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Statistical bulletin: Balance of Payments, Quarter 1 (Jan to Mar) 2015 This product is designated as National Statistics

Released: 30 June 2015 Download PDF

Main points

  • The United Kingdom’s (UK) current account deficit was £26.5 billion in Quarter 1 (Jan to Mar) 2015, down from a revised deficit of £28.9 billion in Quarter 4 (Oct to Dec) 2014. The deficit in Quarter 1 (Jan to Mar) 2015 equated to 5.8% of gross domestic product (GDP) at current market prices, down from 6.4% in Quarter 4 (Oct to Dec) 2014.
  • The narrowing of the current account deficit was due to a narrowing in the deficit on the secondary income account and the primary income account, partially offset by a widening in the deficit on the trade account.
  • The secondary income deficit narrowed to £5.5 billion in Quarter 1 (Jan to Mar) 2015, from £7.7 billion in Quarter 4 (Oct to Dec) 2014. This was mainly due to the deficit in general government narrowing by £2.0 billion, to £4.5 billion in Quarter 1 (Jan to Mar) 2015.
  • The trade deficit widened to £7.5 billion in Quarter 1 (Jan to Mar) 2015, from £6.9 billion in Quarter 4 (Oct to Dec) 2014. This was due to a slight widening in the trade in goods deficit, and a slight narrowing in the trade in services surplus.
  • The financial account recorded net inward investment of £24.3 billion during Quarter 1 (Jan to Mar) 2015.
  • The international investment position recorded UK net liabilities of £289.3 billion at the end of Quarter 1 (Jan to Mar) 2015.

Summary

The balance of payments summarises the economic transactions of the UK with the rest of the world. These transactions can be broken down into 3 main accounts: the current account, the capital account and the financial account.

The current account comprises the trade in goods and services account, the primary income account and secondary income account. The difference in the monetary value of these accounts is known as the current account balance. A current account balance is in surplus if overall credits exceed debits, and in deficit if overall debits exceed credits.

The sum of the current and capital account balances are equal to the balance of the financial account. As the capital account is relatively small in comparison, the current account and financial account can be said to be counterparts.

The current account balance plus the capital account balance measures the extent to which the UK is a net lender (that is, in surplus) or net borrower (that is, in deficit). The UK has run a combined current and capital account deficit in every year since 1983, and every quarter since Quarter 3 1998.

Figure 1: UK current account balances (seasonally adjusted), Quarter 2 2012 to Quarter 1 2015

Figure 1: UK current account balances (seasonally adjusted), Quarter 2 2012 to Quarter 1 2015

Notes:

  1. Q1 refers to Quarter 1 (Jan to Mar), Q2 refers to Quarter 2 (Apr to June), Q3 refers to Quarter 3 (July to Sept) and Q4 refers to Quarter 4 (Oct to Dec).

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Quarter 1 2015 overview

In Quarter 1 2015, the UK was a net borrower of £26.4 billion, down from £28.4 billion in Quarter 4 2014. This was due to the total secondary income and total primary income deficits narrowing by £2.1 billion and £0.8 billion respectively. Slightly offsetting this was a widening in the deficit on total trade of £0.6 billion.

The narrowing in the total secondary income deficit was mainly due to a fall of £2.0 billion in the general government deficit, from £6.5 billion in Quarter 4 2014 to £4.5 billion in Quarter 1 2015.

The decrease in the total primary income deficit was mainly due to the total investment income deficit narrowing by £0.8 billion, from £14.0 billion in Quarter 4 2014 to £13.2 billion in Quarter 1 2015.

The widening in the total trade deficit was due to a widening of £0.3 billion in the trade in goods deficit and a narrowing of £0.2 billion in the trade in services surplus. The widening in the trade in goods deficit was due to exports falling by £2.2 billion and imports falling by just £1.9 billion. The narrowing in the trade in services surplus was due to imports rising by £0.5 billion and exports rising by just £0.2 billion.

Notes for Summary:

Throughout this release Quarter 1 refers to January to March, Quarter 2 refers to April to June, Quarter 3 refers to July to September, and Quarter 4 refers to October to December.

 

Current account balances as percentage of GDP

Figure 2: UK balances as percentage of GDP, Quarter 2 2012 to Quarter 1 2015

Figure 2: UK balances as percentage of GDP, Quarter 2 2012 to Quarter 1 2015

Notes:

  1. Q1 refers to Quarter 1 (Jan to Mar), Q2 refers to Quarter 2 (Apr to June), Q3 refers to Quarter 3 (July to Sept) and Q4 refers to Quarter 4 (Oct to Dec).

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The current account deficit equated to 5.8% of gross domestic product (GDP) at current market prices in Quarter 1 2015, compared with 6.4% in Quarter 4 2014. The deficit on trade in goods and services was equivalent to 1.6% of GDP in Quarter 1 2015, compared with 1.5% in Quarter 4 2014. The deficit on primary income equated to 2.9% of GDP in Quarter 1 2015, compared with a deficit equivalent to 3.2% in Quarter 4 2014. The deficit on secondary income equated to 1.2% of GDP in Quarter 1 2015, compared with 1.7% in Quarter 4 2014.

Notes for Current account balances as percentage of GDP

  1. Throughout this release Quarter 1 refers to January to March, Quarter 2 refers to April to June, Quarter 3 refers to July to September, and Quarter 4 refers to October to December.

