Services turnover in the UK: 2016

• This article provides detailed product-by-industry proportion estimates using Annual Survey of Goods and Services (ASGS) data for the first time.

• The majority of turnover generated by the UK service economy came from businesses in the wholesale and retail trade industrial section (45.3%).

• The gambling and betting industrial division was the least diverse, with most of the products provided being from the gambling and betting industry itself (96.2%).

• 20.0% of all service industry turnover was generated by businesses providing products outside their main industrial classification.

The primary aim of the Annual Survey of Goods and Services (ASGS) is to provide a comprehensive picture of the services provided by the UK service economy. This level of detail is required to feed into the supply and use tables (SUTs) and ultimately the compilation of gross domestic product (GDP). The data collected will also feed into the Services Producer Price Index (SPPI); an important measure of inflation used by the Bank of England during their monetary policy-making process.

The ASGS will help Office for National Statistics (ONS) to meet a main recommendation from Professor Sir Charles Bean’s review of economic statistics. Specifically, the ASGS collects businesses’ turnover, broken down into the goods and services that a business provides.

This publication follows on from the Development of the Annual Survey of Goods and Services, which is a detailed methods article outlining how the statistics were produced.

This publication will highlight the estimates produced from the ASGS 2016, released for the first time. This will include high-level product by industry group turnover estimates (15 product groups by 14 industry groups). A breakdown at the more detailed product and industry level is also provided. This more detailed level is consistent in structure, but not concept, with the combined use matrix within the SUT publication, although it does not map exactly as the ASGS only covers the services industries.

We are keen to seek views and would welcome your feedback on the contents of this report. If you have any comments, please email at asgs@ons.gov.uk.

At present, the estimates produced from the Annual Survey of Goods and Services are still regarded as preliminary as the survey is still in development. This will be the case until we go through a formal assessment with the UK Statistics Authority to ensure compliance with the Code of Practice for Statistics. We will make further improvements to the survey, for example, to the questionnaire design, which is currently being reviewed. Data from further survey periods will be also be processed and validated.

The estimates provided are for the 2016 calendar year. Their primary purpose is to measure product- level information from businesses classified to the service economy, to estimate the proportion of turnover generated for each product.

ASGS measures the turnover generated by the service industries, whereas national accounts, and supply and use tables measure output. Output is defined as the total of products created during the accounting period (European System of Accounts 2010 (PDF, 6.4MB) , page 55). We plan to use the estimated proportions from the ASGS to inform the distribution of output to products within the supply and use tables from UK National Accounts, The Blue Book 2019 onwards. This is currently done based on estimates from the International Trade in Services (ITIS) survey along with administrative sources.

The main source for the total value of output used within SUT is from the well-established Annual Business Survey (ABS). As the breakdown of products provided within the industry is required from the ASGS estimates, they will be constrained to the ABS industry totals. As a result, it is appropriate to present the ASGS data product proportions within the industries. There are additional sources included within the full supply and use tables, such as public sector data and financial corporations together with balancing adjustments so estimates will differ.

The ASGS covers a large element of the service economy, with some exceptions such as public administration and certain elements of the financial sector. The exact inclusions and exclusions of industries are detailed in Annex B and based on the Standard Industrial Classification: UK SIC 2007; Annex A , which is used to classify business establishments by their economic activity.

The ASGS collects turnover data at the Statistical Classification of Products by Activity (CPA code) three-digit (for wholesale trade, except of motor vehicles and motorcycles), five-digit (for retail trade, except of motor vehicles and motorcycles and waste collection, treatment and disposal activities; materials recovery) or six-digit level (for all remaining industries). The CPA is the classification of products at the level of the European Union (EU) and is designed to categorise products that have common characteristics. They provide the basis for collecting and calculating statistics on such products. The CPA is consistent with SIC at four-digit level and provides further detail at five- and six-digit level.

The ASGS has a sample size of approximately 40,000.

An overall response rate of 78.1% was achieved for the 2016 ASGS. The response for each UK country was:

• England – 78.6%

• Scotland – 74.5%

• Northern Ireland – 71.7%

• Wales – 77.5%

Results from the Annual Survey of Goods and Services 2016 have been aggregated to a broad industry section level using Standard Industrial Classification: UK SIC 2007. Using these values, the proportion of industry section total turnover within the total turnover value across all industries has been calculated.

Figure 1 shows that the majority of turnover generated by the UK service economy in 2016 came from businesses in the wholesale and retail trade industrial section (45.3%). This was followed by businesses in the professional, scientific and technical industry section (9.8%) and the financial and insurance industrial section (8.9%).

Results from the Annual Survey of Goods and Services 2016 have been aggregated to a broad industry and product section level. Using these values, the proportion of each product group within the total value for the industry has been calculated. The sum of the product proportions will sum to 100 within each industrial sector. These proportions are detailed within Figures 3 and 4.

