Index of Services, UK: September 2017

• Services output increased by 0.4% in Quarter 3 (July to Sept) 2017 compared with Quarter 2 (Apr to June) 2017; following growth of 0.4% between Quarter 1 (Jan to Mar) 2017 and Quarter 2 2017.

• The business services and finance sector made the largest contribution to the quarterly growth, contributing 0.25 percentage points.

• In the three months to September 2017, services output increased by 1.4% compared with the three months ending September 2016; this growth is at its lowest since the three months ending October 2013.

• The Index of Services increased by 0.1% between August and September 2017.

• Motion pictures made the largest contribution at industry level to the month-on-month increase, contributing 0.06 percentage points.

The monthly Index of Services (IoS) provides a timely indicator of growth in the output of the services industries and is the largest contributor to the output approach to the measurement of gross domestic product (GDP), accounting for 79.3% of UK GDP in 2015. Also published today (23 November 2017) is the UK GDP, second estimate: July to September 2017.

The IoS measures the UK output in: distribution, hotels and restaurants; transport, storage and communication; business services and finance; and government and other services. The Monthly Business Survey (MBS) makes up approximately 43% of data, with the remainder coming from various other current price and volume sources. These data are used to produce seasonally adjusted estimates of output at chained volume measures (removing the effect of inflation). Unless otherwise stated, all estimates included in this release are based on seasonally adjusted data.

The IoS is an important economic indicator and one of the earliest short-term measures of economic activity. It is used in the compilation of the national accounts and widely used by private and public sector institutions, particularly by the Bank of England and Her Majesty’s Treasury to assist in informed decision and policy-making.

Data relating to the retail industry are broadly comparable with Retail sales, Great Britain: September 2017, published on 19 October 2017.

This September 2017 release contains revisions from July 2017. This means that we have incorporated additional data since this period.

Revisions can be made for a variety of reasons, the most common include:

• late responses to surveys and administrative sources

• forecasts being replaced by actual data

• revisions to seasonal adjustment factors, which are re-estimated every month and reviewed annually

This revisions period is consistent with the National Accounts Revisions Policy.

The UK Index of Services has been designated by the UK Statistics Authority as National Statistics, in accordance with the Statistics and Registration Service Act 2007 and signifying compliance with the Code of Practice for Official Statistics.

Table 1 shows data for the Index of Services (IoS) and each of the main components for September 2017.

During Quarter 3 (July to Sept) 2017, services output increased by 0.4% following growth of 0.4% in Quarter 2 (Apr to June) 2017. This is unrevised from the estimates used in the Gross domestic product, preliminary estimate: July to September 2017 statistical bulletin.

The main sector contributing to the Index of Services (IoS) quarterly growth is business services and finance, increasing by 0.6%, contributing 0.25 percentage points. The industries with the largest contribution within this sector were employment activities and accounting activities both contributing 0.05 percentage points. They increased by 4.0% and 3.6% respectively.

Two of the other three main sectors also increased in the most recent quarter. In order of their contribution to growth:

• government and other services increased by 0.2%, contributing 0.05 percentage points

• distribution, hotels and restaurants increased by 0.3%, contributing 0.05 percentage points

• transport, storage and communication was flat on the quarter

The industries with the largest contribution to positive growth in the government and other services sector were education and human health activities. They both increased by 0.4% and contributed 0.03 percentage points. Creative, arts and entertainment activities offset some of this, decreasing 9.5% and contributing negative 0.04 percentage points. This industry saw a fall in each of the three months of the quarter with the largest decrease in July 2017.

Retail trade was the industry with the largest contribution to the positive growth in the distribution, hotels and restaurants sector, increasing by 0.7% and contributing 0.05 percentage points. Please see the Retail sales, Great Britain: September 2017 release for more information. In addition, motor trade contributed 0.04 percentage points to growth, increasing by 1.4%. Offsetting some of this was food and beverage services, falling by 0.9% and contributing negative 0.03 percentage points.

In the transport, storage and communications sector, computer programming increased by 1.2% and contributed 0.04 percentage points while telecommunications contributed 0.03 percentage points, increasing by 1.5%. This was offset by decreases in publishing activities and land transport. Both these industries contributed negative 0.03 percentage points, decreasing by 3.3% and 1.4% respectively.

Figure 2 shows the three-month on a year ago growths since January 2012.

In the three months to September 2017, services output increased by 1.4% compared with the three months ending September 2016. This growth is at its lowest since the three months to October 2013, which increased by 1.2% compared with the three months ending October 2012.

Since the start of 2016, we have seen a decrease in the size of the peaks and troughs. The growth rate reached an increase of 2.8% in the three months to October 2016 but then fell to 1.9% in the three months to February 2017. Since February, the growth rate remained stable up until September 2017, averaging 1.8%. This has now seen another fall to an increase of 1.4% in the three months to September 2017.

Figure 3 shows the three-month on three-month growth rates from January 2012.

During September 2017, services output increased by 0.1% following a rise of 0.1% in August 2017.

Figure 4 shows the Index of Services (IoS) month on month growth rates since January 2015 and Figure 5 shows the month-on-month contributions of each of the main IoS components for September 2017.