Current account with EU and non-EU countries (Table C)

Figure 3: UK current account balances with EU and non-EU countries (seasonally adjusted), Quarter 2 2012 to Quarter 1 2015

Figure 3: UK current account balances with EU and non-EU countries (seasonally adjusted), Quarter 2 2012 to Quarter 1 2015

Notes:

  1. Q1 refers to Quarter 1 (Jan to Mar), Q2 refers to Quarter 2 (Apr to June), Q3 refers to Quarter 3 (July to Sept) and Q4 refers to Quarter 4 (Oct to Dec).

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A deficit of £29.9 billion was recorded with the EU in Quarter 1 2015, compared with a deficit of £30.6 billion in Quarter 4 2014. This decrease was mainly due to a narrowing in the deficit on the primary and secondary income balances, these were slightly offset by a widening in the deficit on the total trade balance. The current account surplus with non-EU countries in Quarter 4 2014 of £1.6 billion widened to £3.3 billion in Quarter 1 2015. The widening was mainly due to the deficit on secondary income narrowing and the surplus on total trade widening. Slightly offsetting these was a widening in the deficit on the primary income balance.

Notes for Current account with EU and non-EU countries (Table C)

  1. Throughout this release Quarter 1 refers to January to March, Quarter 2 refers to April to June, Quarter 3 refers to July to September, and Quarter 4 refers to October to December.

Trade in goods (Table E) and services (Table F)

Figure 4: UK trade in goods and services balances (seasonally adjusted), Quarter 2 2012 to Quarter 1 2015

Figure 4: UK trade in goods and services balances (seasonally adjusted), Quarter 2 2012 to Quarter 1 2015

Notes:

  1. Q1 refers to Quarter 1 (Jan to Mar), Q2 refers to Quarter 2 (Apr to June), Q3 refers to Quarter 3 (July to Sept) and Q4 refers to Quarter 4 (Oct to Dec).

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Trade in goods covers transactions in general merchandise for which changes of ownership occur between UK residents and the rest of the world. General merchandise (with some exceptions) refers to moveable goods.

The trade in goods deficit in Quarter 1 2015 was £30.4 billion, compared with £30.1 billion in Quarter 4 2014. The widening in the deficit was due to exports falling by £2.2 billion while imports fell by just £1.9 billion.

The deficit on finished manufactured goods widened by £0.9 billion to £17.2 billion, and that on other fuels widened by £0.3 billion to £1.5 billion between Quarter 4 2014 and Quarter 1 2015. These were partially offset by the deficit on semi-manufactured goods narrowing by £0.5 billion to £3.7 billion, and the surplus on unspecified goods rising by £0.2 billion to £0.6 billion.

Trade in services covers the provision of services by UK residents to non-residents and vice versa. It also covers transactions in goods which are not freighted out of the country in which transactions take place, for example, purchases for local use by foreign forces in the UK, or by UK forces abroad and purchases by tourists. Transactions in goods which are freighted into or out of the UK are included under trade in goods.

The trade in services surplus was £22.9 billion in Quarter 1 2015, a decrease of £0.2 billion from Quarter 4 2014. Exports were £0.2 billion higher than Quarter 4 2014, at £55.2 billion, with increases mainly in the transport services, personal, cultural and recreational services, and financial services of £1.0 billion, £0.4 billion and £0.4 billion respectively. Partially offsetting these was a decrease in the other business services of £1.5 billion.

Imports increased by £0.5 billion to £32.3 billion, mainly due to increases in intellectual property services, financial services, and manufacturing and maintenance services of £0.3 billion, £0.3 billion and £0.2 billion respectively. Partially offsetting these was a decrease in government services of £0.5 billion.

Notes for Trade in goods (Table E) and services (Table F)

  1. Throughout this release Quarter 1 refers to January to March, Quarter 2 refers to April to June, Quarter 3 refers to July to September, and Quarter 4 refers to October to December.

Primary income account (Table G)

Figure 5: UK primary income account balances (seasonally adjusted), Quarter 2 2012 to Quarter 1 2015

Figure 5: UK primary income account balances (seasonally adjusted), Quarter 2 2012 to Quarter 1 2015

Notes:

  1. Q1 refers to Quarter 1 (Jan to Mar), Q2 refers to Quarter 2 (Apr to June), Q3 refers to Quarter 3 (July to Sept) and Q4 refers to Quarter 4 (Oct to Dec).

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The primary income account (previously titled income account) is comprised of compensation of employees, investment income and other primary income.

Compensation of employees presents remuneration in return for the labour input into the production process contributed by an individual. In the international accounts, compensation of employees is recorded when the employer (the producing unit) and the employee are resident in different economies.

Investment income covers earnings (for example, profits, dividends and interest payments and receipts) arising from foreign investment in financial assets and liabilities. Credits are the earnings of UK residents from their investments abroad and other foreign assets. Debits are the earnings of foreign residents from their investments in the UK and other UK liabilities. The flow of investment in the financial account is recorded separately from earnings, although reinvested earnings of companies with foreign affiliates are a component of both. The total value of UK assets and liabilities held at any time is also recorded separately under the international investment position.

