Annex 1 - Definitions

General – Interim adjusted Labour Force Survey (LFS) estimates

National and regional mid-year population estimates (MYE) for 2004 were published by ONS in September 2005 and revised projections for 2005 and later were published in October 2005. These revised population estimates have been incorporated into LFS estimates using interim re-weighting adjustment methodology.  Data in Table 15(a) are taken from the LFS micro-data, which have not been adjusted. It is planned that modernised LFS processing systems will be introduced that will enable future population data to be incorporated into revised LFS micro-data much more swiftly than is now possible. Currently the aim is to complete this part of ONS’s statistical modernisation work by mid 2007.

1. Gross Value Added and household disposable income per head

Gross Value Added (GVA)

The estimates published here have been calculated on the basis of the European System of Accounts 1995 (ESA95).  GVA is the major component of gross domestic product (GDP).  Under ESA95 the difference between GVA and Gross Domestic Product (GDP) is that GDP includes taxes (less subsidies) on products (mainly Value Added Tax) while GVA does not.  ONS does not presently regionalise taxes on products.

These indicators contain two separate measures of economic activity that fall under the broad definition of ‘GVA’.  The data in Tables 1(a) and 2(a) and (b) taken from the regional economic accounts, produced by ONS, which are calculated based on a series of economic and labour market surveys.  The same source is used for the denominators in Tables 3(c), 4(a)(ii), 14(a) and 14(c). In some cases (Tables 2(a), 3(c), 14(a) and 14(c)) it should be noted that they exceed published GVA estimates and those used in other productivity measures because the adjustment for Financial Intermediation Services Indirectly Measured (FISIM) has not been made.

The second set of GVA data that appear in Table 3(b) are based on a single survey: the Annual Business Inquiry/2 (ABI/2).  The GVA estimates taken from the regional economic accounts cover a greater portion of the economy and are a much broader measure of regional economic activity than the ABI series.  In particular, the ABI financial data do not cover Section J (Financial intermediation), Section L (Public Administration and Defence; Compulsory Social Security) and the majority of Section A (Agriculture, hunting and forestry).  In sections M (Education), and N (Health and social work), local and central government are excluded.  Section N also excludes public sector hospitals, medical and dental practises and some charitable sociable work.

There are also some discontinuities in coverage over time; ABI did not cover Section B (Fishing) and Division 02 (Forestry) before 2000, or any part of Section A before 2001. More information on ABI coverage, variables and methodology can be obtained from www.statistics.gov.uk/abi/.

Regional GVA estimates presented in this publication are workplace-based. This means that the earnings of employees who commute across regions are allocated to the region where they work and not where they live.  In practice, residence and workplace-based GVA differ only in London, the South East, and the East of England, as ONS does not make adjustments for other regions.

Regional GVA data are subject to adjustments in three key areas: adjustments for coverage; adjustments needed to move the accounts onto an ESA 95 basis; and adjustments for balancing purposes.  This year New Earnings Survey data were replaced with data from the Annual Survey of Hours and Earnings. Estimates of average weekly pay using the ASHE methodology are higher than those previously taken directly from NES for 1998 to 2003.  GVA estimates used in UK figures include ex-regio.

Gross disposable household income (GDHI)

The household sector includes traditional households within the UK, in addition to people living in institutions such as retirement homes, hospitals and prisons.  This sector also includes the activity of the non-profit making units that provide a service to households, for example charities and most universities. 

GDHI is defined as total household income less payments of current taxes on income and wealth (such as income and property taxes) and social contributions such as pension and National Insurance deductions.  This series is compiled under the latest ESA95 framework.

It should be noted that neither GVA nor GDHI are the same as ‘wealth’.  It is possible for a household to possess substantial material wealth and assets while receiving a comparatively low level of income.

2. Labour Productivity

Labour productivity in manufacturing and other industries is calculated by dividing workplace-based GVA for manufacturing, services and the ‘other industries’ sector by the number of workforce jobs within each sector. The estimates of GVA are drawn from the regional economic accounts produced by the Regional Accounts branch in ONS.

