U.K. Economy Size May Be Revised Upward on EU Statistics ChangesJennifer Ryan and Scott Hamilton
The size of the U.K. economy may be revised upward as officials change the way they calculate output to reflect new European Union standards.
The changes may add 2.5 percent to 5 percent to the level of gross domestic product, according to a presentation yesterday by Peter Patterson, deputy chief economic adviser at the Office for National Statistics, and Graeme Walker, head of national accounts. Among the biggest changes are the treatment of research and of pensions, which will boost the saving ratio. The shift reflects changes to the European System of Accounts, the legal national accounts framework for the EU.
“For the most part, the changes make sense and are consistent with international practice,” said Philip Rush, an economist at Nomura International Plc in London. “The U.K. will look less of an outlier in its saving data than it used to, but we haven’t become a nation of savers and the recovery is still reliant upon consumer debt and dissaving.”
Spending on weapons and research and development will now be considered as capital expenditure, according to the presentation. The R&D change may add about 25 billion pounds annually to the level of nominal GDP, and the weapons change may add about 3 billion pounds.
A change for defined-benefit pension plans will now include imputed contributions, and will add about 5 percentage points to the level of GDP. The ONS will publish articles detailing the changes this month and next month. They will affect all historical data, though they will typically go back as far as 1997.
The ESA is revised approximately every 15 years, and the change to ESA10 from ESA95 will be implemented across the EU by September. The ONS is now engaged in a work program through 2017, and plans to put in place this year the changes affecting GDP.