UK economic output to be revised up after ONS updates

Testing blood samples in a lab Among the biggest changes is the treatment of spending on research and development

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The UK's economic output will be revised up as a result of changes to the way gross domestic product (GDP) is measured by the Office for National Statistics (ONS).

Changes include the treatment of research and development and pensions.

The ONS has calculated that the changes mean GDP for 2009 will be revised up by 4.6%, or £65bn.

The changes will apply retrospectively, but 2009 is the most recent year that has had its figures updated so far.

How the changes to the absolute level of GDP will affect the figures for GDP growth, which is the most closely-watched figure on the UK economy, will be announced on 30 June.

Most of these changes have been made by statistical bodies across the world to help make their data comparable.

Of the £65bn increase to GDP for 2009, £22bn comes from the decision that spending on research and development should be treated as an investment by companies, not just as normal spending.

A contribution of £23.6bn comes from changes to the way the ONS treats non-profit institutions that provide services to households. These include organisations such as charities and religious institutions, which often provide their services for free, but the cost of providing the services is still included in the national accounts.

Another £3.5bn comes from the reclassification of government spending on "military weapons of destruction and the equipment needed to deliver them", which also now count as a capital investment.

There will be £9.7bn added due to the inclusion of illegal drugs and prostitution, as discussed in a previous article on calculating the sex and drugs economy.

The level of GDP will be raised £5.1bn by new treatment of defined benefit pension schemes (the ones where you know how much money you will end up receiving), which will also have the effect of doubling the country's savings ratio.

There will also be small effects from removing the minimum price at which buying small tools can be considered to be an investment, as well as changes to assumptions about how much will have to be spent decommissioning oil, gas and nuclear infrastructure.

The ONS will reveal more details of all of the changes to the calculation of GDP, leading up to the publication of the Blue Book on 30 September, which will contain the most up to date figures calculated in the new way.

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