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How TBR measures and calculates GVA using the Trends Central Resource.
Measuring GVA with the Trends Central Resource
As Government addresses the issues surrounding UK productivity, it is becoming increasingly important to be able to effectively measure productivity. The method favoured by Government is Gross Value Added (GVA). Until now, GVA figures have only been available on a very broad geographical and sectoral basis. Crude estimates only of GVA by cluster and region have been possible by disaggregating these total figures (a 'top down' approach), using guides such as number of firms or employment. This method is not ideal since it does not take account of the variations in productivity from one firm to the next, regardless of how comparable they are in terms of size and activity.
TBR have recently added new data to the Trends Central Resource, enabling us to calculate GVA and GVA per employee for individual firms. We use these data in a 'bottom up' process to calculate GVA by cluster, region or sub-region. And because of the other data we hold on business activity (a textual description of activity) we are not limited to SIC based cluster definitions - we can build them from the ground up. We can also measure GVA at ward level.
Our ability to measure GVA and GVA per employee in this way - i.e. based on real data - has created a great deal of interest. We have already completed two projects based solely on measuring GVA, and included GVA data in various other projects. Details of these are provided below.
Chart 1: Average GVA per employee for UK food and drink firms
The chart shows a comparison of average GVA per employee for food & drink firms in the East Midlands and UK, by broad segment within the sector.
Measuring GVA in North East Clusters
For ONE North East we have completed a project that measured GVA and GVA per employee in 13 clusters (including bioscience, pharmaceuticals, services, tourism, creative and environmental industries). These clusters were defined by SIC, but the project is likely to be followed up by a more in-depth study that defines clusters based on their description of activity.
Key findings from this work included:
- Average GVA per employee for the clusters studied was considerably higher than for the rest of the North East economy. This is a finding that supports the development of clusters; cluster theory proposes that productivity in clusters will be higher, delivering wealth and jobs in the long term.
- GVA and GVA per employee varied greatly by cluster and sizeband. Some clusters showed an increase in GVA per employee with size, while others showed a decrease. This suggests that optimal firm size (in terms of productivity) may vary by cluster.
Measuring GVA in Devon & Cornwall
For Business Link Devon & Cornwall we produced a set of benchmarking tables by a range of sizebands, clusters and firm age, analysing average GVA per firm and per employee for each group. This enables the Business Link to compare individual firms against a 'peer group'.
Other projects
Additionally, we have added important GVA data analysis to projects for emda (food and drink in the East Midlands - see above chart), SEEDA (research and technology development cluster) and LDA (ICT in London).
Further information
If you would like more details on GVA (e.g. sample sizes, deriving estimates of total GVA, relationship to sales per employee data etc), or to discuss potential project work, please contact Steve Mayes or Andrew Graves on 0191 2819955.
