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SERVCOM FEASIBILITY STUDY

Produced for the Statistical Office of the European Community (Eurostat)

Project Sponsor:Tim Clode

Project Manager:Grant Whiting

Project Team:Anne Richards

Nicola Smith

Craig Taylor

Melanie Worlock

January 2004

PRODCOM Branch

Office for National Statistics, UK

CONTENTS

  1. Introduction ……………………………………………………………………… 2
  2. Summary ………………………………………………………………………… 2
  3. Background ……………………………………………………………………… 2
  4. Main Elements of the Study …..……………………………………………….. 3
  5. Conclusion ………………………………………………………………………..17
  6. Annex A …………………………………………………………………………..19
  7. Annex B …………………………………………………………………………..20

INTRODUCTION

  1. This report is produced by the Office for National Statistics (ONS) for the Statistical Office of the European Community (Eurostat) on the SERVCOM Feasibility Study (Eurostat Contract No 200244501003).
SUMMARY
  1. The objective of the project is to assess and report on the feasibility of introducing a SERVCOM inquiry across all services as classified in the CPA (the Statistical Classification of Products by Activity in the European Economic Community). This inquiry would be similar to the current Products of the European Community (PRODCOM) inquiry, but would collect data on service industry sales by type of service ‘product’ and would fill a gap in the availability of detailed ‘product’ statistics for services.
  1. The conclusions of the study suggest that a SERVCOM inquiry is feasible, though further research would be necessary before it could be implemented in practice.
  1. If a SERVCOM inquiry were to be established it could provide information that would be useful to a wide range of public and private users. This would provide a detailed breakdown of service sector activity classification and sales that is not currently available from other ONS sources. Some examples of the uses would be to improve balancing of the components of GDP through the Input-Output framework; to improve the quality of the Corporate Services Price Index (CSPI); and to generally provide a better breakdown of service sector activity classification.

BACKGROUND

  1. A pilot study into the computer services sector was carried our by the ONS in 2000-01. The aim of this study was to make an initial assessment into the feasibility of introducing a SERVCOM inquiry across all the service sectors in order to complement the existing PRODCOM inquiry. Information from this study and from other current ONS service sector works e.g. the Index of Services (IOS) and the CSPI has fed into this project.
  1. The future introduction of a SERVCOM inquiry across all service sectors would improve the quality of current service sector work in the ONS.
  1. This project aimed to assess the challenges and opportunities involved in extending PRODCOM to cover the service sector. It involved carrying out a feasibility study across the whole of the service sector with the following objectives:
  • Utilising existing research into service ‘products’ within the UK, EU and internationally (lessons learnt from Computer Services Feasibility Study, CSPI work, etc);
  • Consideration of alternative sources for SERVCOM (for example, industry regulators);
  • Wide consultation with trade associations, other government departments, key businesses and experts across the service sectors to gauge levels of interest, demand and potential availability of service ‘product’ statistics;
  • Preliminary coding of service ‘products’ across all service sectors (looking at effectiveness of current product classifications for the service sector (CPA));
  • Investigate the appropriate levels of service ‘product’ detail and periodicity across service sectors (for example, would it be suitable to aim for similar levels as PRODCOM?);
  • Preliminary development of suitable units of measurement for service ‘products’;
  • Estimation of potential compliance costs of a SERVCOM inquiry;
  • Evaluation of the feasibility of a SERVCOM inquiry.

MAIN ELEMENTS OF THE STUDY

  1. The conclusions for the objectives of the study, listed above, are as follows:
  • Utilising existing research into service ‘products’ within the UK, EU and internationally

8.1The Computer Services Feasibility Study (NACE Division 72) carried out by ONS in 2000-01 suggested that although only one sector was examined, a SERVCOM inquiry would be feasible, although any future extensions should be on the basis of pilots leading to a rolling program of live surveys. It determined that data should be collected from the supply side rather than the demand side and that the frequency of collection should be annual. The study did recommend that, in general, volume data should not be collected – however for some industries, where appropriate, this could be considered. In the second year the Annual Business Inquiry (ABI), rather than SERVCOM, widened the coverage to include some industries from NACE Division 74 namely:

  • Accounting, book-keeping and auditing activities; tax consultancy (74.12)
  • Market research and public opinion polling (74.13)
  • Business and management consultancy activities (74.14)
  • Architectural and engineering activities and related technical consultancy (74.2)
  • Advertising (74.4)

8.2The product headings were based on the CPA classifications and collected data on turnover by product and by client. The study was also carried out by a number of other countries.

