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The Balance of Payments (BoP) measures UK transactions with the Rest of the World.


Balance of Payments
Department: Office for National Statistics
Trade in goods and services, income, current and capital transfers, transactions in UK external assets and liabilities, and levels of identified assets and liabilities are detailed within the current account.
Explanations beyond exchange rates
Department: Office for National Statistics
This article examines the reaction of the UK trade balance since the substantial depreciation of sterling between Q3 2007 and Q1 2009.
Foreign Direct Investment
Department: Office for National Statistics
Provides a detailed breakdown of UK foreign direct investment flows, positions (stocks) and earnings (both inward and outward), by country, component and industry.
International Trade in Services
Department: Office for National Statistics
Detailed product, industry and geographic breakdowns of imports and exports of services, mainly based on data from the International Trade in Services (ITIS) Survey.
International transactions of the UK film and television industries
Department: Office for National Statistics
Covers International Transactions of the film and television industry through a variety of formats.
Monthly Balance of Payments (experimental)
Department: Office for National Statistics
A system is in development to provide monthly balance of payments to the European Central Bank (ECB) for the purposes of monetary policy and foreign exchange operations in the Euro area.
Monthly Review of External Trade Statistics
Department: Office for National Statistics
UK exports and imports of goods.
National Statistics Quality Review
Department: Office for National Statistics
A series of in-depth methodological reviews. NSQRs complement existing quality assurance practices, providing an additional tool to make sure ONS methods are - and remain - fit for purpose.
The International Investment Position
Department: Office for National Statistics
The UK's international investment position can be viewed as the balance sheet recording the UK's stock (or level) of foreign financial assets and liabilities at a specific point in time. The net international investment position is the difference between the stock of foreign financial assets and foreign liabilities at a particular date.
UK Trade
Department: Office for National Statistics
Latest monthly statistics on trade in goods classified according to Standard International Trade Classification (SITC) as well as monthly estimates for total trade in services.
UK Trade in Goods Analysed in Terms of Industry
Department: Office for National Statistics
The value of UK exports and imports of goods grouped by industry. Goods are attributed to the industry of which they are the principal products.
UK Trade in Services
Department: Office for National Statistics
Service sector data highlighting the UK's major trading partners, which services are common to a number of industries and the geographical breakdown on services and industries.
United Kingdom Balance of Payments
Department: Office for National Statistics
Balances between inward and outward transactions, providing a net flow of transactions between UK residents and the rest of the world and reports on how that flow is funded.
Welsh Exports
Department: Welsh Government
Summarises HM Revenue and Customs (HMRC) estimates of exports from Wales.

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The Balance of Payments (BoP) is one of the UK's key economic statistics. It measures the economic transactions between UK residents and the Rest of the World. It also draws a series of balances between inward and outward transactions, provides an overall net flow of transactions between UK residents and the rest of the world, and reports how that flow is funded.

Economic transactions include:

  • exports and imports of goods such as oil, agricultural products, other raw materials, machinery and transport equipment, computers, white goods and clothing

  • exports and imports of services such as international transport, travel, financial and business services

  • income flows such as dividends and interest earned by non-residents on investments in the UK and by UK residents investing abroad

  • financial flows, such as investment in shares, debt securities and loans

  • transfers, which are offsetting entries to any one-sided transactions listed above, such as foreign aid and funds brought by migrants to the UK

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Technical Data

The standard balance of payments classification comprises two main groups of accounts: the current account and the capital and financial account.

Transactions classified to the current account include goods and services, income and current transfers. Within the capital and financial account, the capital account includes capital transfers and the net acquisition or disposal of non-produced, non-financial assets. The financial account includes transactions in financial assets and liabilities.

Transactions in current account and capital account items are generally shown on a gross basis (gross debits and credits separately). Transactions in financial account items are mainly recorded on a net basis.

Current account

Each of the broad categories is described briefly below.

Goods and services are divided into separate accounts for goods and services. Goods comprise most movable goods that change ownership between UK residents and non-residents.

Services comprise services transactions between UK residents and non-residents, together with some transactions in goods where, by international agreement, it is not practical to separate the goods and services components (for example, goods purchased by travellers are classified to services).

