Index of Services, UK: February 2020

• There was a 0.2% growth in services in the three months to February 2020 compared with the previous three months.

• Real estate activities and education were the main drivers of three-monthly growth, both contributing 0.06 percentage points.

• There was no growth in the Index of Services between January 2020 and February 2020.

• The biggest positive driver to monthly growth, professional, scientific and technical, contributed 0.11 percentage points, and transportation and storage was the largest negative driver, contributing negative 0.11 percentage points.

• Services output increased by 1.3% between the three months to February 2019 and the three months to February 2020.

• The period covered by this release is 1 February to 29 February and is largely unaffected by recent developments with the coronavirus (COVID-19); however some businesses in wholesale and warehousing have reported that activities with China have been affected in this period, as well as travel agents and tour operators showing an effect in February.

In the three months to February 2020 (Dec to Feb), services output grew 0.2% compared with the three months to November 2019 (Sept to Nov). Notably, of the sectors that have recently been providing the largest contributions to growth: information and communication, and wholesale, retail and motor trade, information and communication is now providing negative contributions to the three-monthly growth and this is a continuation of the decline seen last month (Figure 1).

Of the 14 sectors, only three contributed negatively. The decline in information and communication almost wholly offset growth in other sectors.

Education and real estate activities, the two largest positive contributors, continue a period of growth in those industries.

The biggest decline, in information and communication, is mainly caused by classification updates to reflect changes in business structures, but declines in film and TV, and telecommunications also contributed to the fall.

Services output remained flat in February 2020 compared with January 2020, continuing a period of subdued growth. Care should be taken when using the month-on-month growth rates as data can be volatile, as can be seen in Figure 2 compared with the three-month on a year ago growth as seen in Figure 5.

There have been declines in wholesale trade except of motor vehicles (negative 1.2% growth) and warehousing and support activities (negative 3.0% growth). Both industries have been impacted by oil prices, weather and issues surrounding the coronavirus (COVID-19) through business activities with China, mainly supply chains and exports. It should be noted that some businesses in these industries have seen a positive impact in their output from the coronavirus, for example, in personal protective equipment.

The negative growth rate in warehousing and support activities is the lowest monthly growth since December 2015.

There is some responder-led evidence that accommodation has seen an impact from international travel, especially from China, in the wake of the coronavirus. However, accommodation growth of 0.5% shows that this has had little overall impact in this industry at an aggregate level. Food and beverage services decreased by 0.7%, which may be partially caused by a decrease in tourism but mostly caused by reduced footfall, primarily resulting from the adverse wet weather in February 2020.

Travel agents and tour operators has also seen an impact from the coronavirus and this industry is now at its lowest index level since February 2014 (Figure 4); responder-led comments centre around reduction in cruise bookings and a general decline in bookings overall.

Although largely unaffected by recent developments with the coronavirus, Retail sales, Great Britain: February 2020 report a small number of retailers who suggested that online orders shipped from China were reduced because of the impact of the coronavirus.

In the three months (Dec to Feb) to February 2020, compared with the three months to February 2019, services output increased by 1.3%. This is a continuation of the weakness throughout 2019 (Figure 4). More information around the slowdown in three-monthly growth compared with the previous year is given in Index of Services, UK: December 2019.

Information and communication has previously provided strength to the three-month on a year growth in services output. However, after a period of sustained growth, information and communication has the lowest three-month on a year contribution since November 2014, a significant weakening in this industry, enhanced by classification updates to reflect changes in business structures and supported by actual declines in film and TV, and telecommunications.

In particular, in comparing the contributions to three-month on a year ago growth for February from 2016 to 2020, computer programming has weakened from a contribution of approximately 0.30 percentage points from 2016 to 2019, to 0.08 percentage points in February 2020.

The reporting period for this bulletin is the calendar month of February 2020. As part of our Monthly Business Survey (MBS) we encourage businesses to provide us with comments and anecdotal information to help interpret individual data returns. Some of these may be helpful in a deeper understanding of the factors that may be impacting businesses. This has been made easier by the move to an online survey in May 2019.

In the entire MBS¹ sample of approximately 34,000 businesses covering the production, manufacturing and services sectors, approximately 1,500 of these provided us with comments and anecdotal evidence. From these responses we were able to identify approximately 400 that referenced the coronavirus (COVID-19) and 240 that referenced the weather.

Comments varied widely, from these factors showing no effect, showing a positive effect on the turnover, a negative effect on the turnover, or expectations for upcoming months. The most pertinent comments have informed our interpretation of the data within this bulletin. Overall, we identified a negative but negligible effect to the aggregated data.

The weather

The Met Office stated that the country experienced a record amount of rainfall for the month of February, which was also the fifth-wettest calendar month in a series since 1862. However, little impact has been seen in services, some small effect was seen within food and beverage service activities and retail; please see Retail sales, Great Britain: February 2020 for more information.

Coronavirus (COVID-19)

This publication covers the period 1 February to 29 February 2020 and so is largely unaffected by recent developments. However, some businesses in wholesale and warehousing have reported that activities with China have been affected in this period as well as travel agents and tour operators showing an effect in February.

