WIREDGOV

ONS has yesterday published the first results from its new Flow of Funds Project, which is being run in partnership with the Bank of England. The objective is to improve the quality of the statistics relating to financial and sectoral balance sheets.

This work follows recommendations from international organisations such as Eurostat, the United Nations and the International Monetary Fund, as well as the recent UK National Statistics Quality Review, to ensure ONS continues to measure the changing economy in the best way possible.

High quality Flow of Funds statistics are essential for identifying the build-up of risks in the financial sector and in understanding financial connections amongst the institutional sectors and sub-sectors within the economy.

Yesterday’s release published for the first time a full “from-whom-to-whom” matrix of loans in the UK economy, with time series data covering the period 2006-2013. These statistics provide further detail on the connections between sectors from those presented in the UK Economic Accounts (UKEA). This allows for a more granular analysis of lending within the UK economy.

Taking loans to households as an example, the estimates show how the rapid increase in lending to households in the run up to the economic downturn came from both banks and other financial institutions (OFIs), which include entities such as finance companies and investment funds. An increasingly large proportion of total household borrowing was from the OFI sector during this time, predominantly due to the securitisation of household mortgage loans that were transferred into securitisation ‘special purpose vehicles’, which are classified as OFIs.

The new breakdown of sectors of the economy shows that household borrowing from OFIs has been increasing over time, both in terms of the absolute amounts outstanding and the proportion of total borrowing that it accounts for. This reflects the increased presence of institutions offering alternative sources of finance for households, such as payday loan companies and specialist mortgage lenders. This is not, however, shown up in the current aggregated UKEA estimates.

ONS and the Bank of England will continue to work on the development of Flow of Funds statistics. Future updates on work plans and progress of the project will be published on the dedicated Flow of Funds page on the ONS website.

Background notes

1. The full ‘The UK Flow of Funds Project; introduction, progress and future work’ article is available here: http://www.ons.gov.uk/ons/rel/naa1-rd/national-accounts-articles/the-uk-flow-of-funds-project--introduction--progress-and-future-work/index.html
2. Details of the policy governing the release of new data are available from the media office.

3. National Statistics are produced to high professional standards set out in the Code of Practice for Official Statistics. They undergo regular quality assurance reviews to ensure that they meet customer needs. They are produced free from any political interference. 
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4. Details of the policy governing the release of new data are available by visiting www.statisticsauthority.gov.uk/assessment/code-of-practice/index.html or from the Media Relations Office email: media.relations@ons.gsi.gov.uk