Estimates of the total number of workforce jobs are calculated by summing employee jobs (mainly collected through postal surveys of employers), self-employment jobs from the Labour Force Survey, those in HM Forces and Government-supported trainees.  These same sources are used to calculate the total number of jobs filled.  The count of jobs includes both full- and part-time jobs. 

This year, for the first time, regional estimates of GVA per filled job and GVA per hour worked have been calculated using GVA figures as published in the regional accounts.  The annual hours figure that is used in the compilation of the GVA per hour worked index is an average of the four quarters’ Labour Force Survey (LFS) data for Employees and Self employed, and annual data for Government Supported Trainees (from Workforce Jobs and the LFS), and HM Forces data provided by the Ministry of Defence.

The estimates of GVA are drawn from the regional economic accounts produced by the Regional Accounts branch in ONS.

3. Manufacturing investment and output by UK and foreign-owned companies

Gross Value Added (GVA) from the Annual Business Inquiry is used to gauge the output of foreign-owned companies.  For a further description of GVA, please refer to section 1 of the Definitions.  Estimates of Gross Value Added shown here will not be exactly the same as those published in the Regional Accounts, the basis of tables 1 and 2.

Net Capital Expenditure is used as a proxy for investment and is calculated by adding the value of new building work acquisitions, less disposals of land, and existing buildings, vehicles and plant and machinery.

Since 1998 the data are taken from the Annual Business Inquiry/2 (ABI/2), an integrated survey of accounting information from businesses and other establishments.  ABI does not cover the whole of the economy (see section 1 of Definitions for details).

Investment as a percentage of GVA has been calculated, as last year, using the GVA data produced by the Regional Accounts branch of ONS.

4. Exports of goods

The counts in Table 4(b)(ii) of companies exporting goods to EU and outside the EU are not fully comparable.  Company details for businesses’ export transactions with non-EU countries are mandatory and are automatically recorded by HM Revenue and Customs.  The counts for exports to non-EU countries are taken from these.  However, because of the Single European Market, there is far less recording of companies exporting to the EU.  Supplementary declarations for companies exporting to the EU are recorded through the Intrastat system, which only picks up businesses exporting goods with a value in excess of £221,000 (during 2005) to the EU.  Hence, the company counts of EU exporters will be artificially low as compared to the count for exporters to the rest of the world.  Note that companies who export to both EU countries and the rest of the world will appear more than once in the company count, that is, in both parts of table 4(b). 

Comparisons between regions should be interpreted with care because the value added of an export product may have been generated in areas other than the region from which the item was actually exported.

Export trade is assigned to a region through the postcode associated with a company’s VAT registration.  Some adjustments have been necessary for exports to the EU to ensure that manufacturing that takes place at branch premises is properly allocated to the region where the branch is situated.  Exports to countries outside the EU already contain a regional coding.

Exports of goods by employee job are DTI estimates using HM Revenue and Customs data for value of exports of goods and employee jobs as a denominator.  The employee jobs data were drawn from the workplace-based Short-Term Employment Survey (STES) produced by ONS.

5. Average earnings

Estimates of average earnings to 2003 were drawn from the New Earnings Survey (NES) and include remuneration for overtime worked during the survey period and shift pay, but not other payments such as profit shares or annual bonuses.  NES data are collected in April of each year. The estimates may be affected by seasonality.

In 2004, a new survey was developed by ONS to replace the NES called the Annual Survey of Hours and Earnings (ASHE).  The ASHE includes improvements to the coverage of employees and to the weighting of earnings estimates.  The data variables collected remain broadly the same, although an improved questionnaire will be introduced for the 2005 survey.  The change in methodology means that statistics on pay and hours published from the ASHE, including the calculation of ONS's low pay statistics, are discontinuous with previous NES surveys.

To improve coverage and make the survey more representative, supplementary information was collected for the 2004 ASHE on businesses not registered for VAT and for people who changed or started new jobs between sample selection and the survey reference period.  The 2004 ASHE results are therefore discontinuous with the results for 2003, for which no supplementary information was collected.  However, for 2004 two sets of results are available; the headline results that include supplementary information and results that exclude this information.  These second set of results are given solely for comparison to earlier results.  Growth rates between 2004 and 2003 are only given for the data that exclude supplementary information.