See Section 8, Measuring the data, for more information about the implications of the coronavirus (COVID-19) for the collection of our statistics.

Leap year

The month of February 2020 also includes a leap year, meaning that there is an extra day of trading on 29 February. Seasonal factors in the calculations will account for this pattern and so no effect will be seen in the seasonally adjusted estimates.

Notes for External influences on services

1. Note that the businesses in the MBS include those in the Index of Services and the Index of Production.

Index number

The index number is a measure of the average level of prices, quantities or other measurable characteristics relative to their level for a defined time period or location.

Industrial classification or breakdown

The industrial classification or breakdown is the internationally standardised method for classifying the wide range of industrial sectors in an economy. We use the Standard Industrial Classification 2007: SIC 2007 for industrial breakdowns.

Monthly Business Survey

The Monthly Business Survey (MBS) collects information on the monthly turnover of UK businesses within the production and services sectors from various industrial sectors and regions in the UK.

Services

Services refers to the output produced by the services industries within the UK economy. There are four main components of the services industries: distribution, hotels and restaurants; transport, storage and communication; business services and finance; and government and other services. Overall, services industries account for 79.6% of gross domestic product (GDP).

Turnover

The turnover of a company is the value of the goods or services sold during a particular time period. It includes total takings or invoiced sales and receipts. Interest and similar income, "other operating income", and extra ordinary income is excluded. Value Added Tax (VAT) invoiced to the customer is excluded.

Data sources and collection

The Index of Services (IoS) is compiled using data from several different sources:

• ONS: Monthly Business Survey (43.3%)
• ONS: Retail Sales Inquiry (6.6%)
• ONS: Government Expenditure (20.7%)
• ONS: Households' Expenditure (15.5%)
• ONS: Finance Expenditure (9.1%)
• Other (4.8%)

The Monthly Business Survey (MBS) data are published alongside this release in MBS turnover in services industries.

Data relating to the retail industry are broadly comparable with Retail sales, Great Britain: February 2020, published on 26 March 2020.

For further information on what is included within Other, please see the GDP(o) data sources catalogue.

Percentage of each data source is based on their gross value added weight. The GDP(o) methods and sources pages provide more information on the data that underpin these statistics; of particular note is the GDP(o) data sources catalogue.

From February 2018, Value Added Tax (VAT) data have also been included across 64 production industries for small- and medium-sized businesses. For more information, see VAT turnover data in national accounts: background and methodology.

Quality and methodology

More quality and methodology information on strengths, limitations, appropriate uses, and how the data were created is available in the Index of Services QMI.

Leaving the EU

As the UK leaves the EU, it is important that our statistics continue to be of high quality and are internationally comparable. During the transition period, those UK statistics that align with EU practice and rules will continue to do so in the same way as before 31 January 2020.

After the transition period, we will continue to produce our national accounts statistics in line with the UK Statistics Authority's Code of Practice for Statistics and in accordance with internationally agreed statistical guidance and standards.

The Withdrawal Agreement outlines a need for UK gross national income (a fundamental component of the national accounts, which includes gross domestic product (GDP)) statistics to remain in line with those of other EU countries until the EU budgets are finalised for the years in which we were a member. To ensure comparability during this cycle, the national accounts will continue to be produced according to European System of Accounts (ESA) 2010 definitions and standards.

Coronavirus (COVID-19)

We are aware of the upcoming challenges relating to the pandemic. However, the Monthly Business Survey is fully online, meaning that business owners can log on from any location and submit their data at an appropriate time. Most other data in the Index of Services comes from within the Office for National Statistics (ONS) and therefore will be less impacted than survey data.

Our latest data and analysis on the impact of the coronavirus (COVID-19) on the UK economy and population is now available on a new webpage. This will be the hub for all special virus-related publications, drawing on all available data.

The ONS has released a public statement on the coronavirus (COVID-19) and the production of statistics. Specific queries must be directed to the Media Relations Office.

Seasonal adjustment

The data published in the Index of Services (IoS) release are all seasonally adjusted. This aids interpretation by removing annually recurring fluctuations, for example, those caused by holidays or other seasonal patterns.

Data volatility

Care should be taken when using the month-on-month growth rates as data can be volatile. Longer-term growth rates and examination of the time series allow for better interpretation of the statistics.

International comparisons

International comparison with the IoS is difficult, as most comparable economies do not produce equivalent estimates.

Eurostat Turnover in services estimates are not comparable with the IoS, as they exclude the wholesale and retail trade; furthermore, most of the estimates are only available three-monthly. The US Bureau of Economic Analysis also produces services output estimates, but only on a three-monthly basis, with a four-month lag time. Japan has a direct equivalent of the IoS, but the estimates are not seasonally adjusted.

The closest equivalent estimates are from Canada, which produces a monthly output estimate of GDP with a breakdown by industry (including an aggregate for services). There are also comparable three-monthly estimates from Sweden and three-monthly estimates from Ireland.