Other primary income covers earnings from rent and taxes, and subsidies on production and on the import of goods. Under the Balance of Payments Manual fifth edition, taxes and subsidies on production and on the import of goods were classified to secondary income (previously titled current transfers). The recording of rent was previously classified to other investment income.

The primary income deficit narrowed from £14.3 billion in Quarter 4 2014, to £13.5 billion in Quarter 1 2015. In terms of functional categories, the decrease was mainly due to the deficit on portfolio investment narrowing, from £6.2 billion in Quarter 4 2014 to £5.4 billion in Quarter 1 2015. Partially offsetting this was a widening in the direct investment deficit of £0.3 billion, from £5.1 billion in Quarter 4 2014 to £5.4 billion in Quarter 1 2015.

The deficit on compensation of employees narrowed in Quarter 1 2015 to £50 million, from £156 million in Quarter 4 2014.

The deficit on direct investment income widened from £5.1 billion in Quarter 4 2014, to £5.4 billion in Quarter 1 2015. The widening was due to receipts falling while payments were virtually unchanged. Payments were £16.9 billion in Quarter 1 2015, £0.3 billion lower than in Quarter 4 2014. The fall was mainly due to UK private non-financial corporations and UK monetary financial institutions recording a decrease in profits of £0.8 billion and £0.4 billion in Quarter 1 2015, to £11.4 billion and £0.8 billion respectively. Partially offsetting this, insurance companies recorded an increase in profits of £1.0 billion in Quarter 1 2015, to £1.6 billion. Receipts showed very little movement between Quarter 4 2014 and Quarter 1 2015, as the movement within the sectors offset each other. Foreign-owned UK private non-financial corporations recorded a decrease in profits from £17.2 billion in Quarter 4 2014 to profits of £15.3 billion in Quarter 1 2015. Offsetting this, foreign-owned UK other financial intermediaries, foreign-owned UK monetary financial institutions and foreign-owned UK insurance companies all recorded increases in profits of £1.2 billion, £0.5 billion and £0.2 billion respectively in Quarter 1 2015.

The portfolio investment income deficit narrowed between Quarter 4 2014 and Quarter 1 2015, with the deficit narrowing to £5.4 billion from £6.2 billion. This was due to a narrowing in the deficit of debt securities, partially offset by a widening in the equity securities deficit. UK earnings on portfolio investment abroad increased by £0.5 billion, this was mainly due to an increase of £0.6 billion in earnings on debt securities. This was partially offset by a slight decrease of £0.1 billion in the earnings of equity securities. Foreign earnings on portfolio investment in the UK decreased by £0.3 billion, this was mainly due to a fall of £0.7 billion in foreign earnings on UK debt securities. Partially offsetting this was an increase in foreign earnings on UK equity securities rising by £0.3 billion. 

The deficit on earnings from other investment narrowed by £0.3 billion to £2.6 billion in Quarter 1 2015. UK earnings from other investment abroad decreased by £0.6 billion to £5.1 billion, while foreign earnings on other investment in the UK decreased by £0.9 billion to £7.7 billion.

The deficit on other primary income was £0.2 billion in Quarter 1 2015, virtually unchanged from Quarter 4 2014.

Notes for Primary income account (Table G)

  1. Throughout this release Quarter 1 refers to January to March, Quarter 2 refers to April to June, Quarter 3 refers to July to September, and Quarter 4 refers to October to December.

Secondary income account (Table H)

Figure 6: UK secondary income balance (seasonally adjusted), Quarter 2 2012 to Quarter 1 2015

Figure 6: UK secondary income balance (seasonally adjusted), Quarter 2 2012 to Quarter 1 2015

Notes:

  1. Q1 refers to Quarter 1 (Jan to Mar), Q2 refers to Quarter 2 (Apr to June), Q3 refers to Quarter 3 (July to Sept) and Q4 refers to Quarter 4 (Oct to Dec).

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Secondary income (previously titled current transfers) represents the provision (or receipt) of an economic value by one party without directly receiving (or providing) a counterpart item of economic value. In plain terms, this is a transaction representing "something for nothing" or without a quid pro quo. Transfers can be in the form of money or of goods or services provided without the expectation of payment. General government transfers include receipts, contributions and subscriptions from or to European Union (EU) institutions and other international bodies, bilateral aid and military grants.

The deficit on secondary income narrowed by £2.1 billion, from £7.7 billion in Quarter 4 2014 to £5.5 billion in Quarter 1 2015. This was primarily due to a decrease in payments and a small increase in receipts. 

It should be noted that the quarterly path of net contributions to EU institutions can be erratic due to the timing of payments.

Notes for Secondary income account (Table H)

  1. Throughout this release Quarter 1 refers to January to March, Quarter 2 refers to April to June, Quarter 3 refers to July to September, and Quarter 4 refers to October to December.

Capital account (Table I)

The capital account comprises 2 components: capital transfers and the acquisition or disposal of non-produced, non-financial assets.
Under BPM6, there is no longer a requirement to record migrant transfers. The manual clarifies that the change in the residence does not involve a transaction between 2 entities but a change in status.

Capital transfers are those involving transfers of ownership of fixed assets, transfers of funds associated with the acquisition or disposal of fixed assets, and cancellation of liabilities by creditors without any counterparts being received in return. As with current transfers, they can be subdivided into general government transfers and other sectors transfers. The main sources of information are government departments (Department for International Development and HM Treasury) and the Bank of England. Compensation payments from the EU are also included here, for example, payments related to the destruction of animals to combat BSE and foot and mouth disease.

