You asked
How much of the UKs GDP is derived from Capital Gains on assets?
We said
Thank you for your request.
Capital gains are not the result of a production process and cannot therefore contribute to Gross Domestic Product (GDP). There may be costs associated with the transfer of capital assets which would contribute to GDP. However, these are not capital gains.
A number of examples are included below which detail how capital gains on assets are treated within the UK National Accounts:
- Sale of existing non-financial assets (at a profit) -- in this scenario we treat the sale as a disposal for the seller and an acquisition for the buyer for the same value. If both the seller and the buyer are resident units (i.e. institutional units that have a centre of economic interest in the UK economic territory) then the value of the acquisition and the disposal cancel each other out and the net effect is on UK GDP is zero. If the buyer is non-resident the value of the disposal and the export cancel out and again the net effect on UK GDP is zero. The only exception here are transfer costs (i.e. the costs associated with changing the ownership of an asset from one institutional unit to another) which will contribute to GDP but do not represent capital gains.
- Sale of financial assets at a profit -- these appear only in the financial account and have no bearing whatsoever on GDP. Associated fees / commissions (stockbrokers fees, foreign exchange commission etc) are part of GDP, but are not capital gains.
- Holding gains (or losses) on existing assets (financial or non-financial) -- These are irrelevant to GDP as they appear in the revaluation account. Please note that presently we only provide estimates of such gains for financial assets and not non-financial assets.
- Holding gains (or losses) on inventories -- we know that inventories will likely generate holding gains (or losses) as the market prices of the goods held in stock rise or fall. However, any such gains are not the result of a production process. We therefore make a holding gains adjustment when estimating changes in inventories to account for this and ensure no impact on GDP.