Our LEP has an open meeting on its “productivity strategy” tomorrow at 11 am at
Regency Suite, Devon Hotel
Exeter EX2 8XU
However, it may find itself in some difficulty as the way productivity is measured will change drastically next month when, instead of measuring productivity only in large firms, for the first time 600,000 businesses employing less than 100 people will be included. Our LEP has not based its strategy on these new measurements.
“The Office for National Statistics is overhauling the way in which it measures the UK economy by including vast amounts of VAT data from small firms for the first time.
Previously, GDP estimates have been generated from a survey of the turnover at 45,000 companies – including all of the country’s largest businesses.
From December, information from a third of the UK’s 1.8m VAT returns will also be added to turnover data and included in official GDP figures.
This will dramatically change how the country’s economic growth is measured, providing far more insight into specific industries and locations. The greater proportion of VAT returns will also encompass more small companies, which make up 98pc of UK businesses.
For instance, in past GDP estimates, sectors such as restaurants and pubs were reported on, but only at a high level of “food and beverage service activities” based on 172 monthly surveys and 28,000 tax returns.
Having access to much more data will allow for a detailed view on the performance of pubs, takeaways and restaurants in different parts of the country, the ONS said.
For this first new estimate, only VAT returns from small and medium firms with headcounts of 100 or fewer will be included. Surveys of large firms will continue to be part of the ONS’s data gathering and reporting.
While smaller firms account for most of UK businesses, they only constitute 20pc of the economy. That means the data gathered and analysed by the ONS will be more detailed, but the impact on the GDP headline figure might not be altered by its inclusion, as larger company responses have greater sway.
Economist John Hawksworth of PwC said that it would be good if the ONS published “GDP estimates with and without use of the new VAT data”, so users could clearly see the difference made by its inclusion.
“It should also allow a more timely and detailed breakdown of economic activity by industry sub-sector and region to be produced than is possible at present,” Mr Hawksworth said.
Nick Vaughan, chief economist for the ONS, said the process of incorporating the additional data would be gradual.
“We are phasing these data in gradually and will ramp up the number of VAT returns we use over the coming years,” he said. He added that the new approach should lessen the administrative burden on small firms of completing surveys and help cut costs at the ONS.”