour
Productivity
Inputs Final goods and
services
Living standards
#economicforum

Gross fixed capital formation (GFCF)
 Measuring regional capital expenditure (gross fixed capital
formation) is the first step towards measuring regional capital
stocks
 GFCF captures investment in fixed capital assets by both the
public and private sectors
o GFCF = Acquisitions less Disposals of produced assets
 Used in the UK National Accounts expenditure approach to
measure gross domestic product (GDP)
#economicforum

Context
Clear requirement for development of more granular regional
capital estimates
 Improve on existing estimates
 Intended to support delivery of the Government Statistical
Service (GSS) subnational data strategy and support locally
targeted policy making
Please note that these are experimental statistics
#economicforum

Project scope
In scope Out of scope
Existing ONS data sources New data collection
Publicly available data sources Unknown admin/commercial data
Improved methods Fully developed methods
Experimental improved estimates
 More granular regional data (ITL3)
 Specific assets breakdowns
 Lower industry breakdowns (SIC section)
A full production system,
integrated with Regional
Accounts
#economicforum

Regional granularity
ITL1 • 12
regions
Geographical boundaries being used are International
Territory Level (ITL) which were formerly NUTS
ITL3 • 179
regions
ITL2 • 41
regions
#economicforum

Current ‘industry based’ approach
Agriculture
industry
Retail
industry
ICT
equipment
Transport
equipment
Other
machinery &
equipment Buildings
#economicforum

Our ‘asset based’ approach
Agriculture
industry
Retail
industry
ICT
equipment
Other
machinery &
equipment Buildings
Transport
equipment
#economicforum

Assets
Asset descriptions Data sources
Dwellings Barbour ABI; ONS construction statistics; Northern Ireland Statistics and Research Agency construction
statistics; Department for Levelling Up, Housing and the Communities; Welsh Government; Scottish
Government; Northern Ireland Government
Other buildings and structures – roads
Barbour ABI; ONS construction statistics; Northern Ireland Statistics and Research Agency road lengths data;
Department for Infrastructure Northern Ireland road lengths data; ONS Annual Business Survey
Other buildings and structures – general Barbour ABI; ONS construction statistics; Northern Ireland Statistics and Research Agency construction
statistics; ONS Annual Business Survey
Costs of ownership transfer on non-produced assets Barbour ABI; ONS construction statistics; Northern Ireland Statistics and Research Agency construction
statistics; Department for Levelling Up, Housing and the Communities; Welsh Government; Scottish
Government; Northern Ireland Government
Other buildings and structures – land improvements Barbour ABI; ONS construction statistics; Northern Ireland Statistics and Research Agency construction
statistics; ONS Annual Business Survey
Ships VesselsValue; IHS-Markit
Road transport vehicles Driver and Vehicle Licencing Agency; Labour Market Statistics
Other transport equipment ONS Annual Business Survey
Aircraft ONS Annual Business Survey
ICT hardware and telecoms equipment ONS Annual Business Survey
Other machinery and equipment ONS Annual Business Survey
Cultivated assets Department for the Environment, Farming and Rural Affairs
Weapons systems Ministry of Defence - regional armed forces personnel data
Research and development ONS Business, Enterprise Research and Development survey
Mineral exploration and evaluation ONS UK GFCF totals
Computer software and databases - purchased software ONS Annual Business Survey
Computer software and databases - own account software ONS Annual Survey of Hours and Earnings
Entertainment, literary or artistic originals ONS Labour Market Statistics
#economicforum

Final output
 annual – covering the period 1997 to 2020
 UK International Territorial Level 3 (ITL3) regions
 Standard Industrial Classification 2007 (SIC07) section level
industry groups
 high-level asset groups (buildings and structures, transport
equipment, information and communications technology (ICT)
equipment, other tangible assets, intangible assets)
 constrained to national GFCF totals consistent with The Blue
Book 2021
#economicforum

Highlighted methods
Dwellings
 Using dwellings values from Barbour ABI and ONS construction statistics
better reflects differences in regional house prices. Previously this was
estimated exclusively using dwellings counts
Buildings and structures
 Using Barbour ABI data has allowed for specific microdata relating to the
regional investment
Own account software
 Using ASHE micro data to estimate investment using professions involved
in own account software development earnings to estimate regional
investment
#economicforum