Income refers to income earned by UK residents from non-residents and vice versa. Income covers compensation of employees and investment income. Compensation of employees comprises wages, salaries and other benefits earned by individuals from economies other than those in which they are residents, as well as earnings from extraterritorial bodies such as foreign embassies (which often employ staff from the economy in which they are located).

Investment income comprises income earned from the provision of financial capital and is classified by direct, portfolio and other investment income and income earned on the UK’s reserve assets.

Transfers represent offsets to the provision of resources between residents and non-residents with no quid pro quo in economic value (for example, the provision of food aid). Current transfers are distinguished from capital transfers, which are included in the capital account.

Current transfers represent the offset to the provision of resources that are normally consumed within a short period (less than 12 months) after the transfer is made. In the example of food aid, the food is presumed to be consumed within 12 months of it being received. The classification of current transfers is by general government and other sectors.

Capital account

The capital account comprises both capital transfers and the acquisition and disposal of non-produced, non-financial assets (such as copyrights). The latter includes land purchases and sales associated with embassies and other extraterritorial bodies. Capital transfers entries are required where there is no quid pro quo to offset the transfer of ownership of fixed assets, or the transfer of funds linked to fixed assets (for example, aid to finance capital works), or the forgiveness of debt. It also includes the counterpart to the transfer of net wealth by migrants, referred to as migrants’ transfers.

Financial account

The financial account comprises transactions associated with changes of ownership of the UK’s foreign financial assets and liabilities. The main classifications used in the financial account are discussed in conjunction with the international investment position classification below.

The international investment position measures the UK’s stock of external financial assets and liabilities, whereas the balance of payments financial account measures transactions in these assets and liabilities. Therefore, the classifications used in the financial account and international investment position need to be essentially the same.

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  • Acceptances

    See bills and acceptances.

  • Accrued interest

    A method of recording transactions to relate them to the period when the exchange of ownership of the goods, services or financial asset applies. For example, value added tax accrues when the expenditure to which it relates takes place, but HM Revenue & Customs (HMRC) receive the cash some time later. The difference between accruals and cash results in the creation of an asset and liability in the financial accounts, shown as amounts receivable or payable.

  • Advance and progress payments

    Payments made for goods in advance of completion and delivery of the goods.

  • Affiliates

    Branches, subsidiaries or associate companies.

  • Allocation of Special Drawing Rights (SDRs)

    See Special Drawing Rights.

  • Arbitrage

    A technique of deriving profit with little or no risk of loss by exploiting temporary misalignments in the price of financial instruments, or of one instrument in different markets.

  • Assets

    This term commonly refers to financial assets that are claims on non-residents, from whose point of view the same item is a liability to a UK resident. Among reserve assets however, gold and Special Drawing Rights (SDRs) have a value which exists independently of any corresponding liabilities. Real assets such as merchandise, although they may be entered in company accounts as assets, are seldom described as assets in balance of payments analysis.

  • Associated companies

    Companies in which the investing company has a substantial equity interest (usually this means that it holds between 10 per cent and 50 per cent of the equity share capital) and is in a position to exercise a significant influence on the company (see Subsidiary).

  • Balancing item

    See Net Errors and Omissions.

  • Bank for International Settlements (BIS)

    An international organisation which fosters international monetary and financial co-operation and serves as a bank for central banks.The BIS fulfils this mandate by acting as (i) a forum to promote discussion and policy analysis among central banks and within the international financial community, (ii) a centre for economic and monetary research, (iii) a prime counterparty for central banks in their financial transactions, (iv) agent or trustee in connection with international financial operations.Established on 17 May 1930, the BIS is the world's oldest international financial organisation, which has its head office based in basel, Switzerland. The most recent BIS data used within the UK balance of payments accounts covers non-bank borrowing from banks in the following countries: Algeria, Argentina, Australia, Austria, Belgium, Bosnia and Herzegovina, Brazil, Bulgaria, Canada, Chile, China, Croatia, the Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hong Kong SAR, Hungary, Iceland, India, Indonesia, Ireland,  Israel, Italy, Japan, Korea, Latvia, Lithuania, Macedonia (FYR), Malaysia, Mexico, the Netherlands, new Zealand, Norway, the Philippines, Poland, Portugal, Romania, Russia, Saudi Arabia, Serbia, Singapore, Slovakia, Slovenia, South Africa, Spain, Sweden, Switzerland, Thailand, Turkey, the United Kingdom and the United States, plus the European Cental Bank. The data used for balance of payments purposes are locational banking statistics on a residence basis.

