Non-financial business economy, UK (Annual Business Survey): 2011 provisional results

• The UK Business Economy, as measured by the Annual Business Survey (ABS), recorded a rise in approximate Gross Value Added at basic prices (aGVA) of £35.7 billion (3.8 per cent) between 2010 and 2011

• This increase in aGVA is a continuation in the recovery seen between 2009 and 2010 and takes aGVA to a level 1.1 per cent (£10.2 billion) above that seen in 2008, at the start of the recession

• The recovery was seen across many sectors, although for many, aGVA growth was suppressed due to growth in purchases of goods, materials and services being higher than that for turnover

• The Service sector led this recovery with aGVA rising £21.6 billion (4.3 per cent) between 2010 and 2011, the second consecutive annual increase in aGVA. Within the Service sector, strong increases were seen in Professional, scientific and technical activities (Section M), Administrative and support activities (Section N) and Information and communication (Section J)

Overview

This release contains 2011 provisional results from the Annual Business Survey (ABS), formerly the Annual Business Inquiry part 2 (ABI/2). The ABS is the key resource for understanding the detailed structure, conduct and performance of businesses across the UK. It is an annual survey of businesses covering the production, construction, distribution and service industries which represent the UK Business Economy. This is about two thirds of the UK's whole economy in terms of Gross Value Added. For more information about the survey and its coverage see the background notes.

Estimates published include turnover, purchases, approximate Gross Value Added at basic prices (aGVA) and employment costs for industry sectors and the UK Business Economy. These estimates are collected and presented as monetary values, giving a snapshot of UK business activity: they can be used to understand the level of the contributions of different business sectors to the UK economy at any one time. The statistics produced are referred to as structural business statistics.

The business economy is constantly evolving as businesses merge, are taken over, or simply change the main focus of their activity. These changes can result in the industry classification of a business changing over time. For example, if a business undertakes both manufacturing and wholesale activities, but most of its employment is within manufacturing, it will be classified to manufacturing.

If the employment were to change substantially so that the majority then worked in wholesale, the industry classification would change and the whole of the business' turnover, for example, would move from manufacturing to wholesale. In industries where movements are common, or where large businesses are involved, these changes can themselves sometimes cause large changes in ABS estimates. This should be taken into consideration when changes over time are being assessed.

The ABS has a wide range of uses. For example, ABS statistics are essential feeders to the overall quality of the UK National Accounts (174.2 Kb Pdf) and the measurement of Gross Domestic Product (GDP), they are supplied to Eurostat to meet the requirements of the European Structural Business Statistics (SBS) Regulation, and are used by devolved administrations and central and local government to monitor and inform policy development. For other uses see background note 11.

The approximate estimate of Gross Value Added at basic prices (aGVA) published in this release is a measure of the income generated by businesses within their industries and sectors, less the cost of goods and services used to create the income. The main component of income is turnover, while purchases is the main component of the consumed goods and services (referred to as intermediate consumption).

Stock levels which may rise or fall can also have an impact on aGVA, as can the values of subsidies received or duty paid. Businesses' employment costs are met from the value of aGVA, leaving an operating surplus which is a close approximation for profit. This ABS measure of aGVA is called 'approximate' because it does not fully allow for some National Accounts concepts such as taxes, subsidies or income earned in kind. National Accounts make these adjustments to calculate GVA and include information from other sources which cover parts of the economy not included in ABS.

The recession and recovery described by the ABS between 2008 and 2011 is broadly in line with Gross Domestic Product (GDP) figures published in the National Accounts. Both the ABS aGVA estimates and the National Accounts GDP estimates show a fall between 2008 and 2009 and increases between 2009 and 2010 and between 2010 and 2011, although the recovery in the ABS results is estimated to be stronger. For further information on aGVA see background note 3.

For more information, including more detail on the industry coverage, the users and uses of ABS and the measure of aGVA, please see the background notes in this release.

What data are available?

Provisional 2011 UK National results at the industry class level (4 digit Standard Industrial Classification 2007) are available free of charge via the 'Data in this release' button at the top of this publication, or from the ABS webpages on the ONS website. The published variables include turnover, purchases, employment costs, capital expenditure and stocks.

