(Bloomberg) — The same kind of poll failures that left Britain unsure about the number of people in Britain’s workforce are now casting doubt on the size of the British economy.
The Office for National Statistics has seen a drop in responses to a key household questionnaire it relies on to make growth estimates, prompting it to take corrective action. The so-called Living Costs and Food Survey – used in GDP measures such as those for the third quarter published on Monday – helps the British statistics agency determine people’s incomes and where they spend their money.
The latest data shows that barely a fifth of forms are being completed and returned, reflecting a shortfall in the ONS’s monthly jobs survey, which policymakers say no longer provides a reliable snapshot of the country’s labor market. In the case of the growth report, the pullback means an increased risk of sudden retroactive changes in gross domestic product measurements, potentially leading to poor decisions by political leaders and officials.
“There is a greater chance of revisions, (and) a greater chance of policy mistakes as a result, because policies are made in real time,” said Greg Thwaites, research director at the Resolution Foundation. “If there is a problem with the LCF survey and consumption data, it will have a small effect on the GDP estimate, but not a large effect.”
The fall shows that the crisis of confidence that has rocked the ONS employment report could spread to other indicators used by the Bank of England, the Treasury and others. In slow-growing Britain, small revisions to data could make the difference in public perception of whether Prime Minister Keir Starmer fails or succeeds in his promise to rebuild the economy.
Employment Minister Alison McGovern told Bloomberg last week that the government was already using alternative sources for employment data, warning that it is “too big for us to wait” for reliable ONS figures. BOE officials have also expressed dismay over the inaccurate numbers that have clouded their view of the labor market at a crucial time for interest rates.
An ONS spokesperson said in a statement that it is using artificial intelligence to streamline data collection in the LCF survey and rely more on card issues to supplement responses from the first quarter of 2025. Still, the agency said the survey remained an “important source of data on household spending” and that efforts to increase the number of questionnaires increased responses by more than a third.
Although response rates for such economic surveys have been declining for decades, the trend has accelerated since 2020, possibly due to changes in behavior and data collection during the Covid-19 pandemic. At the LCF, the response rate was only 22% last year. This compares with approximately 40% in 2020 and 70% thirty years ago.
Concerns about the accuracy of the LCF survey during the pandemic led the ONS to withhold some tables. The low percentage of households responding means biases may persist in the data, such as one group, such as younger people who may not check their mail as often, being underrepresented.
“People are much more reserved and people are simply short on time,” says Huw Dixon, professor of economics at Cardiff University. “They will use data they have from other sources, such as tax returns.”
The ONS uses three approaches to measuring GDP: production, expenditure and income. Monthly estimates are made using the output data alone, while later figures are derived by averaging output, expenditure and income data from the LCF to obtain a more complete reading.
The ONS has cited issues with LCF response rates in recent GDP data releases, including when it made a sharp retrospective upgrade to 2022 growth from 4.3% to 4.8%. Britain has performed better than initially thought since the pandemic hit, undercutting some of the criticism of the now former Conservative government.
Explaining the review, the ONS highlighted wide differences in the growth rates derived from each of the three methods, which produced GDP growth rates ranging from 3.1% to 5.3%. Problems with the LCF were also highlighted in the latest quarterly growth figures, although the output approach has led the way for the two most recent quarters.
“The low response rate to the LCF isn’t great, of course, but it’s only really a problem if it’s a biased non-response rate,” says Thwaites of the Resolution Foundation.
More stories like this are available at bloomberg.com
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