National accounts: GDP and GVA methodology

This methodology document explains how Statistics Jersey produces annual estimates of Gross Domestic Product (GDP) and Gross Value Added (GVA) for Jersey. It describes the concepts, data sources, methods, adjustments, deflators, revisions and quality considerations that underpin the National Accounts: GDP and GVA statistical output.

Purpose and scope

The National Accounts: GDP and GVA report provides Statistics Jersey’s annual estimates of the size and real-terms growth of Jersey’s economy. The output is designed to support public understanding, policy development, economic analysis and international comparison.

The estimates described in this methodology are compiled using the income approach to national accounting. This approach measures economic activity by summing the income generated through production, consisting of compensation of employees and gross operating surplus, including the mixed income of sole traders.

This document covers the production of annual current-price and real-terms estimates of GVA and GDP, including sector-level estimates. It also explains the treatment of:

The methodology reflects the data currently available for Jersey. At present, sufficient data exist to produce annual estimates using the income approach. Statistics Jersey does not currently produce a full expenditure-based or output-based set of national accounts. As far as possible, Statistics Jersey follows the international guidance set out in the System of National Accounts (UN Statistics); however, resource constraints mean that only a small subset of the full national accounts framework can currently be produced.

Key concepts and definitions

The size of an economy can be measured through three main approaches: income, output and expenditure. The income approach measures the incomes generated by production; the output approach measures the value of output less intermediate consumption; and the expenditure approach measures final expenditure on goods and services, including household consumption, government consumption, investment, exports and imports.

Gross Value Added (GVA) is the value generated by production after deducting the cost of goods and services used in the production process. In Jersey’s income-based estimates, GVA is calculated as the sum of compensation of employees and gross operating surplus, including mixed income (see below). GVA is evaluated separately for each sector of the economy.

Gross Domestic Product (GDP) is the aggregate measure of economic activity. It measures the total value created through the production of goods and services in Jersey during the reference year. For this output, total GVA across all sectors of the economy, measured at market prices, is equal to Jersey’s GDP.

Compensation of employees includes wages, salaries and employers’ social contributions paid to employees.

Gross operating surplus represents the surplus generated by production after labour costs have been deducted.

For unincorporated businesses, the income of owner-managers is treated as mixed income, because it includes both a return to labour and a return to capital.

Current-price estimates measure economic activity in the prices of the reference year. Real-terms estimates remove the effect of price change over time and are used to assess changes in the volume of economic activity.

Data sources

The primary data source for the estimates is the Annual Business Survey, conducted by Statistics Jersey under the Statistics and Census (Jersey) Law 2018 (Jersey Law). The survey collects financial and employment information from businesses operating in Jersey and provides the principal basis for estimating sector-level income components.

The Annual Business Survey is supplemented by other administrative, survey and published sources where appropriate. These include information on employment and earnings, public sector activity, financial services income, housing and rental data, price indices and sector-specific sources used to improve coverage or estimate components that are not fully captured through the business survey.

The precise combination of sources varies by sector and component, reflecting the structure of Jersey’s economy and the availability of suitable data. Where survey responses are incomplete, estimates are produced using appropriate imputation, weighting or benchmarking methods, drawing on prior-year data, administrative records or comparable businesses where necessary.

Compilation method

GVA is compiled separately for each broad industry sector. For each sector, the main income components are estimated and combined to produce current-price GVA. The core calculation is compensation of employees plus gross operating surplus, including mixed income.

Business survey returns are validated, cleaned and classified by sector. Reported values are checked for internal consistency, year-on-year plausibility and coherence with other available information. Where large businesses or key sectors have a material effect on the aggregate estimates, additional quality assurance is undertaken to understand movements and ensure that responses are interpreted consistently.

The estimates are produced in two stages. First, the previous reference year is benchmarked using the most complete survey and administrative information available. Second, the latest reference year is estimated to provide the most reliable measure of annual change relative to that benchmark. This approach recognises that the most recent year is compiled before all complete source data are available.

Sector estimates are then aggregated to produce total GVA and GDP. Throughout the process, the estimates are checked for coherence with known developments in the economy, changes in employment, movements in earnings, business survey evidence and other published economic indicators.

Owner-occupied imputed rental and household rental income

The international framework for national accounts requires the inclusion of some transactions that are not directly observed in cash terms. One important example is owner-occupied imputed rental. This is an estimate of the rental value that owner-occupiers would pay to rent their own property. Although no payment takes place, the item is included so that economies with different rates of owner-occupation can be compared on a consistent basis.

The rental income of private households, including owner-occupied imputed rental, is therefore included within the estimates. This component is treated separately from most business-sector activity because the source data, conceptual basis and price movements differ from those used for other sectors.

For real-terms estimates, this component is deflated using a rental-specific price measure rather than the whole-economy proxy deflator. This better reflects the price movements relevant to rental income and owner-occupied imputed rental.

