National Statistical

As part of ONS’s transformation plans we’re working to introduce new sources of data that will help improve the quality, detail and timeliness of the UK’s key economic statistics. This includes using VAT returns as an additional source of data for calculating Gross Domestic Product (GDP).

The main short-term data source currently is ONS monthly business survey (MBS), which gathers information from around 45,000 firms per month. While this allows us to calculate high quality, relatively timely, estimates of economic performance at a UK level, the size of the survey does not allow us to publish detailed data either at industry or local level.

Also, when other sources of information like the annual tax data from HMRC become available later in the process they may be the cause of revisions. While GDP revisions are unbiased and usually small, VAT turnover can help improve that performance further.

“ONS now has access to VAT returns from 2.2 million companies per quarter…”

ONS now has access to VAT returns from 2.2 million companies per quarter, allowing for an almost complete picture of the economy to be published within five months of the end of the period, along with detailed industry and local data available much more quickly than previously possible.

Working with this kind of big, complex and detailed dataset is not easy, but we’re making good progress. We’re on track to use these VAT returns as a key source for calculating GDP by the end of this year. We plan on initially using VAT for small and medium-sized companies (up to 99 employees), whose contribution to the overall economy is significant. We do not initially plan to use VAT for larger firms, as they are well covered by the MBS.  In addition, larger businesses typically have complex structures and can consist of a holding company that reports its VAT and activity for several operating companies. Operating companies within these complex business structures are often spread across many industries.

Today we have published a new article, available here, giving more detail about our plans. We have also published low level data for the sports, amusement and recreation sectors of the economy, to highlight the opportunities this new source of data offers.

While this work is challenging, it is also imperative if ONS is to continue to produce the high- quality data that decision makers need in a rapidly evolving modern economy.

Lewis Edwards is Head of VAT Development at ONS