The analysis of this data will refer to both on-diagonal and off-diagonal. On-diagonal turnover means businesses classified to an industry, providing a product mapped to the same industry. Industry classifications are determined using Standard Industrial Classification: SIC and products are classified using Classification of Products by Activity: CPA. An example of on-diagonal turnover within sections is a business in the accommodation industry (industry 55) providing food and beverage-serving services (CPA 56); both industry and product are within the accommodation and food service activities section.

On the other hand, an example of off-diagonal turnover within sections are businesses in education (industry 85) providing a service product belonging to accommodation services (CPA 55); the industry is in the education section while the products provided are within the accommodation and food service activities section.

Figure 2 demonstrates the concept of on-diagonal and off-diagonal turnover.

Figure 2: Example matrix demonstrating on-diagonal and off- diagonal turnover

UK

Source: Annual Survey of Goods and Services, Office for National Statistics

Notes:

1. Please note that this figure has been amended to highlight the concept of on-diagonal and off-diagonal turnover.

Download this image Figure 2: Example matrix demonstrating on-diagonal and off- diagonal turnover

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Looking across the 14 industrial sections, the majority of turnover was generated by providing services within the same industrial section (on-diagonal). The highest proportion of on-diagonal turnover came from the financial and insurance activities section, with 95.4% of its turnover being generated from finance and insurance services. This was followed by the electricity, gas, steam and air conditioning supply section, with 89.6% of turnover being generated from electricity, gas, steam and air conditioning supply services.

Notably, other service activities had the largest percentage of off-diagonal turnover with 67.6% of turnover being generated from activities outside the section.

Figure 4 shows in greater detail the spread of turnover across the sections. It shows the percentage of total turnover on products within a section. The darker the colour, the higher the percentage.

Figure 4: Spread of product turnover in 2016

UK

Source: Annual Survey of Goods and Services 2016, Office for National Statistics

Download this image Figure 4: Spread of product turnover in 2016

.png (87.2 kB)

Note: there is not a Production industry group, because only businesses classified to services industries were sampled. Therefore, only production carried out by the services industries was measured.

Of turnover generated by the other service activities section, 39.5% was generated by providing professional, scientific and technical services, a greater proportion than by providing on-diagonal services (32.4%). The other services section includes a broad range of industries:

• activities of membership organisations

• repair of computers and personal and household goods

• other personal service activities

The broad range of industries classified within the other service activities section may explain why there is a greater level of diversity in the products provided. Further analysis is being undertaken to understand why this is the case.

The Annual Survey of Goods and Services (ASGS) collects information at a much more detailed level than data shown in Figure 4. One requirement for the ASGS is to replicate the “combined use” matrix used in the supply and use tables (SUTs) (excluding certain industries detailed in previous sections). The size of the table is 53 industries by 58 products. This is smaller than the 114 by 114 SUTs, because the ASGS only samples the services industries, whereas SUTs measure the whole economy, including the production industries. Due to the size of the table, it is not possible to show it in its entirety in the article, but it can be found in a supplementary dataset accompanying this release.

The following section will detail the turnover trends of the UK service economy, based on the main findings from the detailed table. In particular, the spread of data, the top 15 products across all sections and a focus on specific industries.

Spread of data

To look more in-depth at the data, the concept of on-diagonal and off-diagonal turnover is considered within two-digit industrial divisions. This is slightly different to the approach of on-diagonal and off-diagonal turnover at industrial section level mentioned in Section 5.

In this context, on-diagonal turnover refers to businesses providing a service product mapped to the industry based on both the Standard Industrial Classification: SIC and Classification of Products by Activity: CPA at a two-digit industrial division level. Off-diagonal turnover refers to businesses providing a product not directly mapped to their industry at a two-digit industrial division level.

An example of on-diagonal turnover is where a business in the accommodation industry (industry 55) provides a service product within accommodation services (CPA 55). An example of off-diagonal turnover is where a business in the accommodation industry (industry 55) provides food and beverage serving services (CPA 56). Although both industry and product are within the accommodation and food service activities section, they are not in the same industry at the two-digit level.

Overall, 20.0% of all services industries turnover was off-diagonal at the two-digit level.

Industry with the most off-diagonal

The industry with the most off-diagonal turnover was the other personal services industry, with 74.6% of turnover generated by providing products outside the industry (Figure 5). This industry includes businesses classified to washing and dry cleaning, hairdressing and other beauty treatments, funeral activities and physical well-being activities.

Figure 6 shows the top ranked products provided by this industry. Of the off-diagonal turnover, 41.7% was generated by providing products in the activities of head offices and management consultancy activities industry. This is the only industry where the top-ranked product was off-diagonal, with the on-diagonal product the next largest at 25.4%. In contrast, in all remaining industries the top-ranked product provided was the on-diagonal product.

One reason for a large amount of off-diagonal turnover in this industry is the potential for industrial misclassification. This is where a business may have been assigned an industrial classification that does not accurately represent their business activity. Whilst business classifications are constantly under review, the ASGS is an additional important source of data for ensuring that businesses are classified as accurately as possible.

Industries with the most on-diagonal

The least diverse industry was the Gambling and betting industry, with 96.2% of all turnover generated from the provision of gambling and betting services. The next least diverse industry was the Air Transport industry, with 96.1% of all turnover generated from the provision of air transport services. These are both tightly regulated industries so a high level of on-diagonal turnover is expected.