The sale or purchase of non-produced, non-financial assets covers intangibles such as patents, copyrights, franchises, leases and other transferable contracts, and goodwill. It also covers transactions involving tangible assets that may be used or needed for the production of goods and services but have not themselves been produced, such as land and sub-soil assets. The use of such assets is recorded under trade in services as royalties and license fees; only the outright purchase or sale of such assets is recorded in the capital account.

The capital account recorded a surplus of £0.1 billion in Quarter 1 (Jan to Mar) 2015, a decrease from a surplus of £0.5 billion in Quarter 4 (Oct to Dec) 2014.

Financial account (Table J)

Figure 7: UK financial account balances (not seasonally adjusted), Quarter 2 2012 to Quarter 1 2015

Figure 7: UK financial account balances (not seasonally adjusted), Quarter 2 2012 to Quarter 1 2015

Notes:

  1. Q1 refers to Quarter 1 (Jan to Mar), Q2 refers to Quarter 2 (Apr to June), Q3 refers to Quarter 3 (July to Sept) and Q4 refers to Quarter 4 (Oct to Dec).

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The financial account covers transactions that result in a change of ownership of financial assets and liabilities between UK residents and non-residents, for example, the acquisitions and disposals of foreign shares by UK residents.

The financial account showed a net inflow (that is, more money flowing into the UK) of £24.3 billion in Quarter 1 2015, compared with a net inflow of £30.1 billion in Quarter 4 2014. UK investment abroad switched from net disinvestment (net selling of assets abroad) of £35.8 billion in Quarter 4 2014 to net investment (net buying of assets abroad) of £77.4 billion in Quarter 1 2015. Investment in the UK switched from net disinvestment (net selling of UK assets) of £5.7 billion in Quarter 4 2014 to net investment (net buying of UK assets) of £101.7 billion in Quarter 1 2015.

Direct investment recorded a net inflow (that is, more money flowing into the UK) of £14.5 billion in Quarter 1 2015, compared with a net inflow of £11.0 billion in Quarter 4 2014. For further information on the impact of foreign direct investment acquisitions and disposals, please see background notes, section 3, part 2 interpreting the data.

Figure 8: UK financial account: direct investment (not seasonally adjusted), Quarter 2 2012 to Quarter 1 2015

Figure 8: UK financial account: direct investment (not seasonally adjusted), Quarter 2 2012 to Quarter 1 2015

Notes:

  1. Q1 refers to Quarter 1 (Jan to Mar), Q2 refers to Quarter 2 (Apr to June), Q3 refers to Quarter 3 (July to Sept) and Q4 refers to Quarter 4 (Oct to Dec).

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Direct investment abroad increased from net investment of £6.0 billion in Quarter 4 2014 to net investment of £12.8 billion in Quarter 1 2015. The increase was due to investment in reinvested earnings switching from net disinvestment of £5.5 billion in Quarter 4 2014 to net investment of £7.5 billion in Quarter 1 2015. Offsetting this was a decrease in net investment of equity capital from net investment of £9.4 billion in Quarter 4 2014 to net investment of £4.5 billion in Quarter 1 2015. On a sector basis, the increase was mainly due to private non-financial corporations recording an increase in net investment from £4.4 billion in Quarter 4 2014 to net investment of £10.0 billion in Quarter 1 2015. Additionally, other financial intermediaries increased from net investment of £2.6 billion in Quarter 4 2014 to net investment of £4.4 billion in Quarter 1 2015. These were partially offset by insurance companies increasing net disinvestment from £0.8 billion in Quarter 4 2014 to net disinvestment of £1.6 billion in Quarter 1 2015.

Direct investment in the UK increased from net investment of £17.0 billion in Quarter 4 2014 to net investment of £27.2 billion in Quarter 1 2015. The increase was due to a rise in net investment in reinvested earnings and debt instruments from net investment of £4.5 billion and £6.8 billion in Quarter 4 2014, to net investment of £10.5 billion and £11.9 billion in Quarter 1 2015 respectively. On a sector basis, the increase in net investment was due to investment in UK private non-financial corporations increasing from net investment of £11.9 billion in Quarter 4 2014 to net investment of £23.4 billion in Quarter 1 2015. Partially offsetting this was a decrease in UK insurance companies from net investment of £1.7 billion in Quarter 4 2014 to net investment of £0.7 billion in Quarter 1 2015.

Portfolio investment recorded a net inflow (that is, more money flowing into the UK) of £59.1 billion in Quarter 1 2015, an increase from a net inflow of £30.4 billion in Quarter 4 2014. The increase was due to non-residents increasing their portfolio investment in UK more than UK residents increased their portfolio investment abroad.

Figure 9: UK financial account: portfolio investment (not seasonally adjusted), Quarter 2 2012 to Quarter 1 2015

Figure 9: UK financial account: portfolio investment (not seasonally adjusted), Quarter 2 2012 to Quarter 1 2015

Notes:

  1. Q1 refers to Quarter 1 (Jan to Mar), Q2 refers to Quarter 2 (Apr to June), Q3 refers to Quarter 3 (July to Sept) and Q4 refers to Quarter 4 (Oct to Dec).