Estimates of average earnings from the NES are arithmetic means, which can be distorted by a few extremely high or low values.  There tend to be a small number of individuals at the top end of the distribution with extremely high earnings, therefore the mean can become unrepresentative.  Average earnings estimates from the ASHE are now presented as medians.  This can be thought of as the ‘middle value’ if all hourly earnings are placed in order of magnitude, therefore the median is not skewed by extreme values and, in many respects, can be considered representative.

6. Employment and employee jobs

Tables 6(a) and 6(b) detail the number and percentage of people of working age in employment who are resident in each region or country.  The data contained in both tables are drawn from the Labour Force Survey (LFS) and are interim adjusted and seasonally adjusted.  People aged 16 and over are classed as employed by the LFS if they have worked for at least one hour in the reference week or are temporarily away from a job (e.g. on holiday).

The data contained in Table 6(c) are drawn from the Short-Term Employment Survey (STES) carried out by ONS and show the number and percentage of employee jobs on a workplace basis.  The STES measures the number of employee jobs on a quarterly basis and unlike the data in Tables 6(a) and 6(b) does not include self-employed people.  Additionally, the data for regions in Table 6(c) may not sum to UK or England totals because of approximations in allocating national estimates to regions.

7. Unemployment

This is based on the International Labour Organisation (ILO) definition of unemployment which includes as unemployed all those who are out of work, want a job, have actively sought work in the last four weeks prior to interview and are available to start work within the next fortnight, or are out of work and have accepted a job they are waiting to start in the next fortnight.  The data are from the LFS, interim adjusted and seasonally adjusted.

The unemployment rate is the percentage of economically active people who are unemployed.  To be economically active, a person must either be in employment (see definition under 6. Employment and employee jobs) or unemployed (ILO definition).

8. Claimant count

The claimant count is based on the number of people claiming Jobseeker’s Allowance (JSA) and National Insurance credits at Jobcentre Plus local offices on a particular day each month.  People claiming JSA must declare they are out of work, available for, capable of and actively seeking employment during the week in which the claim is made.  Claimant count rates express the number of JSA claimants as a percentage of the sum of claimants and workforce jobs in the area.  The number of workforce jobs is comprised of employee jobs, agricultural jobs, HM armed forces, self–employed and persons on government–supported training schemes.

The figures for long-term JSA claimants (12 months or more) only account for computerised claims – around 1 per cent of claims are dealt with manually, and these are excluded.

9. DfES Public Service Agreement targets (England only)

In July 2004, the Department for Education and Skills (DfES) launched a ‘Five Year Strategy for Children and Learners’.  This, along with the Spending Review in 2004, outlined a number of objectives for the Department, two of which are relevant to the statistics in this publication, along with associated milestones and targets for delivery:

DfES Objective 3      (England)

All young people to reach age 19 ready for skilled employment or higher education.

Relevant Targets/Milestones

Raise standards in schools and colleges so that:

- By 2008, 60 per cent of those aged 16 to achieve the equivalent of 5 GCSEs at grade A* to C; and in all schools at least 20 per cent of pupils to achieve this standard by 2004, rising to 25 per cent by 2006 and 30 per cent by 2008;

- Increase the proportion of 19 year olds who achieve at least level 2 by 3 percentage points between 2004 and 2006, and a further 3 percentage points between 2006 and 2008, and increase the proportion of young people who achieve level 3; and

- Reduce the proportion of young people not in education, employment or training by 2 percentage points by 2010.

DfES Objective 4 (England)

Tackle the adult skills gap.

Relevant Targets/Milestones

Increase the number of adults with skills required for employability and progression to higher levels of training through:

- Improving the basic skill levels of 2.25 million adults between the launch of Skills for Life in 2001 and 2010, with a milestone of 1.5 million in 2007; and

- Reduce by at least 40 per cent the number of adults in the workforce who lack NVQ 2 or equivalent qualifications by 2010 (baseline is Autumn 2001 figure of 71.6%).  Working towards this, one million adults in the workforce to achieve level 2 between 2003 and 2006

The Learning and Skills Council also share these targets with the DfES.

10. Proportion of Income Support Claimants

Income Support (IS) claimants can be grouped into Pension Credit, Disabled, Lone Parents and Other.  From October 2003, IS has been paid to a person who is aged 16 to 59 years old, is not working 16 hours or more a week and whose income is less than what is considered necessary to live on. 