  • Banking statistics

    A term used to denote an integrated set of returns, covering all UK banks, collected by the Bank of England. The returns were introduced in late 1974 and during 1975. The data collected cover all listed banks up to the end of 1981 and the revised group of institutions classified as UK banks from 1982 onwards. It collects, on a regular basis, extensive information relating to the levels of, and changes in, assets and liabilities. Revised banking returns were introduced from the end of 1997 to reflect the requirements of the International Monetary Fund Balance of Payments Manual 5th edition and to remove the Channel Islands and the Isle of Man from the definition of the economic territory of the UK. 

  • Bank of England – Issue Department

    This part of the Bank of England deals with the issue of bank notes on behalf of central government. It was formerly classified to central government but is now part of the central bank/monetary authorities sector. Its activities include, inter alia, market purchases of commercial bills from UK banks.

  • Banks (UK)

    Banks are defined as all financial institutions recognised by the Bank of England as UK banks. For statistical purposes, this includes (1) institutions which have a permission under Part 4 of the Financial Services and Markets Act 2000 (FSMA) to accept deposits, other than, (i) credit unions, (ii) firms which have a permission to accept deposits only in the course of carrying out contracts of insurance in accordance with that permission, (iii) friendly societies, (iv) building societies; (2) European Economic Area credit institutions with a permission under Schedule 3 to FSMA to accept deposits through a UK branch; (3) the Banking and Issue Departments of the Bank of England (the latter from April 1998). Prior to December 2001, banks were defined as all financial institutions recognised by the Bank of England as UK banks for statistical purposes, including the UK offices of institutions authorised under the Banking Act 1987, the Banking and Issue Departments of the Bank of England (the latter from April 1988), and deposit-taking UK branches of ‘European Authorised Institutions’. This includes UK branches of foreign banks, but not the offices abroad of these or of any British owned banks.  An updated list of banks appears regularly in the Bank of England’s Monetary and Financial Statistics publication, available at:www.bankofengland.co.uk/statistics/ms 

  • Bills and acceptances

    A bill is an unconditional order in writing, addressed by the drawer to the drawee, to pay a fixed sum to the drawer on a specified date. A UK resident may draw a bill in Sterling on a foreign resident representing credit extended by the UK resident to the foreign resident. If the UK resident sells the bill to a UK bank, generally at a price less than the nominal value of the bill, the bank is said to discount the bill, and the claim on the foreign resident is transferred to the UK bank. A bill is known as an acceptance when the drawee accepts the bill. A UK bank may accept a bill on behalf of a foreign resident in which case the UK resident draws the bill on the UK bank and not on the foreign resident. The accepting bank has a claim on the foreign resident and expects to be paid by him before the bill matures.

  • Bond

    A financial instrument that usually pays interest to the holder. Bonds are issued by governments as well as companies and other institutions, for example, local authorities. Most bonds have a fixed date on which the borrower will repay the holder. Bonds are attractive to investors since they can be bought and sold easily in a secondary market. Special forms of bonds include deep discount bonds, equity warrant bonds, Eurobonds, and zero coupon bonds.

  • BPM5

    The Balance of Payments Manual, 5th Edition, published in 1993 by the International Monetary Fund (IMF).

  • Branch

    An unincorporated enterprise, wholly or jointly owned by a direct investor.

  • Branch indebtedness

    Net amounts owed by a branch to its head office (or vice versa).

  • British government stocks

    Securities issued or guaranteed by the UK government. Also known as gilts.

  • Building societies

    Building societies are mutual institutions specialising in accepting deposits from members of the public and in long-term lending to members of the public, mainly to finance the purchase of dwellings, such lending being secured on dwellings. Their operations are governed by special legislation which places restrictions on their recourse to other sources of funding and other avenues of investment.