8.3In 2004 the UK, via the ABI, is extending this study further to include Legal activities (74.11); Technical testing and analysis (74.3); Labour recruitment and provision of personal (74.5); and Adult and other education not elsewhere classified (80.42).

8.4At the Voorburg Group in September 2002 (Nantes, France) a paper was presented on the experiences of Denmark, Finland and Sweden in carrying out the pilot survey on Business Statistics which investigated how business service enterprises could break down turnover into products linked to CPA classes. The survey showed that it was possible to collect information although it is advisable to include a selection of potential respondents in the design of the questionnaire.

8.5The Australian Bureau of Statistics also presented a paper on the collection of service industry statistics. It recommended that in-depth consultation with providers was important on how readily available information was and recommended that the breakdown of income should reflect what was recorded in an enterprise’s annual accounts.

8.6At the Voorburg Group meeting of October 2003 (Tokyo, Japan) it was reported that a survey was carried out in Brazil on companies with 20 or more employees in the Information and Transport sectors. In both these sectors data was collected in a classification that compared to the 6-digit CPA classification.

8.7A paper was also presented on the improvements in the measurement of the services sector in the USA. The North American Product Classification system (NAPCS) has been developed. This is a classification of products produced by both manufacturing and service industries based on a marked orientated/demand based framework. The initial focus of the NAPCS was service products as there was no product data for the services sector. The US conducts a Services Annual Survey (SAS) which produces estimates of total output for all the industries it covers. The measurement of service products began in the 2001 SAS using a provisional product list for the Information Sector and Computer System Design and Related Services – these are now categorised using NAPCS. For the 2003 SAS NAPCS data will be collected for the Motion Picture and Sound Recording industries. The data for these NAPCS products are used by US government departments to improve measures of economic growth, real output, prices and productivity for the US economy. It is intended that as further service products are rolled out in the SAS, the following program is to be implemented:

2004

  • Professional, Scientific and Technical services
  • Administrative and support, waste management, remediation services
  • Hospitals, Nursing and residential care facilities

2005

  • Truck, transportation, couriers, messengers and warehousing
  • Securities and commodity contracts intermediation and brokerage, and other financial investment activities
  • Rental and leasing
  • Healthcare and social assistance
  • Arts, entertainment and recreation services

8.8This will not be a complete picture. A number of service areas have still to be developed and added to the SAS.

8.9In the UK the CSPI collects data on various service industries. The survey covers services provided to corporate (business) clients and also only looks at business services sales within the UK. The CSPI has developed a range of service product headings. The service product headings developed are not closely linked to the CPA classification although the CSPI breakdowns give a useful overview of the information that might be collected in a SERVCOM inquiry.

8.10The Index of Services (IoS) indicates the month on month percentage changes in net output in the service sector. The IoS is intended to cover the whole service sector as grouped in the Standard Industrial Classification (SIC). To produce indicators suitable for use as deflators, indexes are weighted together. However, reliable data on the sales of individual services are lacking, a SERVCOM study would address this.

8.11Consultation within ONS considered what other data sources were available and what would be the requirements of a SERVCOM inquiry. Existing inquiries relating to the service sector include the Monthly Inquiry into Distribution and Services Sector (MIDSS) which collects monthly turnover from industries in the service sector using some, but not all, of the SIC classifications 50 to 93; and the International Trade in Services (ITIS) which collects data on pre-set service products. Their requirements for a SERVCOM inquiry include identifying whether service customers are households or other businesses as well as further seeking information as to whether customers are either domestic or foreign. Potential ONS SERVCOM customers also endorsed these requirements.