Additional standard extracts containing more detail are available on request. Bespoke analyses are also available but there will be a charge for these. For more information about these services please email abs@ons.gov.uk, or telephone +44(0) 1633 456592 for standard extracts, or +44 (0)1633 456606 for bespoke special analyses.

User feedback

We are aiming to improve this release and its associated commentary. We would welcome any feedback you might have, and would be particularly interested in how you make use of these data to inform your work. Please contact us via email: abs@ons.gov.uk or telephone Heather Bovill on +44 (0)1633 455107.

This release provides an estimate of the size and growth of the UK Business Economy, as measured by the Annual Business Survey (ABS), from 2008 to 2011 (see Figure 1 and Table 1). It provides a breakdown by broad industry showing the impact of each on the size and growth of the UK Business Economy from 2008 to 2011 (see Table 1 and Figure 2). The release then looks in more detail at specific industries to understand the drivers behind sectoral changes over this period. Where the recession is mentioned in this release it refers to the 'first dip' which started in 2008 rather than the subsequent recession which began at the end of 2011.

Commentary in this release is based on industries' contributions to the changes between 2010 and 2011. Where possible, the commentary draws on evidence from businesses or other sources of information to help explain possible reasons behind the observed changes.

Approximate Gross Value Added at basic prices (aGVA), that is the income generated by businesses, less the cost of goods and services used to create this income, for the UK Business Economy was estimated to be £974.1 billion in 2011, 3.8 per cent (£35.7 billion) above the level seen in 2010 (see Figure 1 and Table 1). This is the second consecutive annual increase in aGVA, taking it above the level seen in 2008, at the start of the recession.

The increase in aGVA between 2010 and 2011 was a result of increases in turnover and purchases. Turnover increased by 6.3 per cent (£197.2 billion) between 2010 and 2011 but purchases of goods, materials and services increased at a higher rate of 8.0 per cent (£172.8 billion), resulting in aGVA growth that was lower than growth for turnover.

Note: Please note that aGVA is not adjusted for inflation. To see which industries are included in the ABS measure of the UK Business Economy, refer to background note 3.

Increases in aGVA were seen across all of the broad industry groups (Figure 2 and Figure 3) but services, the largest broad industry group, contributed most to overall growth. The services sector contributed £21.6 billion to aGVA growth in the UK Business Economy between 2010 and 2011, an increase in aGVA for the sector of 4.3 per cent taking it above the level seen in 2008.

Production also saw an increase in aGVA between 2010 and 2011, contributing £11.8 billion to aGVA growth in the UK Business Economy. This was an increase of 5.6 per cent for the sector, but below the 7.4 per cent growth seen between 2009 and 2010. Despite being the second consecutive annual increase, production aGVA remains slightly below the level seen in 2008.

Agriculture (Part), forestry and fishing, Construction and Distribution saw lower growth in aGVA between 2010 and 2011. Together these industries contributed £2.4 billion to aGVA growth recording an aGVA rise of 1.1 per cent.

Within Section A, the Annual Business Survey (ABS) covers only hunting, forestry, fishing and the support activities to agriculture. Detailed commentary has not been included because its size in terms of economic output, as measured by the ABS, is small in comparison to the other sections of the UK Business Economy. However, data for these parts of Section A can be found in Table 1 and in the reference tables linked to this bulletin.

The other parts of Agriculture, which include crop and animal production, are covered by the Department for Environment, Food and Rural Affairs (DEFRA).

Approximate Gross Value Added at basic prices (aGVA) in the Production sector was estimated to be £221.8 billion in 2011, 5.6 per cent (£11.8 billion) higher than the level seen in 2010 (Figure 4 and Table 2). Turnover increased by 6.9 per cent (£45.2 billion) and purchases increased by 9.2 per cent (£39.3 billion), suggesting that businesses in the Production sector may not be passing on all of their increasing input costs to customers. Another possible explanation for the relatively high increase in purchases may be businesses building up stocks after reducing them during the recession which started in 2008.