Pension Credit was introduced in October 2003 for those aged 60 and over, replacing the Minimum Income Guarantee benefit.  Former MIG claimants are all entitled to Pension Credit, but Pension Credit also brings in pensioner households whose incomes are slightly above the eligibility levels for MIG and who have saved money in an occupational or personal pension, or a savings account, or both. 

While MIG allowed either partner to claim, Pension Credit needs the partner aged 60 or over to be the claimant.  Households where the partner aged under 60 was the MIG claimant were invited to make a new claim with the partner aged 60 or over as the Pension Credit claimant.  For about 15,000 of these households, no new claim was received as of November 2003.  They continue to receive IS, but are not currently included in Table 10(a) or Table 10(b).  Over time, new claims will be made for all these households and they will move into Table 10(b). 

Benefits statistics for the GB regions have been sourced from the newly published Work and Pensions Longitudinal Survey (WPLS) based on 100% of claimants.  Previous figures had been taken from a 5% sample of data.  Background data for the featured tables can be accessed via the online Tabulation Tool (http://193.115.152.21/100pc/tabtool.html).  Northern Ireland data is currently based on a 5% sample of claimants and is not directly comparable with the rest of the UK.

11. Income deprivation

Table 11 and Chart 11 provide the percentage of the population within families that are dependent on Income Support (IS) benefit.  The percentage for each of the English regions is included alongside the proportion for the 20 per cent of the population living within the ‘most deprived’ areas within each region and England.

For this indicator Super Output Area (SOA), lower layer, deprivation has been defined according to the Indices of Multiple Deprivation 2004 (IMD 2004).  The IMD 2004 is an index for areas in England consisting of 37 indicators of deprivation that fall under 7 broad dimensions: income, employment, health and disability, education training/skills, barriers to housing and services, crime and living environment.

For this indicator, the number of IS ‘dependants’ reflect the number of persons living in families where at least one member is receiving income support benefit.  The data are derived by the DTI using the Income Strand of the IMD 2004 as well as Census 2001 population and ward level estimates of IS and dependents, all taken from the Neighbourhood Statistics web site.

12. Business registration and survival rates

VAT registrations are not synonymous with business start-ups; some registrations are the results of changes in ownership or legal status of a business.  In Great Britain the total number of business start-ups is estimated to be around twice the number of registrations for VAT.  It is estimated that between 1995 and 1999 there were around 530,000 businesses created.

Businesses with annual turnover below the VAT threshold (£58,000 at the end of 2004) may decide not to register for VAT for a variety of reasons, and so would not be included in these estimates.

The data are compiled from the Inter-Departmental Business Register (IDBR).  The IDBR is a structured list of around 2 million units in the UK available for the selection, mailing and grossing of statistical inquiries.  It is supplied by the ONS and is mainly used as a sampling frame for official business surveys.  The estimates refer to the location of the head office or main centre of business activity.  If a new factory owned by a business is located elsewhere in the UK then it does not appear as a new registration.  Industry sectors have been divided using Standard Industrial Classification[1] (SIC) codes, where service industries are SIC sections G to O, manufacturing industry is SIC section D and other industries are SIC sections A, B, C, E & F.

Care should be taken when comparing the rates of VAT registrations/population or stock of businesses between regions since the estimates can be influenced by variations in commuting, industry mix and differences the profile of businesses between regions as well as ‘actual’ changes over time.  In addition, there are areas where the stock of businesses is relatively low, so the rate of business formations could be artificially inflated.

The ‘survival’ rates contained in the Table 12(c) are not derived from actual business closures.  Firms can be removed from the VAT register for a variety of reasons including: falling turnover, mergers, take-over and relocation in addition to the business actually ceasing trading.  However, registrations and de-registrations are strongly correlated with the underlying trends in business ‘birth’ and ‘death’ rates.

13. Entrepreneurship

The Global Entrepreneurship Monitor UK (GEM UK) is part of a study comparing rates of Total Entrepreneurial Activity (TEA) internationally.  The survey interviews a stratified representative sample of individuals across the UK on various aspects of entrepreneurship.