Three of the four main components of the services industries increased during September. In order of their contribution to growth:

• business services and finance increased by 0.2%, contributing 0.09 percentage points

• transport, storage and communication increased by 0.4%, contributing 0.05 percentage points

• government and other services increased by 0.1%, contributing 0.03 percentage points

• distribution, hotels and restaurants decreased by 0.6%, contributing negative 0.11 percentage points

The industries with the largest contributions to the 0.1% rise in September were:

• motion pictures, which increased by 7.3%, contributing 0.06 percentage points; further details on this industry can be found in the next section

• scientific research and development, which increased by 4.8%, contributing 0.04 percentage points

• office administration, which increased by 1.9%, contributing 0.03 percentage points.

This growth was partially offset by retail trade and food and beverage activities. These two industries decreased by 0.9% and 1.1% respectively, contributing negative 0.06 and 0.03 percentage points.

The motion pictures industry continues to impact headline services figures. In September 2017, it was the industry that made the largest contribution to the monthly growth, contributing 0.06 percentage points.

With an Index of Services (IoS) weight of 0.8% the motion pictures industry, or motion picture, video and television programme production, sound recording and music publishing activities (UK Standard Industrial Classifications 2007: SIC 2007), covers:

• production of theatrical and non-theatrical motion pictures whether on film, video tape or disc for direct projection in theatres or for broadcasting on television

• supporting activities such as film editing, cutting, dubbing

• distribution of motion pictures and other film productions to other industries

• motion picture or other film productions projection

• buying and selling of motion picture or other film productions’ distribution rights is also included

• sound recording activities, that is production of original sound master recordings, releasing, promoting and distributing them, publishing of music as well as sound recording service activities in a studio or elsewhere.

Data for this industry is collected via the Monthly Business Survey which collects business turnover data. In September 2017, motion picture distribution accounted for 27% of the total turnover in this industry. This component was the main contributor to the industry growth of 7.3%, accounting for 50% of the month-on-month turnover growth. Motion picture distribution only makes up a small percentage of the total sampled businesses. However, there is a continued trend where this component is the main contributor to upwards and downwards movements in the monthly turnover. Due to the level of change observed within this industry and component specifically we have decided to undertake a review of the seasonal adjustment methodology.

In September 2017, other components impacting the monthly growth in the industry were motion picture production and television production. Motion picture production made up 12% of the total monthly turnover and television production accounted for 29%. They accounted for 15% and 14% respectively of the month-on-month turnover growth.

The motion pictures industry has seen accelerated growth since the start of 2015. On 1 April 2015, Film Tax Relief was extended to 25% for films of all budget levels and is part of the wider creative industry Corporation Tax Relief (for further information see the GOV.UK website). Figures published by HM Revenue and Customs, Creative Industries Statistics July 2017 show that the amount of tax relief paid has seen large increases from 2015 to 2016 onwards.

Further information on the film industry can be found on the British Film Institute (BFI) website.

The response rates and revisions tables can be found in the main datasets.

Monthly economic commentary was published alongside this release, presenting new analysis on the latest economic data.

Methods and sources

The gross domestic product output approach (GDP(O)) methods and sources pages provide more information on the data that underpin these statistics; of particular note is the GDP(O) source catalogue.

International comparisons

International comparison with the Index of Services (IoS) is difficult, as most comparable economies don’t 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 quarterly. The US Bureau of Economic Analysis also produces services output estimates, but only on a quarterly 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 quarterly estimates from Sweden and Ireland.

We will begin using Value Added Tax (VAT) data, alongside the Monthly Business Survey data, in the production of gross domestic product (GDP) statistics from December 2017. The first use of VAT in the national accounts will be in the Quarterly National Accounts: July to September 2017 and the Index of Services: October 2017 bulletins, which are both due for publication on 22 December 2017. An article was published on 20 November 2017, which reviewed the methodological improvements and provides further detail on implementation plans.

This change means that the Monthly Business Survey will no longer be the sole turnover data source. We are therefore stopping the publication of Turnover in Production and Services Industries (TOPSI), which is based on the Monthly Business Survey, in its current form. The final release was on 10 November 2017. Instead, additional information drawn from our new data sources will be provided in the relevant Index of Production or Index of Services release from December 2017.

We published a response to the consultation on proposed changes to the GDP release schedule on 19 October 2017. Further details on this response are available on our Consultation Hub. In summary, an estimate of monthly GDP will be published from July 2018 (for the reference period of May) and there will be two quarterly estimates of GDP a quarter rather than the current three; the preliminary estimate of GDP will be deferred by around two weeks and the second estimate of GDP will be brought forward by two weeks to form the new first estimate, meaning the income and expenditure approaches to GDP will be made available earlier than presently. The first estimate of quarterly GDP (for Quarter 2 (Apr to June) 2018) under this new model will be published in August 2018.

We welcome your feedback on this bulletin via our short survey.

The monthly Index of Services (IoS) was developed to provide a timely indicator of growth in the output of services industries, at constant prices for the UK. The IoS is an important component of monthly output (gross domestic product output approach (GDP(O)), representing about 79.3% of UK gross domestic product (GDP) as of 2015. The IoS shares the exact same industry coverage as the corresponding quarterly series within GDP(O).

The Index of Services datasets contain additional material, including:

• Monthly Business Survey (MBS) response rates (current and historic)
• IoS and main component indices to four decimal places
• publication tables
• revisions triangles
• lower-level time series data

The Index of Services Quality and Methodology Information report contains important information on:

• the strengths and limitations of the data and how it compares with related data
• uses and users of the data
• how the output was created
• the quality of the output including the accuracy of the data