FOI ref: FOI-2023-1407
You asked
On Friday 1 September 2023, the ONS stated that UK economic recovery from Coronavirus (COVID-19) was better than previously stated. Previous estimates that the UK economy was 1.2% below pre-Covid levels by the end of 2021 were revised to say the UK economy was actually 0.6% higher than pre-Covid levels by the end of 2021 due to "new data". I would like to ask:
(1) What was the new data that allowed such a dramatic improvement to be determined? (2) Where did the new data come from? (3) Why was this new data previously unavailable?
We said
Thank you for your request.
The ONS has published several articles on the reasons for the revisions to 2020 and 2021 data as part of this year's regular annual update with the impact article for data for the years up to 2020 released on 3 July 2023, followed by this impact article for the years 2020 and 2021 on 1 September 2023.
Each year the ONS produces updated estimates of the economy through the annual Blue Book publication which includes the Supply and Use balancing of annual Gross Domestic Product (GDP) data in both current price and volume measures. The Supply and Use approach allows us to confront detailed product and industry information at 114 products by 114 industries, including how products are used within and across industries (e.g. intermediate consumption). In this year's Blue Book, data for the year 2021 is supply and use balanced for the first time as, by this point in the GDP data evolution, there are sufficient detailed annual data sources to enable this detailed data confrontation.
There are many new data sources which are available by the time of the annual Supply and Use balancing, which occurs 2 years after the initial estimates. These are not available earlier during the quarterly GDP production rounds. For example - in the quarterly GDP compilation we have detailed information on the output of each industry, gathered by collecting turnover information from around 35,000 businesses a month, but we do not have any detailed information about the costs involved in generating this output - e.g. the intermediate consumption - so we have to assume that the intermediate consumption to output ratio of the last Supply and Use balanced year applies to all subsequent quarters, until we have the new detailed annual information. For 2021 data the revision is caused by the replacement of the assumed ratio applied forward from 2020 with the new annual data giving us best estimates of actual intermediate consumption in 2021. This intermediate consumption data comes primarily from the Annual Business Survey which collects detailed information on businesses purchases, employment costs and other expenses as well as their turnover. The annual business survey can only collect information from businesses once their financial year has completed and their financial accounts are finalised. Therefore the 2021 annual business survey was despatched early in 2022 and all data were received back by August 2022. This is too late for our annual Blue Book 2022 process which had already completed the supply and use balancing in June 2022. Therefore the 2021 Annual Business Survey data is used at the next opportunity which is the Blue Book 2023 process which started in January 2023. There are many other data sources which are available at the Supply and use balancing stage, which are not available earlier for quarterly rounds - for instance, our Annual Purchases Survey, HMRC data on wages and salaries from income tax payments, self assessment returns, and company profit information all have a lag before annual data are received as the deadline for filing a return with HMRC is significantly after the end of the reference period. Detailed data from government department outturns are also available after the end of the financial year in question which runs from 1 April to 31 March each year. So in practice, the availability of comprehensive annual data sources, means that revisions are a natural part of the way that GDP is compiled and published. This applies to all countries that compile and publish GDP.
You may have seen the exchange of letters between the Office for National Statistics and the Office for Statistics Regulation which has commissioned a review into the latest GDP revisions:
- Letter from Michael Keoghan to Ed Humpherson: review of GDP revisions - Office for National Statistics
- Ed Humpherson to Mike Keoghan: Revisions of estimates of UK Gross Domestic Product (GDP)
The OSR will focus on a short review covering: process and quality assurance; potential improvements; communication and one area the review will consider is whether ONS can obtain earlier access to key data sources or indeed access to new data sources which will enable us to arrive at the supply and use balanced position more quickly in the future.