Quarterly Sector Accounts: Quarter 1 Jan to Mar 2016

Annually for 2015, the central government, local government, financial corporations and households and non-profit institutions serving households (NPISH) sectors were net borrowers. The public corporations, private non-financial corporations and rest of the world sectors were net lenders. Compared with 2014, the local government and households and NPISH sectors switched from net lenders to net borrowers. All other sectors remain unchanged.

In Quarter 1 (Jan to Mar) 2016, the central government, local government, financial corporations and households and NPISH sectors were net borrowers. The public corporations, private non-financial corporations and rest of the world sectors were net lenders. Compared with the previous quarter, public corporations and private non-financial corporations switched from net borrowers to net lenders. All other sectors remain unchanged.

Households and NPISH net borrowing increased in Quarter 1 (Jan to Mar) 2016 to £4.4 billion from net borrowing of £4.3 billion in the previous quarter.

Private non-financial corporations switched from net borrowing of £58 million in Quarter 4 (Oct to Dec) 2015 to net lending of £1.1 billion in Quarter 1 (Jan to Mar) 2016.

The level of real households and NPISH disposable income (RHDI) increased by 3.5% in 2015, following an increase of 1.5% in 2014. This is the highest annual increase in the level of RHDI since 2001, when it increased by 4.7%.

The level of real households and NPISH disposable income (RHDI) increased by 2.0% in Quarter 1 (Jan to Mar) 2016, following a decrease of 0.5% in the previous quarter.

For 2015, the households and NPISH saving ratio was 6.1%, compared with 6.8% in 2014. This is the lowest annual saving ratio since 2008, when it was 5.4%.

The households and NPISH saving ratio for Quarter 1 (Jan to Mar) 2016 was 5.9%, compared with 5.8% in the previous quarter.

This bulletin, Quarterly Sector Accounts, is part of a developmental programme to improve coverage of the sector and financial accounts and we would welcome your feedback (background note 1). It was first published on 30 March 2016 to present main economic indicators and summary estimates from the institutional sectors of the UK economy: non-financial corporations, financial corporations, central and local government, households and NPISH that are presented in the UK Economic Accounts (UKEA) dataset.

This latest bulletin provides estimates consistent with our annual National Accounts Blue Book publication, to be published on 29 July 2016. An article, Detailed assessment of the changes to the sector and financial accounts was published on 7 June 2016 giving details of the changes implemented for Blue Book 2016.

The UKEA provides detailed estimates of national product, income and expenditure, UK sector non-financial and financial accounts and UK balance of payments. The Quarterly Sector Accounts and the UKEA are published at quarterly, pre-announced intervals alongside the Quarterly National Accounts and Quarterly Balance of Payments statistical bulletins. These accounts are the underlying data that produce a single estimate of gross domestic product (GDP) using income, production and expenditure data.

The accounts are fully integrated, but with a statistical discrepancy, known as the statistical adjustment, shown for each sector account. This reflects the difference between the sector net borrowing or lending from the non-financial account and the identified borrowing or net lending in the financial accounts, which should theoretically be equal but differ due to different data sources and measurement practices.

If you extract data from our website you will notice that some new series have been added for social transfers in kind, and that the identifier codes have changed for central government non-market output and local government non-market output. A full list of the new series is available in the UK Economic Accounts.

Users of the Quarterly Sector Accounts and UK Economic Accounts

UK Economic Accounts (UKEA) has a broad range of users. These include other government departments, the Bank of England (BoE), Office for Budget Responsibility (OBR), knowledge and research institutions, financial and non-financial corporations, journalists, the general public, and international institutions.

The data are widely used by government departments to inform and monitor the effect of policy decisions. UKEA data also aid an assessment of the economy: informing the Bank of England’s Monetary Policy Committee (MPC) discussions when setting monetary policy and the OBR’s forecasts and evaluations of economic growth and public sector finances. The data is also used by knowledge and research institutions such as think-tanks, lobby groups and universities and by researchers, analysts, academics, students and trade organisations.

The UKEA also provides businesses with important statistics and often form the basis on which journalists publish reports and articles. Data series commonly of interest include real household disposable income, gross saving, the household saving ratio, financial wealth and balance of payments data. The UKEA also contains useful information on the holdings of debt for each sector of the economy.