The survey takes a broad definition of entrepreneurship as ‘any attempt at new business or new venture creation, such as self-employment, a new business organisation or the expansion of an existing business by an individual, teams of individuals, or established business’.

14. Research & Development, and employment in high and medium-high technology industries

The survey of Business Enterprise Research & Development (BERD) is conducted by the ONS annually.  It is based on a sample of around 4,000 businesses across the UK that are identified as performing Research & Development (R&D) activity by the Annual Business Inquiry.  Included are all ‘large’ R&D performers, plus a sample of smaller businesses that are deemed as ‘lesser’ R&D performers.  Government organisations, higher education establishments and registered charities are not included within the survey sample.  Gross Domestic Expenditure on Research and Development (GERD) is the most reliable estimate of national R&D spending, drawing together information on R&D spending in the public and private sectors.

It is important to note that this survey assesses the value of R&D performed by businesses in the UK, irrespective of where the funding for the R&D activity came from (i.e. business, government or foreign funding).  It also covers the R&D activity by UK firms on UK territory outside of the mainland (i.e. North Sea oil exploration). The sample size and response rates (at around 94 per cent) are sufficient to allow dissemination of R&D activity within businesses down to regional and sector level.

High and medium-high technology industry employee jobs

These estimates are drawn from the Annual Business Inquiry and the Northern Ireland Census of Employment (carried out every two years).  The definition of high technology industry itself is based on that specified by the Organisation for Economic Cooperation and Development (OECD) in 1997.  The following table shows the sectors covered by the definition ‘high technology’ and ‘medium-high technology’ and which SIC92 class or sub-class corresponds to each.

Co-operation and new/improved products

The Community Innovation Survey (CIS) is a survey conducted every 4 years by EU member states.  The latest UK version was conducted by the DTI in 2005 (CIS4).  Over 15,000 businesses responded to a postal questionnaire on their innovation activities between 2002-2004.  The survey covers aspects of innovation including the constraints faced by businesses, the impact of innovation on businesses and features of the wider innovation process.

The sectoral coverage of the Innovation Survey in 2005 was widened considerably to include a larger portion of the service sector. The additional sectors are: Sale, Maintenance and Repair of Motor Vehicles, Retail Trade, Hotels and Restaurants.  Furthermore, other differences with the previous survey; such as in the sample design and weighting methodology, implies that results from CIS3 and CIS4 are not strictly comparable.

15. Transport

In Chart 15(a), the mode of transport used to travel to work is defined as follows:

Private - car, van, mini-bus, motorcycle.
Public - bus, coach, national rail and other rail (including underground).

In Table 15(b), the estimates are for those roads surveyed in all three years (1998, 2001 and 2003), rather than the full sample for each individual year.

16. Industrial property and office rental costs

Type 3 - Industrial / Warehouse units:  Steel framed on concrete base, concrete block or brickwork to 2m, metal PVC covered cladding above.  Eaves height 4.3-5.5m with lined roof.  10-15 per cent office content.  Detached on own site with private parking & loading facilities.

Type 1 Office Accommodation: Town Centre location. Self contained suite over 1,000 m² in office block erected in last 10 years, good standard of finish with a lift and good quality fittings to common parts.  Limited car parking available.

17. Derelict and vacant land

The information covering previously developed land now vacant or derelict are drawn from the National Land Use Database (NLUD) ( www.nlud.org.uk ). These data are based on a periodic survey of unitary and local authorities covering vacant and derelict sites and other previously developed land and buildings that may be available for redevelopment.  Latest data refer to 2004.

Table 17 covers several distinct types of vacant or derelict land:

Previously developed vacant land: Land previously developed and is now vacant which could be developed without treatment.  Treatment includes: demolition, clearing of fixed structures, foundations levelling etc.

Derelict land and buildings:  Land so damaged by previous industrial or other development that it is incapable of beneficial use without treatment.  This includes abandoned or unoccupied buildings in an advanced state of disrepair.

All land that is unused or may be available for redevelopment: Comprises previously developed vacant and derelict land: vacant buildings; land or buildings currently in use, which are allocated in a local plan for any developed use, have planning permission for any use (including single residential dwellings with planning permission for at least one additional dwelling) or with known potential for redevelopment.