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Portfolio investment abroad showed net investment of £23.3 billion in Quarter 1 2015, an increase from net investment of £13.6 billion in Quarter 4 2014. The increase was due to investment in debt securities increasing from net investment of £11.9 billion in Quarter 4 2014 to net investment of £37.0 billion in Quarter 1 2015. Partially offsetting this was a switch in UK equity and investment fund shares from net investment of £1.7 billion in Quarter 4 2014 to net disinvestment of £13.8 billion in Quarter 1 2015.

Portfolio investment in the UK showed net investment of £82.4 billion in Quarter 1 2015, an increase from net investment of £44.0 billion in Quarter 4 2014. This was mainly due to increased net investment in debt securities from net investment of £25.4 billion in Quarter 4 2014 to net investment of £65.0 billion in Quarter 1 2015. Partially offsetting this was a small decrease in net investment in equity and investment fund shares from £18.5 billion in Quarter 4 2014 to net investment of £17.4 billion in Quarter 1 2015.

Financial derivatives and employee stock options showed net settlement payments of £15.8 billion in Quarter 1 2015, following net settlement payments of £23.7 billion in Quarter 4 2014.

Other investment in Quarter 1 2015 recorded net outflow (that is, more money flowing from the UK) of £52.4 billion, compared with net outflow of £30.7 billion in Quarter 4 2014.

Figure 10: UK financial account: other investment (not seasonally adjusted), Quarter 2 2012 to Quarter 1 2015

Figure 10: UK financial account: other investment (not seasonally adjusted), Quarter 2 2012 to Quarter 1 2015

Notes:

  1. Q1 refers to Quarter 1 (Jan to Mar), Q2 refers to Quarter 2 (Apr to June), Q3 refers to Quarter 3 (July to Sept) and Q4 refers to Quarter 4 (Oct to Dec).

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Other investment abroad showed a switch from net disinvestment of £36.0 billion in Quarter 4 2014 to net investment of £44.6 billion in Quarter 1 2015. The switch was mainly due to UK residents switching from making net withdrawals of deposits of £46.1 billion in Quarter 4 2014 to making net deposits abroad of £7.9 billion in Quarter 1 2015. This was mainly due to other UK financial corporations switching from making net withdrawals of £14.6 billion in Quarter 4 2014, to net deposits of £26.3 billion in Quarter 1 2015. Also, the net withdrawals by UK monetary financial institutions narrowed from £38.0 billion in Quarter 4 2014 to £20.5 billion in Quarter 1 2015. Additionally, there was an increase in the net advances of short-term loans by UK monetary financial institutions from £8.8 billion in Quarter 4 2014 to £38.5 billion in Quarter 1 2015.

Other investment in the UK showed a decrease in net disinvestment, from net disinvestment of £66.6 billion in Quarter 4 2014 to net disinvestment of £7.8 billion in Quarter 1 2015. The decrease was mainly due to a switch in non-resident deposits with UK monetary financial institutions from net withdrawals of £18.2 billion in Quarter 4 2014 to net deposits of £25.5 billion in Quarter 1 2015. Additionally, the net repayment of short-term loans extended to UK residents decreased from net repayments of £50.2 billion in Quarter 4 2014 to £32.8 billion in Quarter 1 2015.

Reserve assets showed net investment of £12.6 billion in Quarter 1 2014, compared with net investment of £4.2 billion in Quarter 4 2014.

Notes for Financial account (Table J)

  1. Throughout this release Quarter 1 refers to January to March, Quarter 2 refers to April to June, Quarter 3 refers to July to September, and Quarter 4 refers to October to December.

International investment position (Table K)

Figure 11: UK net international investment position (not seasonally adjusted), Quarter 2 2012 to Quarter 1 2015

Figure 11: UK net international investment position (not seasonally adjusted), Quarter 2 2012 to Quarter 1 2015

Notes:

  1. Q1 refers to Quarter 1 (Jan to Mar), Q2 refers to Quarter 2 (Apr to June), Q3 refers to Quarter 3 (July to Sept) and Q4 refers to Quarter 4 (Oct to Dec).

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The international investment position brings together the available estimates of the levels of identified UK external assets (foreign assets owned by UK residents) and identified UK external liabilities (UK assets owned by foreign residents) at the end of each calendar period.

The international investment position showed net external liabilities (that is, liabilities exceed assets) of £289.3 billion at the end of Quarter 1 2015, compared with net external liabilities of £444.5 billion at the end of Quarter 4 2014. UK external assets abroad increased by £314.3 billion from the end of Quarter 4 2014, to a level of £10,561.5 billion at the end of Quarter 1 2015. The increase in the stock of UK external assets in Quarter 1 2015 was mainly due to an increase in the stock of financial derivatives and employee stock options, portfolio investment and other investment. UK external liabilities increased by £159.1 billion in Quarter 1 2015, to a level of £10,850.8 billion. The increase in UK external liabilities in Quarter 1 2015 was mainly due to an increase in the stock of financial derivatives and employee stock options and portfolio investment, partially offset by a decrease in direct investment.

Notes for International investment position (Table K)

  1. Throughout this release Quarter 1 refers to January to March, Quarter 2 refers to April to June, Quarter 3 refers to July to September, and Quarter 4 refers to October to December.

