By Mairi Spowage
Accurate and timely regional economic data is crucial for effective policymaking and informed decision-making at all levels. Understanding the economic performance of different regions and countries within the UK allows policymakers to identify areas of strength and weakness, target support to those most in need, and develop policies that promote balanced and sustainable growth. Businesses can also use this information to make informed decisions about investment, expansion, and resource allocation.
In recent years, the UK Office for National Statistics (ONS) has significantly invested in the development of new and novel sub-national statistics to support economic analysis and insight at a regional and country level. One of these innovations was the introduction of experimental Quarterly Country and Regional Gross Domestic Product (QCRGDP) estimates in 2019. These aimed to provide detailed, timely insights into economic performance at a regional level.
However, despite initial success, the series faced some challenges that led to a temporary suspension in 2023. ESCoE was then commissioned to complete a review of its methods and processes.
ONS also historically used separate innovative methods developed via ESCOE. This created nowcast data for quarterly regional estimates in near-real time as an alternative to the existing QCRGDP VAT based estimates. The review does not consider or evaluate these methods.
This blog explores the key findings from the review and outlines key recommendations to enhance the reliability and value of the QCRGDP data for policymakers and other users.
Key findings
The QCRGDP was designed to offer a clearer picture of the economic performance of regions across England and Wales, complementing similar data that is already produced by the Scottish Government for Scotland and NISRA (Northern Ireland Statistics and Research Agency). By leveraging administrative data, particularly VAT returns, it sought to complement traditional survey data to estimate GDP by region and industry.
However, the experimental nature of the series, coupled with its reliance on administrative data, gave rise to some challenges:
- Volatility and revisions: One of the primary issues was volatility in the estimates and sometimes large revisions. Such unpredictability undermined user confidence and decision-making.
- Alignment with other data: QCRGDP estimates were constrained to align with Annual Regional Gross Value Added (ARGVA) data and UK Quarterly GDP (UKQGDP). While this ensured consistency, it also introduced complexities that could amplify revisions.
- Source data suitability: Questions arose about the suitability of some source data, such as VAT returns, for tracking short-term regional economic changes. For some industries, these sources did not correlate well with annual data.
The review also contains an analysis of the different approaches to estimation of quarterly growth by the ONS for UKQGDP, for QCRGDP and for Scotland by the Scottish Government. This highlights areas of difference that could be explored across producers to determine the most appropriate approach.
Recommendations for improvement
The review outlines several recommendations to address these issues and rebuild user confidence:
Short-term recommendations:
- Primary constraint on ARGVA: The review proposes that revisions to historical data should only occur annually, in line with the release of updated ARGVA figures. This approach mirrors the practices used for UK National Accounts and aims to provide greater stability.
- Strict revision windows: Introducing defined revision windows would limit the frequency of changes to historical data. For instance, past data would only be revised once a year when new ARGVA data are released, while more recent data (the “tail”) would align with UKQGDP.
- Source data assessment: Before reintroducing the series, the ONS should evaluate the suitability of source data. Data that show weak correlation with annual figures should minimised to avoid introducing noise into the estimates.
Medium- and long-term recommendations:
- Industry-by-industry method review: A detailed review of methods for each industry is needed to identify optimal approaches. This could include greater use of regionalised business survey data where VAT data prove inadequate, particularly for large businesses. Overall, though, it is important that data producers across the UK are involved in discussions about the optimal approach to the measurement of quarterly GDP at the country and regional level.
- Development of new data sources: To enhance long-term accuracy, the ONS should explore the development of new regional data sources that are equivalent to those used at the national level. For example, better data on construction activity could address current gaps.
Moving forward
The recommendations outlined in the review should provide a clear roadmap for improving the quality and reliability of the estimates produced through QCRGDP. Involving users and leveraging expertise across devolved governments and academic institutions will enhance the quality of statistics and user confidence in the outputs.
ESCoE blogs are published to further debate. Any views expressed are solely those of the author(s) and so cannot be taken to represent those of the ESCoE, its partner institutions or the Office for National Statistics.