The inclusion of this component improves comparability with other countries and ensures that the estimated value of housing services is not affected simply by whether homes are owner-occupied or rented.

Financial Intermediation Services Indirectly Measured

Financial Intermediation Services Indirectly Measured (FISIM) reflects the value of financial intermediation services that are not charged for explicitly. In national accounts, these services are commonly measured through the margin between interest received and interest paid by financial intermediaries.

The GDP and GVA estimates incorporate the adjustments required for the treatment of FISIM at sector level. Jersey’s estimates use net interest income to estimate the value of these indirectly measured services. FISIM is then allocated to user sectors as far as possible using available information on business interest payments.

Where it is not possible to allocate the full value of FISIM directly to user sectors, the remaining balance is assigned proportionally across sectors based on their total GVA. This ensures that the overall adjustment is incorporated in GDP while using the most detailed allocation possible from the available evidence.

Deflation and real-terms estimates

Real-terms estimates are produced by deflating current-price estimates to remove the effects of price change. A broad GDP deflator is generally used for national accounting aggregates, but Jersey does not currently produce a dedicated GDP deflator.

In the absence of a dedicated GDP deflator, Statistics Jersey uses retail price measures as proxy deflators: RPI(X) for years before 2008 and RPI(Y) from 2008 onwards. A separate rental deflator, derived from the private sector rental index, is used for rental income of private households, including owner-occupied imputed rental.

The two-deflator approach is used for the latest estimates and for the historical time series. This provides a more appropriate real-terms measure for the housing-related component while maintaining a consistent approach for the wider economy.

Revisions policy and benchmarking

The estimates are revised as more complete source data become available. The latest year is first published to provide the most reliable estimate of year-on-year change, while the previous year is updated using more complete business survey and administrative information.

The previous year generally represents the most robust assessment of the overall level of economic activity because it incorporates fuller company accounts and more complete survey coverage. This year is used as the principal benchmark for the scale and structure of the economy.

For the latest year, the recorded changes in the principal income components are fixed at first publication and are not normally revised. However, revisions to the level and sectoral composition of the benchmark year can lead to small revisions in the overall GDP growth rate because the weights applied to component changes may change.

Where revisions to the benchmark level are made, these are carried backwards through the historical series to maintain a consistent time series. Earlier year-on-year growth rates generally remain unchanged, but the absolute levels of GDP and GVA are adjusted in line with the updated benchmark.

Industrial classification

Businesses are classified using the UK Standard Industrial Classification of Economic Activities 2007 (ONS). This classification provides a consistent structure for assigning businesses to sectors based on their main economic activity.

Statistics Jersey has updated business classifications to align with SIC 2007 and to code businesses at a more detailed level where possible. This process improves the quality and consistency of sector estimates, but it can affect comparability for sectors where businesses have moved between classifications.

Particular care is therefore needed when interpreting long-term changes for sectors affected by reclassification. Where relevant, the report explains comparability issues and highlights where movements reflect changes in classification rather than underlying economic activity.

Quality assurance

Quality assurance is undertaken throughout the production process. Survey data are reviewed for completeness, consistency and plausibility. Large movements are investigated, and material contributors are checked carefully because they can have a significant effect on sector and aggregate estimates.

The estimates are also compared with other economic indicators, including employment, earnings, prices, industry intelligence and historical trends. This comparison helps identify unusual movements, potential reporting errors and areas where additional investigation is required.

Final estimates are subject to analytical review before publication. This includes checking internal consistency, confirming that revisions have been applied correctly, reviewing sector contributions to overall growth and ensuring that the commentary in the report is supported by the underlying data.

Strengths and limitations

The main strength of the methodology is that it draws on detailed annual business survey data and applies a consistent income-based framework across the economy. The approach allows Statistics Jersey to produce sector-level estimates and a coherent aggregate measure of GDP and GVA.

The main limitation is that the estimates rely on the income approach only. Jersey does not currently have the full range of source data required to compile independent output and expenditure estimates. As a result, the income-based estimates cannot be balanced against independent measures from the other approaches.

Other limitations include the use of proxy deflators, the need to impute or benchmark some components, and the sensitivity of aggregate estimates to large businesses or sectors. These issues are managed through validation, benchmarking, revisions and transparent explanation in the statistical report.

Coherence and comparability

The methodology is designed to align, as far as practicable, with international national accounting concepts while reflecting the data available for Jersey. This supports comparison over time and broad comparison with other economies, subject to differences in data sources, methods, economic structure and revision practices.

Users should take particular care when comparing real-terms estimates with countries that use a dedicated GDP deflator, and when comparing sector estimates across periods affected by classification changes or changes in source data.

Related outputs and further information

Further information on the wider range of Statistics Jersey methodology and explainer documents is available from the Statistics Jersey methods and guidance page. The GDP and GVA report should be read alongside related outputs on labour market statistics, earnings, prices, housing and business activity where these provide additional context for interpreting movements in the economy.