Revisions since the last balance of payments statistical bulletin (Table R1, R2 and R3)

Data in this release have been revised from Quarter 1 (Jan to Mar) 2014. Revisions tables are included in the balance of payments reference tables (Tables R1, R2 and R3).

Trade in goods – Revisions from Quarter 1 (Jan to Mar) 2014 reflect revised data from HM Revenue & Customs and other data suppliers, revised estimates of trading associated with VAT Missing Trader Intra-Community (MTIC) fraud, revised survey data on trade prices and a reassessment of seasonal factors. Further information on trade is available in the UK Trade April 2015 statistical bulletin.

Trade in services – Revisions from Quarter 1 (Jan to Mar) 2014 are due to updated transport survey information and administrative sources and a reassessment of seasonal factors.

Secondary income account – Revisions to the secondary income account are due to revised source data for transfers involving the UK government, the use of the latest data for various ONS surveys and a reassessment of seasonal factors.

Capital account – Revisions to the capital account are attributable to revised source data from HM Treasury and the ONS International Trade in Services survey.

Primary income, financial account and international investment position – Revisions from Quarter 1 (Jan to Mar) 2014 reflect new and revised survey data, a reassessment of coverage adjustments to data from the Bank for International Settlements, and a reassessment of seasonal factors. Revisions also reflect new estimates from the Bank for International Settlements.

Revisions to the current account balance

The quarterly pattern of current account revisions throughout 2014 is as follows:

The current account balance for Quarter 1 (Jan to Mar) 2014 has been revised up by £0.3 billion (or as a % of nominal gross domestic product (GDP) from -4.7% to -4.6%). This was mainly due to an upward revision to trade in goods exports (+£0.2 billion) and a downward revision to trade in goods imports (-£0.4 billion). A downward revision to the balance of portfolio investment balance was the main offsetting revision.

The current account balance for Quarter 2 (Apr to Jun) 2014 has been revised down by £0.2 billion (or as a % of nominal GDP, from -5.4% to -5.5%). This was mainly due to an upward revision to trade in goods imports (+£0.5 billion) exceeding an upward revision to trade in goods exports (+£0.2 billion).

The current account balance for Quarter 3 (Jul to Sep) 2014 has been revised down by £4.1 billion (or as a % of nominal GDP, from -6.1% to -7.1%). This was mainly due to an upward revision to foreign earnings on direct investment in the UK (+£2.9 billion) and a downward revision to earnings on direct investment abroad (-£1.1 billion). Revisions were due to late survey data replacing non-response estimates. A downward revision to trade in goods exports (-£0.5 billion) and an upward revision to trade in goods imports (+£0.4 billion), also have a downward impact on the current account balance, with downward revisions to foreign earnings on portfolio investment (-£0.7 billion) providing a partial offset.

Current account balance for Quarter 4 (Oct to Dec) 2014 has been revised down by £3.6 billion (or as a % of nominal GDP, from -5.6% to -6.4%). This was mainly due to an upward revision to foreign earnings on direct investment in the UK (+£2.0 billion) and a downward revision to earnings on direct investment abroad (-£1.8 billion). Revisions were due to late survey data replacing non-response estimates. A downward revision to trade in goods exports (-£0.5 billion) and an upward revision to trade in goods imports (+£0.4 billion) also have a downward impact on the current account balance, with downward revisions to foreign earnings on portfolio investment (-£1.1 billion) providing a partial offset.

Background notes

  1. What’s new?

    This quarter

    In accordance with the National Accounts revisions policy, the current revision period is open from Quarter 1 (Jan to Mar) 2014.

    We have not been able to apply the 2013 annual benchmark data from the Foreign Direct Investment survey at this time, due to the revisions window only being open for 2014. We apologise for the inconvenience and aim to process the 2013 data as soon as possible.

    The Quarter 1 (Jan to Mar ) 2014 Balance of Payments dataset contains revised Trade in Services estimates compared with those published in the UK Trade bulletin on 9 June 2015. The minor revisions are due to late data returns and the balancing process applied during the compilation of the gross domestic product (GDP) estimates. The trade in goods estimates are unchanged.

    We previously announced a delay in the updating of historic data covering 1987 to 1996 for the Financial Account and International Investment Position. We have now been able to implement the changes relating to the move to the Balance of Payments Manual sixth edition with this release.

    Future revision period

    The next Balance of Payments release for Quarter 2 (Apr to June) 2015 will potentially contain revisions from Quarter 1 (Jan to Mar) 1997. The data in the release will be consistent with that published in UK Balance of Payments Pink Book due to be released on 30 October 2015.

    Future format of the United Kingdom Balance of Payments – The Pink Book

    User consultation was sought on the content of the Pink Book chapter text and consensus was to maintain some form of value added descriptive commentary. Our recommendations are as follows:

    • chapter 1 (summary) – the commentary will cross cut the various chapters, focusing on interesting topics and main messages

    • chapters 2 to 10 – the focus will be descriptive commentary based on the most recent time periods

  2. Code of Practice for Official Statistics

    National Statistics are produced to high professional standards set out in the Code of Practice for Official Statistics. They undergo regular quality assurance reviews to ensure that they meet customer needs. They are produced free from any political interference. © Crown Copyright 2015.

  3. Understanding the data

    1. Short guide to Balance of Payments

    A brief introduction to the United Kingdom balance of payments (92.1 Kb Pdf) provides an overview of the concepts and coverage of the UK balance of payments using the Balance of Payments Manual sixth edition. A short video explaining the current account is also available.