Top 15 services

The ASGS collects a detailed breakdown of the different services provided by the UK services industries. Table 1 shows the top 15 services provided, as a proportion of all turnover generated. Production data are also collected, but at present this is not broken down into the individual goods produced, therefore are not included in Table 1. Of all turnover generated by the UK service economy, 6.7% was generated by producing goods¹. Production data for all industries are available in the data accompanying this release.

The top three services provided were wholesale and retail trade products, which represented 41.5% of all turnover generated by the services industries. However, of all turnover generated by providing retail and wholesale trade, 95.4% was generated by the retail and wholesale trade industries themselves.

The ASGS also collects a breakdown of services provided to customers located inside the UK and exported to customers outside the UK. Quality assurance of this data is currently ongoing and is planned to be published later in the year.

Focus on specific industries

This section focuses on some specific industries to highlight the diversity of their product patterns.

Retail trade, except of motor vehicles and motorcycles

The majority of turnover generated by the retail trade, except of motor vehicles and motorcycles industry was generated by providing on-diagonal products (79.8%), see Figure 7. However, other products were also provided, with the next-largest products provided being production (15.9%), land transport services and transport services via pipelines, excluding rail transport (1.6%) and wholesale trade (0.7%).

In addition, businesses in the retail industry also generated turnover from a number of other diverse service products summing to 1.6% (see the detailed matrix accompanying this release for further details). This would suggest that whilst the majority of turnover in the retail trade industry was generated from the retail trade of products, businesses in this industry also generate a proportion of turnover from manufacturing their own products before selling them.

Repair of computers and personal and household goods

The majority of turnover generated by the repair of computers and personal and household goods industry came from on-diagonal products (44.0%), see Figure 8. However, a breadth of other products were also provided, with the next-largest products provided being wholesale trade services (20.2%) and production (12.1%). This would suggest that businesses classified to this industry are diversifying, manufacturing and selling products as well as repairing them. In addition, 7.8% of turnover was generated by providing computer programming and consultancy.

Notes for: Detailed product proportions by industry

1. Goods are classified as products appearing in sections A, B, C and F in the CPA classification.

A number of actions are planned to develop the survey as part of our continuous development and improvement approach. The main next steps are detailed in this section with indicative timescales. Note that this could be subject to change.

Dissemination

Data for the 2017 Annual Survey of Goods and Services (ASGS) are currently being collected and will then be used to retrospectively quality-assure the 2016 ASGS data, with the current plan to publish the 2017 data in summer 2019.

A detailed Quality and Methodology Information (QMI) report will be produced (as is done for other Office for National Statistics surveys) detailing the methodology and associated metadata. As part of all this work, we will be working towards achieving National Statistics status and more information on this will be made available when appropriate.

The ASGS data is being considered for use in Blue Book 2019 to help inform the product distributions in the supply use tables.Further details of plans for Blue Book 2019 will be disseminated through the usual national accounts updates.

Questionnaire review

The electronic questionnaire was improved for the ASGS 2017 to make it more user-friendly for respondents and to further improve question wording, particularly around the definition of goods and services. This has continued to ensure the collection of high-quality data whilst minimising respondent burden. Further changes will be made to the ASGS 2018 following additional user testing and cognitive testing, which will be undertaken in early 2019.

The 2019 survey will be dispatched to businesses in June 2019 with estimates likely to be available towards the end of the same calendar year.

For more detail on how the questionnaire has been developed, see the Development of the Annual Survey of Goods and Services article.

Feedback

We are keen to get your views on the methods, data and work to date to help inform and make improvements to the ASGS. If you have any comments, please email us at ASGS@ons.gov.uk.

The list in this section provides details of the services industries included and excluded from the Annual Survey of Goods and Services (ASGS). Inclusions:

• Electricity, gas, steam and air conditioning supply (section D)

• Water supply; sewerage, waste management and remediation activities (section E)

• Wholesale and retail trade; repair of motor vehicles and motor cycles (section G)

• Transportation and storage (section H)

• Accommodation and food service activities (section I)

• Information and communication (section J)

• Financial and insurance activities (section K) (64.3, 64.9, 65.1, 65.2, 65.3)

• Real estate activities (section L)

• Professional, scientific and technical activities (section M)

• Administrative and support service activities (section N)

• Education (section P)

• Human health and social work activities (section Q)

• Arts, entertainment and recreation (section R)

• Other service activities (section S)

Exclusions:

• Financial and insurance activities (section K) (64.1, 64.2, 66.1, 66.2, 66.3)

• Public administration and defence; compulsory social security (section O)

• Activities of households as employers; undifferentiated goods-and services-producing activities of households for own use (section T) Activities of extraterritorial organisations and bodies (section U)

Authors: Chloe Gibbs and Georgina Thompson

The authors would like to acknowledge contributions from IFF Research, Lucas Michaelides, Katie Evans, Leela Luke, Teresa Bainton, Craig McLaren, Rob Doody and Jayne Olney.