Main users of the UKEA outside of the UK include international bodies such as Eurostat, the European Central Bank (ECB), the Organisation for Economic Cooperation and Development (OECD) and The World Bank.

For the year 2015, real households and NPISH disposable income increased by 3.5% following an increase of 1.5% in 2014. This is the highest annual increase in the level of real households and NPISH disposable income since 2001, when it increased by 4.7%.

This latest annual rise reflects an increase of 3.7% in nominal gross disposable income partially offset by a 0.3% rise in the households and NPISH final consumption deflator. This increase in nominal gross disposable income was predominantly due to rises in wages and salaries of £28.9 billion, net social benefits other than social transfers in kind of £13.7 billion, together with a rise in gross operating surplus and mixed income of £10.5 billion, partially offset by a rise in taxes on income and wealth of £9.8 billion and a fall in net property income of £3.4 billion.

The level of real households and NPISH disposable income increased by 2.0% in Quarter 1 (Jan to Mar) 2016, following a decrease of 0.5% in the previous quarter (Figure 1).

The rise in the latest quarter is due to the 2.0% rise in nominal gross disposable income with no effect from the households and NPISH final consumption deflator. This increase in nominal gross disposable income was driven by a rise in net social benefits other than transfers in kind of £5.2 billion, a rise in net property income of £2.8 billion, gross operating operating surplus and mixed income of £0.8 billion and a rise in wages and salaries of £0.5 billion, partially offset by a rise in taxes on income and wealth of £2.9 billion.

Figure 2 shows the main components contributing to the quarterly movement of gross disposable income.

Gross saving estimates the difference between households and NPISH total available resources (mainly wages received, revenue of the self-employed, social benefits and net income such as interest on savings and dividends from shares, but excluding taxes on income and wealth) and their current consumption (expenditure on goods and services).

All of the components that make up gross saving and total available resources and in fact all sector accounts data apart from real households’ disposable income (RHDI), are estimated in current prices (CP). These are sometimes known as nominal prices, meaning that they include the effects of price changes.

The saving ratio is published in the UK Economic Accounts (UKEA) as non-seasonally adjusted (NSA) and seasonally adjusted (SA) formats, with the latter removing seasonal effects to allow comparisons over time. However, the saving ratio can be volatile and is sensitive to even relatively small movements to its components, particularly on a quarterly basis. This is because gross saving is a small difference between 2 numbers. It is therefore often revised at successive publications when new or updated data are included.

Annually for 2015, the saving ratio was 6.1%, compared with 6.8% in 2014. The fall in the saving ratio in 2015 reflects a rise in final consumption expenditure of £33.2 billion, a rise in taxes on income and wealth of £9.8 billion and a fall in net property income of £3.4 billion, partially offset by a rise in wages and salaries of £28.9 billion and a rise in gross operating surplus and mixed income of £10.5 billion.

The saving ratio for Quarter 1 (Jan to Mar) 2016 was 5.9%, compared with 5.8% in the previous quarter. The rise in the saving ratio in Quarter 1 (Jan to Mar) 2016 reflects rises in net property income of £2.8 billion, compensation of employees of £2.1 billion and other small movements in the accounts, partially offset by a rise in taxes on income and wealth of £2.9 billion and a rise in final consumption expenditure of £2.5 billion.

Figure 4 shows the main components contributing to the quarterly saving ratio movement.

Annually, the saving ratio has been revised up from 5.4% to 6.8% for 2014 and from 4.2% to 6.1% for 2015. On a quarterly basis, the saving ratio has been revised up from 3.8% to 5.8% for Quarter 4 (Oct to Dec) 2015. The quarterly and annual upward revisions to the saving ratio are primarily due to upward revisions to gross operating surplus and wages and salaries exceeding the upward revisions to household expenditure.

The saving ratio was on a broadly downward trend until 2013. The saving ratio fell from 12.1% in Quarter 2 (Apr to June) 1997 to 4.3% prior to the onset of the economic downturn in Quarter 1 (Jan to Mar) 2008.

Between Quarter 2 (Apr to June) 2009 and Quarter 4 (Oct to Dec) 2010, the saving ratio rose sharply, peaking at 11.5% in Quarter 1 (Jan to Mar) 2010. During this time, households experienced greater economic and financial uncertainty which typically results in households decreasing expenditure and increasing their level of saving.

