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VAT Returns of Small Firms Incorporates to UK GDP Calculation


November, 21 2017
watermark Economic news

The Office for National Statistics evaluates the British economy by overhauling its way which includes huge VAT amounts from smaller companies for the first time. In the previous survey, the gross domestic product of the country was mainly based on the turnover of 45,000 largest firms. Since December, the data from the third of Britain’s 1.8m VAT returns will also be included in the turnover for the calculation of official GDP results.

With this, assessing the UK economic growth will have dramatic changes for this could provide further insights from particular areas and industries. A higher proportion of VAT returns involves small businesses with a total of 98pc of UK companies.


In the past estimates of GDP, pubs and restaurants sectors, particularly  "food and beverage service activities" have high levels according to the 172 monthly poll and 28,000 tax returns.

According to the ONS, a much more detailed data will provide a comprehensive output of pubs, restaurants, and takeaways among various regions. The first new estimate encompasses VAT returns coming from small and medium businesses including 100 or fewer headcounts. While survey for large companies will remain to be part of the data gathering and ONS’s report. As there is only 20 percent of smaller firms in the UK economy, which means that the data accumulated by the national statistical institute will be more accurate but the overall GDP result could possibly be not altered despite its inclusion because major firms have a greater impact.


Based on the perspective of PwC’s Economist John Hawksworth, it would be better if the Statistics authority will release GDP forecast “ with and without (the) use of new VAT data" respectively, in order for the public to understand the difference. On the other hand, ONS  chief economist Nick Vaughan announced that including additional information will be a gradual process.


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