1. The Balance of Payments - focus on where FDI is used Craig Taylor Balance of Payment Investment Income and Coordination branch, ONS craig.taylor@ons.gsi.gov.uk 01633 456333

2. Overview of session Brief introduction Integration with National Accounts and consistency internationally Outputs Publications BoP and IIP (including where FDI data is used)  Current acount  Financial Account and IIP

3. International Accounts – what do they include? The International Accounts for an economy comprise: the balance of payments; the international investment position (IIP); and other changes that reconcile the IIP and BoP for a specific period

4. BoP - the accounts Current account Trade in goods and services Primary Income - money from investments or employment Secondary Income – households or countries sharing money (transfers) Capital account & financial account Capital transfers Sales/purchases of non-produced, non-financial assets transactions which result in a change of ownership of financial assets and liabilities between UK residents and non-residents

5. The Current Account Goods and services coming in to the UK Goods and services leaving the UK Both together – credit to the UK current account Primary and Secondary Income from abroad Primary and Secondary Income going abroad Both together – debit to the UK current account Credits minus debits = current account balance

6. Integration with the National Accounts Harmonisation of balance of payments and national and sector accounts timetables Balance of payments and rest of world consistent Common timetable Common series Same publication date Standard revisions policy Quarterly BoP\RoW reconciliation

7. International Standards The conceptual framework of the UK balance of payments corresponds to that of the sixth edition of the IMF’s Balance of Payments Manual (BPM6) Why use BPM6? Objective and coherent international standards that reflect current global analytical needs International and domestic users need consistent data for comparison with other countries International organisations such as Eurostat and the IMF need conformity when compiling economic statistics

8. Publications Quarterly  Balance of payments statistical bulletin  UKEA - B tables Annual  The Pink Book: United Kingdom Balance of Payments annual UK Balance of Payments (BoP) publication been produced since 1948 Initially produced by the BoE, then by the Central Statistical Office (from 1960) & by ONS (since 1996)

9. BoP – Current Account

10. Current Account focus – Trade in Goods

11. Current Account focus – Trade in Services (Positive balance) (Negative balance)

12. Current Account focus – Trade in Goods and Services balance - - - - - 70- 110 90 50 30 10 30 50 70 90 19921994199619982000200220042006200820102012 £ billion Trade in goodsTrade in servicesTotal Steadily increasing trade deficit Peaking at 107.9 billion Compared to a steady increase in surplus of services Resulting in a total deficit of 33.9 billion

13. Current Account – Primary Income Compensation of employees Investment Income  Direct investment  Portfolio investment  Other investment  Reserve assets Other primary income

14. Current account balance (£ billions) [Credits less debits] 195519651975198519952005 60 30 0 -30 -60 Annual current account balance 1955- 1983 Current account balance around zero 2012 The current account deficit is £59.2 billion, or 3.8% of GDP 1983 - 2012 Current account deficit goes through three distinct phases Surplus – more credits than debits Deficits – more debits than credits

15. 2012 Current account balance £ billions (credits less debits) BalanceGoodsServicesIncomeCurrent transfers 120 0 -60 -120 60 Current account balance Current account balance made up of four constituent parts Offset by a surplus In Trade of services Driver of the deficit Goods is the main driver -£59.2-£107.9 £74.0 -£2.3-£23.1

16. BoP - Financial Account and IIP

17. Financial Account and International Investment position (IIP) The Financial Account and IIP are consistent datasets (the UK’s balance sheets) Financial Account shows acquisitions and disposals of assets e.g. shares, bonds, deposits, loans IIP shows level of investment at point in time

18. Financial Account and International Investment position (IIP) Direct Investment Portfolio Investment Financial derivatives Other investment Reserve assets

19. Thank you for listening: Questions?