1. Survey of Surveys The September 2012 Answering Practices Survey Presented and sponsored by Jonathan Wood, Head of CBI Survey Management Group, with analyses by William Simpson. All data compiled, tested and processed by Alan Joy. jonathan.wood@cbi.org.uk Interpreting the CBI Service Sector Survey

2. Addresses 3 main issues: – What factors respondents take into account when determining their answers – How to correctly interpret survey results – How service firms think about capacity Presentation will focus on the overall results covering 120 respondents, from a sample of 765 companies. – Survey was conducted by post The September 2012 Answering Practices Survey for the CBI Service Sector Survey

3. 12 th to 28 th September with an extra week for late respondents Average regular response to main survey of 159 so the APS has captured a very healthy 75% of the normal monthly response Senior level respondents

4. Started November 1998 Covers a broad range of services, grouped into those selling to consumers, and those selling to businesses (business and professional) The data is used by the Bank of England to analyse employment and output trends, informing its interest rate decisions Undertaken quarterly– Feb, May, Aug, November Monthly version for EC undertaken since Sept 2002 CBI Service Sector Survey

5. Are you more or less optimistic than you were three months ago about the general business situation in your sector?

6. How do you measure the trend in the value of business v three months earlier?

7. Volume of business

8. Assessing normal levels of business

9. When answering questions that refer to trends over the past three months, do you answer in terms of the change being: How respondents define trend over past 3 months

10. What % variation around a no change base would cause you to answer up or down rather than same % of respondents

11. What variation around the level of business would you consider as falling within the reply normal ?

12. Are you able to exclude seasonal variations when answering questions 2 to 6 (demand, employment, prices) ?

13. Where price lists are not revised at the same time every year, would you say that:

14. Would respondents like online/email survey completion in addition to normal postal service?

15. Assessing capacity use in European Commission Q.8 introduced July 2011 Interpreting the CBI Service Sector Survey If demand expanded, could you increase your volume of activity (i.e. volume of business) with your present resources?

16. Lively debate at Nov 11 Workshop Abberger (IfO), Hilbinger (Gfk-DE), Schwartz (Wifo-AT), Gyomia (OECD), Slento (SD-DK) Doubts about respondents potential answering practices – mixing of percentages and percentage points; was the way the capacity utilisation rate was calculated correct; and that some managers could answer by how much with figures well over 100%......

17. When answering Q11 If demand expanded, could you increase your volume of activity (i.e. volume of business) with your current resources? When answering, what was the main consideration? Only with your companys own resources of space, equipment and staff (Dominant answer: 57%) With some other mix of own/bought- in/subcontracted resources and/or staff (29%) With own resources of space and equipment, but with sub-contracted staff (6%) Blank (7%) and other (2%)

18. Do you also factor in financial considerations when answering Q11?

20. How available capacity is measured If demand expanded, by how much could you increase your volume of activity with your present resources? Is it the % increase relative to your current volume of activity? For example if your current turnover is 800 units and you estimate that with your current resources you could reach a turnover of 1000 units, you would specify 25% ((1000-800)/800 = 25%)

21. How available capacity is measured If demand expanded, by how much could you increase your volume of activity with your present resources? Or is it the % difference between current volume of activity and what it could be (the maximum). For example, if your current turnover is 800 units and you estimate that with your current resources you could reach a turnover of 1000 units, you would specify 20% (because you are working at 80% of capacity and could add another 20% to reach full capacity)

22. How available capacity is measured We would prefer 1 (From 800 to 1000 = a 25% increase) to option 2 (working at 80% of full capacity so add another 20% to reach 1000). And indeed 1 is the dominant method chosen by the respondents, by 68% to 22%, with 10% blank.

23. % rise in Capacity - Option 1, % increase relative to current volume of activity, or Option 2, % to reach full capacity, or blank (bars in that order)

24. Conclusions 52% of respondents assess optimism compared to 3 months ago Value of income received is the most important measure for volume of business. Fewer still adjust prices at the same time each year than in 2007 Respondents most commonly use a past level of work when calculating normal levels of business 67% of respondents consider financial constraints when assessing if they could raise their volume of activity with current resources Most respondents calculate % to reach full capacity as a fraction of the current business level. A clear minority subtract the current capacity use ratio from 100. Note Sector anomaly: Hotels, Bars + Restaurants There is more sophistication in the 2012 APS than the 2007 APS in – among others – ability to correct for seasonality, measuring volume of business, and tighter margin measurement of up or down. A more detailed paper will be available in due course

25. Thank you for the opportunity to share the research and a big thank you to Roberta and colleagues for their invaluable input to this Survey September 2012 Answering Practices Survey Jonathan Wood Head of CBI Survey Management Group jonathan.wood@cbi.org.uk Interpreting the CBI Service Sector Survey