  • Wide consultation with trade associations, other government departments, key businesses and experts across service sectors to gauge levels of interest, demand and potential availability of service ‘product’ statistics

8.12This was the main data gathering exercise of the study and forms the basis of the conclusions of this report. Visits were made to trade exhibitions and trade associations to gain information on the availability of data and the level of interest its collection and dissemination would generate. A consultation of representatives across the service sector took place with trade associations, regulators, other government departments and enterprises. Comments were sought as to whether:

  • Information on the value and volume of sales is readily available from existing systems;
  • Services can have a unit of measurement applied to them;
  • The level of detail required could be provided;
  • It is possible to categorise services between those provided to domestic customers and to other businesses;
  • Customers can be identified as being in the ‘home’ market or ‘foreign’ market; and
  • The preferred/appropriate frequency of collection would be quarterly or annually.
  • Trade Exhibition Visits

8.13A number of visits were undertaken to service sector trade exhibitions, where exhibitors views on the availability of the data and willingness to participate in the wider consultation exercise were sought. This offered the opportunity to discuss the issues with a wide range of potential data providers. The exhibitions visited were:

  • Association of Chief Police Officers (ACPO) 2003;
  • Fire Expo 2003;
  • International Fire Safety (IFSEC) 2003;
  • Safety and Health Expo 2003;
  • Security Solutions 2003;
  • Facilities Show;
  • Confex;
  • Railtex; and
  • Expowest 2003

8.14In general exhibitors were interested in the SERVCOM study. Many believed that they would be able to break down information into the potential categories identified by the study. However, due to the tendency of sales representatives being present on the stalls rather than those from accounting sections of enterprises a number could not give a definitive response.

  • Coverage

8.15Over 350 letters were dispatched seeking the views of potential suppliers and users on the appropriateness of a SERVCOM study and the availability of data. Further “reminder” letters were issued to non-responders in order to improve the response rate. The number of responses by organisation type can be found in the following table.

Organisation
Type / No. of letters issued(1) / No. of responses / % response rate
Company / 182 / 57 / 31
Gov Dep't(2) / 17 / 10 / 59
Trade Ass / 144 / 55 / 38
Total / 343 / 122 / 36
(1) Excludes those organisations where documentation was returned as “addressee was not known”
(2) Includes regulators

8.16Representatives across the Statistical Classification of Products by Activity in the European Economic Community (CPA) were selected and the response rate within each of the categories is shown in the following table.

CPA division (1) / No. of responses / % response rate
45 / 1 / 50
50 / 4 / 44
51 / 2 / 17
52 / 5 / 36
55 / 3 / 43
60 / 6 / 30
61 / 1 / 20
62 / 5 / 42
63 / 10 / 47
64 / 6 / 43
65 / 4 / 40
66 / 3 / 19
67 / 1 / 25
70 / 4 / 40
71 / 3 / 16
72 / 5 / 33
73 / 5 / 45
74 / 24 / 38
80 / 6 / 46
85 / 10 / 53
90 / 4 / 50
91 / 2 / 67
92 / 4 / 16
93 / 4 / 33
Total / 122 / 36
(1) See Annex A for descriptions of the CPA divisions

8.17Overall a response rate of 36 per cent was achieved.

8.18It should be noted that Divisions 95 - “Services of households as employers of domestic staff”, and 99 - “Services provided by extra-territorial organisations and bodies”, were excluded from the consultation as it was believed that the information from these divisions would not be appropriate for a potential SERVCOM study. This is in line with the Annual Business Inquiry carried out by the Office for National Statistics (ONS) in the UK.

8.19Division 75 – “Public administration and defence services” were also excluded from the consultation as they fall outside the remit of the SERVCOM study.

  • Responses
  • Availability

8.20The availability of value and volume of sales data was sought. The following responses were received:

Response / No. of responses / % of responses
Value and volume / 68 / 56
Value only / 11 / 9
Volume only / 0 / 0
Neither value or volume / 30 / 25
Don't Know / 3 / 2
Blank / 10 / 8
Total / 122 / 100

8.21The majority of respondents (56 per cent) stated that value and volume data could be supplied but the degree to how “readily available” the information was varied. However, 1 in 4 (25 per cent) stated that information on neither value nor volume was readily available, one of the reasons given being the need to change system requirements to supply such information.

8.22On the whole, value data is more readily available, with volume data being more problematic as services can cover a wide variety of different types of activity.

8.23In some sectors information is already collected by regulators as part of periodic data collection programmes e.g. Oftel. This cannot be said to be the case across the majority of CPA divisions. Also those trade associations which collect data, only do so for their own membership and not necessarily for their whole service sector.

8.24With regard to the CPA divisions there were no clear indications as to whether the data was easier or harder to provide from one sector to another.