    2. Interpreting the data

    Foreign Direct Investment (FDI) acquisitions and disposals impact on numerous parts of the Financial Account and International Investment Position (IIP). A corporate deal between a UK company and a non-UK company would feature in the equity capital component of the Financial Account and IIP. Other categories of the accounts would also be impacted depending on how any such deal was financed. In some cases equity securities would form the payment and impact on Portfolio Investment. In other cases cash would be used and impact on Other Investment, while some deals would use a combination of equity and cash. It should be noted that as elements of a corporate deal filter through the accounts the impacts would be smaller and potentially dwarfed by other transactions.

    Following a review conducted by the Bank of England, we now presents estimates of income from Foreign Direct Investment (FDI) for all sectors of the economy on a current operating performance basis from 1999. Prior to this, estimates for monetary financial institutions will be on an all inclusive basis which means that holding gains and losses are still included.

    Import figures for Trade in Goods include adjustments to allow for the impact of trade associated with VAT MTIC fraud. The adjustments were introduced for the first time in the UK Trade May 2003 First Release published on 9 July 2003. The adjustments are added to the EU import estimates derived from Intrastat returns.

    An article explaining MTIC fraud and the impact on the trade figures (131 Kb Pdf) was published on 9 July 2003. A report on further research into MTIC fraud (137.3 Kb Pdf) was published on 17 February 2005, which summarises the work carried out to review the estimates of the impact on the trade figures.

    Changes to the pattern of trading associated with MTIC fraud can make it difficult to analyse trade by commodity group and by country, as changes in the impact of activity associated with this fraud affect both imports and exports. Originally, most carousel chains only involved EU member states. From 2004 in particular, some carousel chains included non-EU countries, for example, Dubai and Switzerland. However, the MTIC trade adjustments are added to the EU import estimates derived from Intrastat returns, as it is this part of the chain that is not generally recorded. In particular, adjustments affect trade in capital goods and intermediate goods - these categories include mobile phones and computer components, which are still the most widely affected goods.

    Figures for total exports and imports less adjustments for trade associated with VAT MTIC fraud are given in the monthly UK Trade Statistical Bulletin.

    From Quarter 1 (Jan to Mar) 2010, we have included financial derivatives business of UK securities dealers in both the UK’s financial account (flows) and the international investment position (stocks). The inclusion of this data improves the sector coverage of financial derivatives which previously included only data on financial derivatives business of UK banks.

    An article detailing the improvements to the coverage of derivatives within the United Kingdom Economic Accounts (51.5 Kb Pdf) was published on 25 October 2011.

    Figures for the most recent periods are provisional and subject to revision in light of (a) late and corrected responses to surveys; (b) revisions to seasonal adjustment factors which are re-estimated annually; and (c) annual benchmarking of surveys.

    In order to comply with Regulation (EC) No 184/2005, we supply Eurostat and the European Central Bank with current account data for trade in services and investment income unadjusted for FISIM, for example, FISIM will not be included in trade in services but will remain in investment income. Additionally, a detailed geographical and product breakdown of trade in services is supplied to Eurostat to comply with the same regulation.

    3. Definition and explanation

    A glossary (123.3 Kb Pdf) of terms used in the UK balance of payments is available on our website and includes new terms used within BPM6.

    4. Special events

    An article outlining our policy on special events can be found on our website.

    5. Use of the data

    Balance of payments estimates are used by the Bank of England and the Treasury to inform decisions on monetary and fiscal policy. The Department for Business, Innovation and Skills also uses balance of payments estimates to identify international trade partners. International users include the Statistical Office for the European Union (Eurostat) and the International Monetary Fund (IMF). Eurostat uses UK figures to compile aggregate EU accounts and the IMF collate data as a means of ensuring financial stability and sustainability.

    Government departments and others use balance of payments estimates for the following:

    • in providing ministerial briefing on the headline Balance of Payments and Trade statistics pre-release

    • feeding data into their own regular analyses of the macro economy, and also into more ad-hoc and in-depth analyses. For example, importance of trade with particular countries or groups of countries, importance of trade in different commodities, and or services, identifying comparative advantage, changes in import and export prices, economic contribution from trade and primary income, and looking at inward and outward investment. These analyses and briefings are aimed to inform ministers and decision makers of the current and historical situation, and provide evidence for the policy debate

    • balance of payments data are also of interest to a wider range of user groups, including the media, researchers and other regional, national and international policymakers. Some users focus primarily on the developments in the current account and their financing, including the sustainability of the current account imbalances in the longer term and the need for policy adjustments. Others focus on an analytic presentation, classifying its standard components of balance of payments and their relationship to other components (for example trade and direct investment, and foreign direct investment and productivity). The balance of payments allows a sector breakdown of the financial account and their relationship to domestic sources of finance

    Further details on use of the data can be found in the results of the balance of payments user engagement survey (81.8 Kb Pdf) .

  4. Methods

    More detailed methodological notes for the UK balance of payments are available on our website.

    1. Composition of the data

    Table C provides an EU/non-EU breakdown of the current account and is presented on an EU28 basis.

    International investment position statistics are based on recording direct investments at book values, and other assets and liabilities at estimated market values. These estimates are likely in some respects to be deficient in scope and coverage. Quarterly estimates tend to be less reliable because they are largely based on cumulated flows and not reported levels.