Following the economic downturn, the saving ratio was slightly lower between Quarter 1 (Jan to Mar) 2011 and Quarter 3 (July to Oct) 2012, before falling noticeably once more to 5.8% in Quarter 1 (Jan to Mar) 2013.

Quarterly growth in final consumption expenditure averaged 0.9% between Quarter 4 (Oct to Dec) 2012 and Quarter 1 (Jan to Mar) 2016, exceeding the average quarterly growth in total resources of 0.6% over the same period. This has led to a relatively stable saving ratio, averaging 6.5% between Quarter 4 (Oct to Dec) 2012 and Quarter 1 (Jan to Mar) 2016.

Annually for 2015, the central government, local government, financial corporations and households and non-profit institutions serving households (NPISH) sectors were net borrowers. The public corporations, private non-financial corporations and rest of the world sectors were net lenders.

Compared with 2014, local government and households and NPISH switched from net lenders to net borrowers. All other sectors remain unchanged.

In Quarter 1 (Jan to Mar) 2016, the central government, local government, financial corporations and households and NPISH sectors were net borrowers. The public corporations, private non-financial corporations and rest of the world sectors were net lenders.

Compared with the previous quarter, public corporations and private non-financial corporations switched from net borrowers to net lenders. All other sectors remain unchanged.

Annually for 2015, households and non-profit institutions serving households (NPISH) net borrowing was £10.9 billion, following net lending of £0.3 billion in 2014. This switch to net borrowing was mainly due to rises in final consumption expenditure of £33.2 billion, taxes on income and wealth of £9.8 billion, gross capital formation of £4.8 billion and a fall in net property income of £3.4 billion, partially offset by rises in compensation of employees of £30.1 billion and gross operating surplus and mixed income of £10.5 billion.

Households and non-profit institutions serving households (NPISH) net borrowing was £4.4 billion in Quarter 1 (Jan to Mar) 2016, following net borrowing of £4.3 billion in Quarter 4 (Oct to Dec) 2015. This increase in net borrowing was mainly due to a rise in taxes on income and wealth of £2.9 billion, a rise in final consumption expenditure of £2.5 billion and a rise in gross capital formation of £1.3 billion, partially offset by rises in compensation of employees of £2.1 billion and net property income of £2.8 billion.

On an annual basis, households and NPISH net borrowing has been revised from net borrowing of £41.4 billion to net borrowing of £10.9 billion for 2015. The decreased net borrowing is due to upward revision to gross operating surplus and mixed income of £21.5 billion, compensation of employees of £8.2 billion, a downward revision to gross fixed capital formation of £4.4 billion and an upward revision to net property income of £2.8 billion, partially offset by an upward revision to final consumption expenditure of £6.8 billion.

On a quarterly basis, households and NPISH net borrowing has been revised from net borrowing of £12.3 billion to net borrowing of £4.3 billion for Quarter 4 (Oct to Dec) 2015. The same components are the main drivers of the revisions to the quarterly data as the annual for households and NPISH net borrowing in Quarter 4 (Oct to Dec) 2015.

Annually for 2015, private non-financial corporations’ net lending was £18.9 billion, following net lending of £33.0 billion in 2014. This decrease in net lending was mainly due to a fall in net property income of £15.9 billion and a rise of £2.1 billion in gross capital formation, partially offset by a rise of £4.7 billion in gross operating surplus.

Private non-financial corporations’ net lending was £1.1 billion in Quarter 1 (Jan to Mar) 2016, following net borrowing of £58 million in the previous quarter. The switch to net lending is mainly due to increase in gross operating surplus of £3.5 billion and a decrease in gross capital formation of £1.2 billion, partially offset by a decrease in net property income of £3.5 billion.

Annually for 2015, private non-financial corporations’ net lending has been revised from £32.3 billion to £18.9 billion. The revision is due to a decrease in gross operating surplus of £9.9 billion and an increase in gross capital formation of £7.5 billion, offset by an increase in net property income of £4.0 billion.

On a quarterly basis, private non-financial corporations has been revised from net lending of £5.1 billion to net borrowing of £58 million for Quarter 4 (Oct to Dec) 2015. This is mainly due to a fall in gross operating surplus of £3.7 billion and an increase in gross capital formation of £1.9 billion, offset by an upward revision to net property income of £0.5 billion.