The increase in aGVA seen between 2010 and 2011 is a continuation of the recovery seen between 2009 and 2010, although the rate of recovery in the latest year (5.6 per cent) was lower than the 7.4 per cent increase seen between 2009 and 2010. The size of the Production sector in 2011, in terms of aGVA, now stands £0.7 billion (0.3 per cent) below the level seen in 2008, at the start the recession.

All the sections within Production saw increases in aGVA between 2010 and 2011, but the continued recovery in Production was mainly driven by Manufacturing (Section C), which saw an increase in aGVA of £7.0 billion (4.8 per cent) over the period (Figures 5 and 6). Both purchases and turnover increased for this sector, although the rise in purchases was larger than that for turnover (7.8 per cent and 5.8 per cent respectively), suppressing growth in aGVA. Rising costs of raw materials and the price of oil are reported to have particularly impacted businesses in this sector. Despite this, manufacturing aGVA in 2011 was 2.8 per cent (£4.1 billion) above the level in 2008, at the start of the recession.

The picture within the Manufacturing sector was mixed: while the majority of divisions saw increases in aGVA between 2010 and 2011, seven of the 23 divisions experienced falls.

The increase in Manufacturing aGVA was driven by the following divisions: Manufacture of fabricated metal products (Division 25), Manufacture of machinery and equipment (Division 28), Manufacture of other transport equipment (Division 30), Manufacture of beverages (Division 11) and Manufacture of motor vehicles, trailers and semi-trailers (Division 29). Together these five divisions accounted for an increase of £5.7 billion, over four fifths of the total aGVA increase seen for Manufacturing.

There may be a range of reasons for growth across these divisions. For example, the Society of Motor Manufacturers and Traders suggest that growth in Motor vehicle manufacture (Division 29) in 2011 was driven by exports.

While not major drivers of the change in Production aGVA between 2010 and 2011, Mining and quarrying (Section B), Electricity, gas, steam and air conditioning supply (Section D), and Water supply, sewerage, waste management and remediation activities (Section E) also showed a recovery in aGVA.

Mining and quarrying (Section B, which includes oil and gas extraction) saw an increase of 4.6 per cent (£1.2 billion) in aGVA partly due to the continuing increase in the price of gas and oil. These price increases were impacted by a number of external influences such as the Arab Spring uprisings and the Fukushima nuclear disaster. Despite the growth in the Mining and quarrying industry, aGVA in this sector remains 16.8 per cent (£5.7 billion) below the level seen in 2008.

Electricity, gas, steam and air conditioning supply (Section D) saw increases of 7.2 per cent in turnover and 8.4 per cent in purchases (£6.8 billion and £6.0 billion respectively). Despite an increase in aGVA of 9.2 per cent (£2.0 billion) it still remains below the recent peak of £26.1 billion seen in 2009. Increases were primarily driven by the production and sale of electricity.

Water supply, sewerage, waste management, and remediation activities (Section E) saw an increase of 10.8 per cent (£1.6 billion) in aGVA, driven by the Treatment and disposal of non-hazardous waste and the Recovery of sorted materials such as recycling.

Approximate Gross Value Added at basic prices (aGVA) in the Construction sector stood at £69.5 billion in 2011 (Figure 7 and Table 3), 1.4 per cent (£1.0 billion) higher than the level seen in 2010, but still 18.0 per cent (£15.3 billion) below the level seen in 2008. As in Production, the annual increase in aGVA was constrained as purchases costs increased at a much higher rate than turnover (increasing 6.3 per cent (£7.0 billion) and 2.7 per cent (£4.9 billion) respectively).

The most marked change, however, was seen in stocks, which fell over the previous three years (including a large fall in 2009 as the economic crisis took hold) but saw growth of £0.5 billion (1.5 per cent) between the start and end of 2011.

Construction (Section F) consists of: Construction of buildings (Division 41); Civil engineering (Division 42), and Specialised construction activities (Division 43).

