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Home > Statistics > Explanatory Notes - Monetary financial institutions in the United Kingdom: capital expenditure
 

Explanatory Notes - Monetary financial institutions in the United Kingdom: capital expenditure

Overview

Capital expenditure data measure MFIs cash expenditure on acquisitions, and cash receipts from disposals, covering assets both for firms’ own use and for leasing, hiring or renting out under finance leases.

Availability

Data are available quarterly from 1993 Q1, with the exception of data on IT investment, which are available from 2007 Q4. Data are not seasonally adjusted.  Publication of data will usually occur on the 21st working day of the second month following the end of the period, on the Statistical interactive database.

Sources

Capital expenditure data are currently provided by a sample of UK-resident MFIs selected by the Bank of England. This panel currently covers around 90-95% of gross acquisitions and disposals by the sector. Prior to January 2009, a larger panel reported with around 98% coverage and no grossing up was undertaken.  In 2009 Q1 the panel size was reduced following a cost/benefit analysis by the Bank, and grossing up to create estimates for a full population was introduced. Prior to 2008, data were collected on the QX form.

Data are now reported on form CX. For more information about the method used to select the reporting panel, see the article Banks’ capital expenditure data: managing the trade-off between cost minimisation and transparency for reporting institutions.

Definitions

Capital expenditure includes expenditure on outright purchases, on all capital items acquired under hire purchase or conditional sale agreements, and on assets procured under finance leases, if they are not to be leased on under further finance leases. It includes expenditure on intangible items such as goodwill, patents, trade marks, mineral rights and computer software (see below).
It does not include the value of assets acquired in taking over an existing business or disposed of in selling part of a business as a going concern, or rentals payable on goods acquired through operating lease, hire or rental from other lessors or hirers.
No deductions are made for depreciation, amortisation, obsolescence or provision for bad or doubtful debts. Transactions in a currency other than sterling are translated into sterling at the closing middle-market spot rate on the day on which the transaction was done, or on the final day of the quarter.
For more comprehensive definitions about what reporters classify as capital expenditure view def CX.

'New building work' includes expenditure on the construction of new buildings, the extension, alteration or improvement of existing buildings and the cost of any newly-constructed buildings purchased.
'Land and existing buildings' covers the capital cost of freeholds purchased and of premiums payable for leaseholds acquired. It includes associated costs such as architects’ and surveyors’ fees, legal charges, stamp duties and agents’ commission.
'Ships, vehicles and aircraft' covers expenditure on motor vehicles, aircraft, railway rolling stock, yachts and other pleasure craft.
'Plant and machinery' includes expenditure on plant, machinery, and all other capital equipment such as office machinery, computers, TV receivers, furniture and mechanical handling equipment.
Within the 'Plant and machinery' category, 'Computer hardware' includes expenditure on microcomputers, printers, terminals and optical and magnetic readers, including operating systems and software bundled with micro-computers purchased. 'Computer software' encompasses software licence payments and all capitalised items of computer software consultancy and supply, including the purchase or development of large databases. Expenditure on 'In-house software development' includes the costs, including staff costs, of developing software with a useful life of at least one year.
Finance leases are defined according to the standard accounting practices used by banks. A finance lease is defined as one in which an asset is leased for a single fixed contractual period during which all, or nearly all, of its cost is recoverable by the lessor (even though the asset may subsequently continue in operation for an unspecified further period), or any other lease which is treated as a finance lease by the relevant accounting standards.

Valuation and Breaks

  • Building societies started reporting capital expenditure data in 2009 Q1. Prior to that period, the series only included capital expenditure by banks.
Building society conversions


The transfer of a number of building societies to the banking sector over time has contributed to the increase in the value of capital expenditure reported.

  • Cheltenham & Gloucester Building Society joined the Lloyds Bank Group in August 1995.
  • National & Provincial Building Society transferred its business to Abbey National plc in August 1996.
  • Alliance & Leicester Building Society converted to public limited company status in April 1997.
  • Halifax Building Society converted to public limited company status in June 1997.
  • Woolwich Building Society converted to public limited company status in July 1997.
  • Bristol & West Building Society joined the Bank of Ireland Group in July 1997.
  • Northern Rock Building Society converted to public limited company status in October 1997.
  • Birmingham Midshires Building Society joined the Halifax Group in April 1999.
  • Bradford & Bingley Building Society converted to public limited company status in December 2000.

Key Resources

 

 'Data cleansing for Banking and monetary statistics' Bigwood, J (2004), Monetary and Financial Statistics, May

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