Annually for 2015, financial corporations’ net borrowing was £25.5 billion, following net borrowing of £17.9 billion in 2014. This increase in net borrowing was mainly due to a fall in gross operating surplus of £3.7 billion and a rise in gross capital formation of £3.4 billion.

Financial corporations’ net borrowing was £9.1 billion in Quarter 1 (Jan to Mar) 2016, following net borrowing of £9.9 billion in the previous quarter. This reduction in net borrowing was driven by a £1.2 billion increase in net property income, partially offset by a rise in gross capital formation of £0.3 billion.

On an annual basis, financial corporations’ net borrowing has been revised from net borrowing of £11.0 billion to net borrowing of £25.5 billion for 2015. The upward revision to financial corporations’ net borrowing in 2015 is attributable to downward revisions to net property income of £8.8 billion and gross operating surplus of £6.8 billion, partially offset by a downward revision to gross capital formation of £1.1 billion.

On a quarterly basis, financial corporations’ net borrowing has been revised from £4.8 billion to net borrowing of £9.9 billion in Quarter 4 (Oct to Dec) 2015. This is mainly due to downward revisions in net property income of £3.7 billion and gross operating surplus of £1.5 billion, offset by small revisions across the accounts.

Annually for 2015, central government net borrowing was £77.5 billion, following net borrowing of £101.9 billion in 2014. This decrease in net borrowing was mainly due to rises in taxes on income and wealth of £11.8 billion, taxes on production of £6.8 billion, social contributions of £6.5 billion and net property income of £6.0 billion, partially offset by rise in social benefits other than those kind of £4.7 billion, subsidies of £1.5 billion and a fall in net capital transfers of £0.7 billion.

Central government net borrowing was £14.3 billion in Quarter 1 (Jan to Mar) 2016, following net borrowing of £18.2 billion in the previous quarter. This decrease in net borrowing was mainly driven by rises in net other current transfers of £4.4 billion and taxes on income and wealth of £2.5 billion, partially offset by a rise in final consumption expenditure of £0.9 billion and a fall in net capital transfers of £0.6 billion.

Annually, for 2015, local government net borrowing was £3.1 billion, following net lending of £0.1 billion in 2014. This was driven by falls in net current transfers of £3.4 billion and net capital transfers of £1.2 billion, partially offset by a fall in final consumption expenditure of £1.6 billion and a rise in taxes on income and wealth of £0.8 billion.

For 2015 annually, local government net borrowing was £3.1 billion revised from £3.9 billion in 2014, this was mainly due to small changes throughout the accounts.

Local government net borrowing was £2.2 billion in Quarter 1 (Jan to Mar) 2016, compared with net borrowing of £0.7 billion in the previous quarter. This was driven by a £2.9 billion decrease in other current transfers, offset by a £0.8 billion increase in net capital transfers and other small movements across the accounts.

Annually, for 2015, public corporations’ net lending was £0.6 billion, following net lending of £0.9 billion in 2014. This was mainly driven by rises in net acquisitions less disposals of non-produced non-financial assets of £0.5 billion and gross capital formation of £0.4 billion, partially offset by a rise in net capital transfers of £0.7 billion.

For Quarter 1 (Jan to Mar) 2016 public corporations switched to net lending of £0.1 billion compared with the previous quarter, where it was a net borrower of £33 million. This switch to net lending was mainly driven by a rise in net acquisitions of non-produced non-financial assets of £0.3 billion and a rise in gross operating surplus of £0.2 billion, partially offset by a fall in net capital transfers of £0.3 billion.

Annually, for 2015, rest of the world net lending was £101.4 billion, following net lending of £85.4 billion in 2014. This was driven by increases in net property income of £13.1 billion and external balance of goods and services of £2.3 billion, offset by a decrease in net other current transfers of £0.7 billion.

Rest of the world net lending was £32.4 billion in Quarter 1 (Jan to Mar) 2016, following net lending of £34.4 billion in the previous quarter. This was driven by a fall in net current transfers of £1.6 billion and net capital transfers of £0.6 billion, offset by a £0.4 billion increase in the external balance of goods and services.