There was a mixed picture within Construction (Figures 8 and 9). The increase in aGVA was almost entirely due to Specialised construction activities (Division 43) which increased by £1.5 billion (4.6 per cent) between 2010 and 2011. This division may have been impacted by construction contracts in the run up to the London 2012 Olympics. This increase was offset by a £0.6 billion (4.7 per cent) fall in aGVA in Civil engineering (Division 42) which was suppressed by a large rise (9.7 per cent) in purchases (£2.4 billion) and a much smaller increase in turnover (3.5 per cent or £1.3 billion). Increased purchases for this division may have been impacted by rising material costs, particularly the price of steel. Construction of buildings (Division 41) saw a very small increase in aGVA over the same period.

Notes for construction industries (Section F)

1. Please note that the ABS annual figures for the Construction industries should not be compared directly with annual figures in the monthly 'Output in the Construction Industry' release because:

   • the two surveys measure different concepts of this industry
   • while both quote figures for a calendar year, the 'Output in the Construction Industry' are based on the aggregate of the responses to 12 monthly surveys, whereas ABS figures are based on annual responses covering a range of business years
   • the ABS figures will always be larger than those in the 'Output in the Construction Industry' because the latter excludes: Property developers (SIC 41.1); Payment on purchased services (architects, technical engineering, etc.); Payment to subcontractors, unless the subcontractors are not classified to construction and therefore are not part of the survey; Value of land; Value of materials sold (which are not part of a structure); and Fixtures, equipment and tools that are sold

The Distribution industries saw an increase of £98.6 billion in both turnover and purchases between 2010 and 2011 (8.1 per cent and 9.4 per cent respectively). However, due to changes in other components of approximate Gross Value Added at basic prices (aGVA), such as taxes, aGVA for Distribution increased slightly (by 0.9 per cent, £1.4 billion).

This was the second consecutive annual increase in aGVA, however the rate of growth was lower than the 3.3 per cent seen between 2009 and 2010. The size of the distribution industries, in terms of aGVA, remains below the level seen in 2008 (see Figure 10).

Distribution consists of: Wholesale and retail trade and repair of motor vehicles and motorcycles (Division 45), Wholesale trade, except of motor vehicles and motorcycles (Division 46) and Retail trade, except of motor vehicles and motorcycles (Division 47).

Performance within Distribution was mixed (see Figures 11 and 12). The growth in aGVA was driven by Wholesale trade, except of motor vehicles and motorcycles (Division 46) which saw an increase in aGVA between 2010 and 2011 for the first time since 2008, at the start the recession. The division saw an increase in both turnover and purchases, although growth in aGVA was suppressed slightly as the rate of growth for purchases (12.0 per cent) was above that for turnover (10.9 per cent).

Wholesale and retail trade and repair of motor vehicles and motorcycles (Division 45) also contributed to the growth in Distribution, with aGVA increasing by a £1.3 billion (5.6 per cent), as turnover increased at a higher rate than purchases (4.1 per cent and 3.7 per cent respectively). This increase in aGVA was the second consecutive annual increase for Wholesale and retail trade and repair of motor vehicles and motorcycles following the fall between 2008 and 2009. Between 2009 and 2010, aGVA increased by 21.2 per cent (£3.9 billion) largely due to the sale of new cars as the Government car scrappage scheme (which ran from May 2009 to April 2010) aided this industry. The market looks to have changed in composition and most of the increase in turnover between 2010 and 2011 was generated from the Maintenance and repair of cars (SIC Group 45.2), which saw an increase in aGVA of £1.0 billion (16.0 per cent), rather than from Sales of motor vehicles (SIC Group 45.1) which fell by £0.1 billion (0.9 per cent). This suggests that consumers may have brought forward purchases of new cars to take advantage of the scrappage scheme.

In contrast, aGVA in Retail trade, except of motor vehicles and motorcycles (Division 47), saw a decrease of 3.7 per cent (£2.7 billion) between 2010 and 2011, although the general trend without industry restructures and classification changes would be a lot flatter. The decrease in aGVA was seen as a result of a £10.7 billion (3.2 per cent) rise in total turnover but an even larger increase in purchases (£12.9 billion, 5.0 per cent). Perhaps unsurprisingly, reports from businesses indicate that turnover from mail orders and via the internet increased at a higher rate than turnover from shops. Although increasing, retail sales from mail orders and the internet remain a small share of total turnover.

