Data from the census shows us the change in industrial structure across the nation and reminds us of the importance of keeping our accounting frameworks up-to-date.
July 31st will see the release of the 2013 Blue Book and incorporate the annual changes to the methodology used to calculate GDP – the benchmark on which the world’s economies are judged and to which the national press gives much coverage.
This means that most data will be revised in some way. From the start of the series to 2007, data will incorporate methodological improvements as well as partial supply-and-use rebalancing. From 2008-2011 the data will be fully open to revisions from both those sources stated for the earlier period as well as new data sources and a full supply and use rebalance. From 2012q1 – 2013q1 the data is fully open to revisions as well as the usual quarterly round post Supply and Use balancing. The base and reference year will also move on one year to 2010 so all series which are given in real terms will necessarily change given new deflators.
The key changes in methodology include:
- Improvements to Gross National Income.
- Alignment of National Accounts and Public Sector Finances whose methodology is subject to change every quarter.
Next year, with the release of the BB2014 the UK data will be moving to be consistent with the new European System of Accounts (ESA10). This will make improvements in dealing with the financial sector, globalisation, asset changes, pensions, sector detail and a lot more.
Although numbers changing every year is not ideal, the ONS is not only obliged to do so by an EU requirement, but it makes sense to try to capture the changes to the economy over time.
In our view, we support the slight tweaks on a yearly basis rather than a big jump every five or ten years. To demonstrate this, figure 1 shows the industrial structure of the economy over time, according to Census data on employment.
Aside from the steady decline in agriculture share, the big change occurred in the 1970’s when manufacturing began a sharp decline, mirrored by a steep increase in services. This change was not a one-off break in the structure of the economy but an on-going shift. Even since 1991, services’ share of employment has increased from 68% to 81% in 2011 and so it is vital that the accounting classification keep up with the shifting landscape of our economy.
The move from Standard Industry Codes (SIC) 2003 to SIC2007 made a significant update to sector definitions. It introduced much greater coverage in services, including amongst other things, new dedicated allocations to Computing & Information Services.
In turn, many manufacturing categories were disbanded.
As a result, many series are not available before 1997 at the moment but the ONS are working on this and as soon as it is available, we will include this data in our services. In terms of the blue book 2013 and shift to ESA10, we will stay in line with the officially published data as and when it becomes available.
As a side-note to this, the chart illustrates the heavy reliance that the UK now has on services (public and private) and why perhaps the “march of the manufacturers” may be of benefit if in high-skilled industries but has much smaller role in the immediate recovery from the current economic slump than services.