    In theory, every credit entry should be matched by a corresponding debit so that total current, capital and financial account credits should be equal to, and therefore offset by, total debits. In practice there is a discrepancy termed net errors and omissions. The net errors and omissions are shown on Table A.

    2. Seasonal adjustment

    Current and capital accounts are seasonally adjusted. Financial account and international investment position data are not seasonally adjusted.

    When compiling the geographic breakdown of primary income, secondary income and trade in services, the EU countries are seasonally adjusted. The non-EU seasonally adjusted figure is calculated by subtracting the seasonally adjusted EU total from the seasonally adjusted world total. Both EU and non-EU data are seasonally adjusted for trade in goods; these are aggregated to form the world total.

  5. Quality

    1. Basic quality information

    Common pitfalls in interpreting series are the following:

    • expectations of accuracy and reliability in early estimates are often too high

    • revisions are an inevitable consequence of the trade off between timeliness and accuracy

    • early estimates are based on incomplete data

    Very few statistical revisions arise as a result of "errors" in the popular sense of the word. All estimates, by definition, are subject to statistical "error", but in this context the word refers to the uncertainty inherent in any process or calculation that uses sampling, estimation or modelling. Most revisions reflect either the adoption of new statistical techniques, or the incorporation of new information which allows the statistical error of previous estimates to be reduced. Only rarely are there avoidable "errors" such as human or system failures, and such mistakes are made quite clear when they do occur.

    2. Summary Quality Report

    The balance of payments Statistical Bulletin Summary Quality Report (117.6 Kb Pdf) is available on our website. 

    3. National Accounts revisions policy

    The data in this statistical bulletin are subject to revisions following our National Accounts Revision policy.

    Estimates for the most recent quarters are provisional and, as usual, are subject to revision in light of updated source information. We provide analysis of past revisions in the Balance of Payments and other statistical bulletins which present time series.  

    4. Revision triangles

    Revisions to data provide one indication of the reliability of main indicators. The table shows summary information on the size and direction of the revisions which have been made to the data covering a 5 year period. A statistical test has been applied to the average revision to find out if it is statistically significantly different from zero. An asterisk (*) shows that the test is significant.

    Table 1 covers estimates first published in the balance of payments from September 2007 (Quarter 2 (Apr to June) 2007) to June 2012 (Quarter 1 (Jan to Mar) 2012).

    Table 1: Balance of Payments revisions analysis

    Current account (seasonally adjusted)

    £ million
    Revisions between first publication and estimates three years later
      Value in latest period Average over the last five years Average over the last five years without regard to sign (average absolute revisions)
    Credits (HBON) 166,274 5,404* 6,002*
    Debits (HBOO) 192,822 3,277* 4,668*
    Net (HBOP) -26,548 2,126* 2,824*
     

    Table source: Office for National Statistics

    Download table

    Spreadsheets giving revisions analysis (real time databases) of estimates from 1996 to date and the calculations behind the averages in the table are available (720.1 Kb ZIP) on our website.

    An article analysing balance of payments current account revisions (340.2 Kb Pdf) was published in the May 2007 edition of Economic and Labour Market Review.

  6. Publication policy

    Details of the policy governing the release of new data are available from our Media Relations Office. Also available is a list of the organisations given pre-publication access to the contents of this bulletin.

  7. Accessing data

    The complete run of data in the tables of this statistical bulletin is available to view and download in electronic format through ONS Time Series Data. Users can download the complete bulletin in a choice of zipped formats, or view and then download their own sections of individual series. The Time Series Data can be accessed on our website.

    Further balance of payments data is available online in our quarterly publication United Kingdom Economic Accounts (UKEA).

  8. Following ONS

    1. Follow us on Twitter and receive up-to-date information about our statistical releases.

    2. Like us on Facebook to receive our updates in your newsfeed and to post comments on our page.

    3. View the latest podcasts on YouTube.

    Next Publication Date:
    30 September 2015

    Issuing Body:
    Office for National Statistics

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    Telephone: 0845 604 1858
    (8.30am-6.00pm Weekdays)

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    Statistical contact:
    Name: Craig Taylor
    Telephone: +44 (0)1633 456333
    Email: bop@ons.gsi.gov.uk

    Contact us:
    Telephone: 0845 601 3034
    Email: info@ons.gsi.gov.uk
    Website: www.ons.gov.uk

  9. Details of the policy governing the release of new data are available by visiting www.statisticsauthority.gov.uk/assessment/code-of-practice/index.html or from the Media Relations Office email: media.relations@ons.gsi.gov.uk

    The United Kingdom Statistics Authority has designated these statistics as National Statistics, in accordance with the Statistics and Registration Service Act 2007 and signifying compliance with the Code of Practice for Official Statistics.

    Designation can be broadly interpreted to mean that the statistics:

    • meet identified user needs;
    • are well explained and readily accessible;
    • are produced according to sound methods; and
    • are managed impartially and objectively in the public interest.

    Once statistics have been designated as National Statistics it is a statutory requirement that the Code of Practice shall continue to be observed.

Statistical contacts

Name Phone Department Email
Craig Taylor +44 (0)1633 456333 Balance of Payments bop@ons.gsi.gov.uk
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