Between 2010 and 2011 over half of the £35.7 billion increase in approximate Gross Value Added at basic prices (aGVA) for the UK Business Economy was generated by the Service industries. Over this period Service turnover increased by 4.5 per cent (£47.9 billion) and purchases increased by 4.9 per cent (£27.5 billion) resulting in an aGVA increase of 4.3 per cent (£21.6 billion) (see Figure 13 and Table 5). This is a continuation of the improvement seen between 2009 and 2010 (when aGVA increased by 3.0 per cent (£14.5 billion)) and means that Service sector aGVA in 2011 was £28.4 billion (5.7 per cent) above the level seen in 2008.

Most sections within the Service industries saw an increase in aGVA between 2010 and 2011 with the main drivers of the improvement over this period being Professional, scientific and technical activities (Section M), Administrative and support activities (Section N) and Information and communication (Section J), which together accounted for an increase in aGVA of £28.0 billion.

Professional, scientific and technical activities (Section M)

Turnover in Professional, scientific and technical activities (Section M) increased by 5.0 per cent (£9.5 billion) between 2010 and 2011, while purchases increased by only 1.1 per cent (£1.0 billion). This resulted in a substantial increase in aGVA of 9.4 per cent (£9.9 billion), taking aGVA in this sector to £8.7 billion (8.2 per cent) above the level seen in 2008. This broad section, which covers activities such as Legal and accounting services, Scientific research and development and Advertising and market research, saw increases in almost all its divisions between 2010 and 2011, although the main driver was Activities of head offices and Management consultancy activities (Division 70), which saw a £4.1 billion (16.6 per cent) increase in aGVA as turnover increased by £2.7 billion (6.0 per cent) and purchases fell by £1.5 billion (6.9 per cent).

Administrative and support activities (Section N)

Administrative and support activities (Section N) also saw a large increase in aGVA between 2010 and 2011. Turnover increased by £17.2 billion (11.5 per cent), while the increase in purchases was smaller at £7.6 billion (9.7 per cent) resulting in an increase in aGVA of £9.5 billion (13.2 per cent). This is the second consecutive annual increase in aGVA in Administrative and support activities and means aGVA is now £10.9 billion (15.5 per cent) above that seen in 2008, at the start of the recession.

The main driver behind the increase in the Administrative and support service activities was Rental and leasing activities (Division 77) which saw increases of 15.7 per cent (£3.6 billion) in turnover and 3.0 per cent (£0.3 billion) in purchases, resulting in a 28.2 per cent (£3.3 billion) increase in aGVA.

Information and communication (Section J)

Information and communication (Section J) saw an increase in turnover of 2.7 per cent (£5.0 billion) between 2010 and 2011. This increase, coupled with a decrease in purchases of 2.6 per cent (£2.6 billion) has resulted in a positive increase in aGVA of 10.2 per cent (£8.6 billion). This growth rate is an improvement on the 1.3 per cent (£1.1 billion) increase evident between 2009 and 2010 and means that aGVA in Information and communications is now £5.4 billion (6.2 per cent) above the level seen in 2008, at the start of the recession.

All divisions within Information and communications saw an increase in aGVA between 2010 and 2011, but one third of the increase in aGVA came from Computer programming, consultancy and related activities (Division 62). Between 2010 and 2011, turnover in this division increased by £2.9 billion (4.5 per cent), against decreasing purchases which fell £0.1 billion (0.3 per cent) leading aGVA to increase by £2.9 billion (8.0 per cent).

Finance and insurance (Section K (Part))

The results for Finance and insurance (part of Section K) suggest that aGVA decreased between 2010 and 2011, however, this result is experimental and comparisons between years should be undertaken with caution. Validation of data returns for 2011 have highlighted that a small number of businesses within the Finance and insurance sector were returning global figures rather than UK only. While revised results are likely to still show a contraction in the Finance and insurance sector between 2010 and 2011, the size of the fall is likely to be smaller than the results currently indicate. Further validation is being undertaken and a revised 2010 estimate will be published in the ABS Revised Results available in June 2013.