Output
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
100,000
1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019
Published regional GFCF estimates, ITL1, 2000 to 2020
North East North West Yorkshire and The Humber
East Midlands West Midlands East of England
London South East South West
Wales Scotland Northern Ireland
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
100,000
1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019
Experimental regional GFCF estimates, ITL1, 1997 to 2020
North East North West Yorkshire and The Humber
East Midlands West Midlands East of England
London South East South West
Wales Scotland Northern Ireland
2008 2008
£ million £ million
#economicforum

Data availability and disclosure
Two main challenges emerged from the project which proved to be limiting factors
Data availability
 For the scope of the project, data of the necessary detail were not available for
all years or all assets
 This has left data gaps which have been filled either by modelling or using
alternative sources
Disclosure
 Producing data at ITL3 and industry section increases the risk of disclosing
individual businesses
 This is an area that needs future consideration
#economicforum

Recommendations
 Initial approach has produced a good starting point and provides an
opportunity to be developed further
 Further work on mitigating disclosure issues and improving regional
industry allocation
 Further engagement with data owners to make using alternative
administrative data feasible
#economicforum

Thank you for listening
If you’ve got any questions or want to get in touch please email us
Subnational.Development@ONS.gov.uk
Laura Garcia Blasco
Laura.Garcia.Blasco@ons.gov.uk
Michael Becker
Michael.Becker@ons.gov.uk
Link to the publication
Experimental regional gross fixed capital formation (GFCF) estimates by
asset type: 1997 to 2020 - Office for National Statistics (ons.gov.uk)
#economicforum

Closing remarks
Ed Palmer

Forthcoming ONS economic analysis
19 May 2022 – Job changers and stayers, understanding earnings, UK: April 2012 to April 2021
24 May 2022 – GDP and events in history: how the COVID-19 pandemic shocked the UK
economy
26 May 2022 – Long-term international migration, provisional: year ending June 2021
27 May 2022 – Health benefits of recreation, natural capital, UK: 2022
30 May 2022 – Youth unemployment by socioeconomic background, UK: 2014 to 2021
31 May 2022 – Quarterly regional labour productivity, gross value added, hours and jobs
10 June 2022 – The cost of living, current and upcoming work: June 2022
All information on upcoming analysis can be found via the ONS website
#economicforum

ONS Consultations
ONS open participation activities: Research and Development (R&D)
survey
The ONS run a suite of Research and Development (R&D) surveys. Each of these annual
surveys are used to measure R&D activity in the UK. Outputs from each are combined with
administrative data that measures R&D activity for the higher education sector to compile the
ONS’ Gross Domestic Expenditure on R&D release. Headline statistics from this release are
used to measure progress towards government set targets linked to R&D.
We want to ensure that our data meets the needs of the people who use it. To achieve this,
we are conducting a review of our applied methodology, exploring alternative data sources
and reviewing our R&D questionnaires.
Please support to this important work by responding here. The survey is live until 2 June
2022.

ONS User Survey
ONS open participation activities: Labour Market Statistics User
Engagement
The ONS is undertaking an ambitious transformation programme to improve labour market
statistics through survey transformation and increased use of data from administrative and
other sources. The main survey that provides labour market information from an individual
and household perspective is the Labour Force Survey (LFS). With recent developments,
including the addition of the ability to respond by telephone, the ONS is now in a position to
begin moving towards incorporating the transformed LFS data into the regular labour market
data releases.
Please support to this important work by responding here. The survey is live until
29 June 2022
More information, including on how to respond, can be found on our consultation and
stakeholder participation hub: https://consultations.ons.gov.uk

ONS Subnational Workplan
Launched today in response to the GSS subnational data strategy
New or improved subnational outputs and initiatives planned over
the next 18 months
Workstreams covering a wide range of themes, from the economy to
population, migration and Census
With a focus on UK-wide coverage, where possible, enabled by solid
collaboration with the Devolved Administrations

Dates for your diary
23 May 2022 – Global Trade and Investment User Event, London
24 May 2022 – Regional Economic Forum, University of Strathclyde, Glasgow
25-27 May 2022 – ESCoE Conference on Economic Measurement – University of Strathclyde,
Glasgow
15 June 2022 – Economic Data Science Seminar Series - Alexandre Judes
20 June 2022 – ONS Economic Forum
Further details on the above events will be published at ons.gov.uk/economicevents

Thank you for attending the
Economic Forum
You can keep up to date on all up coming events via
ons.gov.uk/economicevents
If you would like to ask a question or provide any feedback, please do so
via economic.engagement@ons.gov.uk

Economic Forum - 16 May 2022

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