  • Unit of measurement

8.25Those consulted were asked whether a unit of measurement could be applied to the services in their sector, and if so what it might be. The following responses were received:

Response / No. of responses / % of responses
Yes / 73 / 60
No / 29 / 24
Don't Know / 5 / 4
Blank / 15 / 12
Total / 122 / 100

8.266 in 10 (60 per cent) of respondents believed that a unit of measurement could be applied to the services they provide, although 1 in 4 (24 per cent) believed they could not assign a unit of measurement.

8.27Of those who responded in the affirmative, the following table provides examples of suggested units of measurement suggested by CPA division and includes comments received from visits to trade exhibitions:

CPA division (1) / Suggested unit(s) of measurement
45 / -
50 / New/used cars sold; Parts turnover; Workshop hours (labour) sold (Trade services for motor vehicles – 50.10)
Litres; parts (Retail trade services of motor fuel – 50.50)
51 / -
52 / Like for like sales; sales per sq. metre; sales per FTE; footfall conversion (Retail trade services of electrical household appliances and radio and television goods – 52.45)
55 / Rooms sold; Rounds of golf played; number of members (Hotel services – 55.10.10)
Overnights (Youth hostel and mountain refuge services – 55.21)
60 / Tonnes lifted; distance travelled (Freight transportation services by road – 60.24)
Twh (Transportation services via pipeline – 60.30.12)
61 / -
62 / Hours flown; passengers (Air transport services – 62)
63 / Pallets stored/distributed (Storage and warehousing services – 63.12)
Kilograms; Tonnes (Other transport supporting services – 63.20)
Passengers (Travel agency and tour operator services – 63.30)
64 / Revenue per consignment sent; revenue per kilo; number of consignments sent (Courier services other than national post services – 64.12)
Traffic minutes; airtime minutes; kilobytes of data; number of lines and/or subscribers; ARPU (average revenue per user); traffic carried; fixed price packages (Telecommunications services – 64.20)
65 / -
66 / Administration fees; gross premiums (Non-life insurance services – 66.03)
Income for life and pensions insurance; Premium income (Insurance and pension funding services – 66.0)
67 / Premium per policy (Insurance and pension funding – 67.20)
70 / Accommodation, leisure (Letting services of own property – 70.20)
Transactions (Real estate services on a fee or contract basis – 70.31)
71 / Annual return on investment by product (Renting services of construction and civil engineering machinery and equipment – 71.32)
72 / Consultancy (Man hours); Managed service units (Other computer related services – 72.60)
73 / -
74 / Numbers of interviews (Market research and public opinion polling services – 74.13)
Fee income and handling (Business and management consultancy services – 74.14)
Hours; manpower days (Architectural, engineering and related technical consultancy services – 74.20)
Number of inspections undertaken (Technical testing and analytical services – 74.30)
Type of worker (Labour recruitment and provision of personnel services – 74.50)
Transaction value per call/contact (Call centre services – 74.86)
Spend by delegate; visitors; square metre space (Exhibition, fair and congress organisation services - 74.87.15)
80 / Pupils; pupil terms (General secondary education services – 80.21)
Participants/delegates; Length of teambuilding activity; type of course (Adult and other educational services n.e.c – 80.42)
85 / Fees paid; occupancy rates (Hospital services – 85.11)
Number of tests carried out on hair samples; on oral fluid samples, on urine samples; units (as in beds) for residential care; hours of homecare (Other human health services – 85.14)
Number of examinations (Veterinary services – 85.20)
90 / Length of sewer/drain surveyed or cleaned (Sewerage services – 90.01)
Tonnage of waste collected, treated and disposed of; collections; Unit revenue/unit disposal = £/m3 (Collection and treatment services of other waste – 90.02)
91 / -
92 / Hire of equipment, catering (Fair and amusement park services – 92.33)
Green fees, hire of equipment (Other sporting services – 92.69)
93 / Men's hairdressing; Ladies' hairdressing; Beauty treatments (Hairdressing and other beauty treatment services – 93.02)
Funerals (Funeral and related services – 93.03)
Membership numbers; yield per member(Physical well-being services – 93.04.10)

8.28As could be predicted the units of measurement differ widely across the divisions. The only method by which to decide on suitable units in a particular sector would be to hold discussions with representatives of an industry. However, these discussions would probably need to be taken down to at least a 6-digit level of detail, due to the breadth of coverage in some of the divisions.