  • Capital account

    The capital account consists of capital transfers (see 'Transfers') and acquisition/disposal of non-produced, non-financial assets (see 'Non-produced, non-financial assets').

  • Capital transfers

    See Transfers.

  • Certificate of deposit

    A short-term interest-paying instrument issued by deposit-taking institutions in return for money deposited for a fixed period. Interest is earned at a given rate. The instrument can be used as security for a loan if the depositor requires money before the repayment date.

  • CIF (Cost, Insurance and Freight)

    The basis of valuation of imports for customs purposes, it includes the cost of insurance premiums and freight services. These need to be deducted to obtain the free on-board valuation consistent with the valuation of exports which is used in the economic accounts.

  • Collective Investment Institution (CII)

    Incorporated (investment companies or investment trusts) and unincorporated undertakings (mutual funds or unit trusts) that invest the funds, collected from investors by means of issuing shares/units (other than equity) in financial assets (mainly marketable securities and bank deposits) and real estate (see Trusts).

  • Commercial paper

    This is an unsecured promissory note for a specific amount, and maturing on a specific date. The commercial paper market allows companies to issue short-term debt direct to financial institutions who then market this paper to investors or use it for their own investment purposes.

  • Commodity gold

    See Gold.

  • Commonwealth Development Corporation

    A public corporation which finances development projects abroad.

  • Compensation of employees

    Total remuneration payable to employees in cash or in kind. Includes the value of social contributions payable by the employer.

  • Coordinated Portfolio Investment Survey (CPIS)

    A survey coordinated and disseminated by the International Monetary Fund (IMF). Participants in the CPIS collect a geographical breakdown of their portfolio investment assets.

  • Counterpart items

    Certain items in the balance of payments exist only as counterpart items, introduced to balance the inclusion of other items that do not fall naturally into the double-entry system. The allocation of Special Drawing Rights (SDRs) is an example of an artificial counterpart item introduced into the balance of payments to offset the corresponding increase in SDR holdings within official reserves (as SDRs are not the liability of any one sector) (see Special Drawing Rights (SDRs)).

  • Cross-trades

    The provision of transportation services by resident operators between two foreign economies.

  • Currency swaps

    A currency swap, also known as a cross-currency interest-rate swap contract, consists of an exchange of cash flows related to interest payments and, at the end of the contract, an exchange of principal amounts in specified currencies at a specified exchange rate.

  • Current account

    The account of transactions in respect of trade in goods and services, income and current transfers.

  • Current balance

    The balance of current account transactions.

  • Current transfers

    See Transfers.

  • Debt forgiveness

    The voluntary cancellation of all or part of a debt within a contractual arrangement between a creditor in one country and a debtor in another country.

  • Debt securities

    Debt securities cover bonds, debentures, notes and money market instruments. These are split into long and short-term (up to one year), based on original maturity.

  • Derivatives

    See Financial Derivatives.

  • Direct investment

    Net investment by UK/foreign companies in their foreign/UK branches, subsidiaries or associated companies. A direct investment in a company means that the investor has a significant influence on the operations of the company, defined as having an equity interest in an enterprise resident in another country of 10 per cent or more of the ordinary shares or voting stock. (See ‘Branch’, ‘Subsidiary’ and ‘Associated companies’.) Investment covers not only acquisition of fixed assets, stock building and stock appreciation, but also all other financial transactions, such as: additions to or payments of working capital; other loans and trade credit; and acquisitions of securities. Estimates of investment flows allow for depreciation in any undistributed profits. Funds raised by the subsidiary or associate company in the economy in which it operates are excluded as they are locally raised and not sourced from the parent company.

  • Disbursements

    Operating expenses, for example, by operators of ships or aircraft.

  • Dividend

    A payment made to company shareholders from current or previously retained profits. Dividends are recorded when they become payable.

  • Equity

    Equity is ownership of a residual claim on the assets of the institutional unit that issued the instrument. Equities differ from other financial instruments in that they confer ownership of something more than a financial claim. Shareholders are owners of the company whereas bond holders are outside creditors.

  • Equity securities

    Equity securities are shares issued by companies to shareholders. Purchases of equity securities in which the purchaser does not have any significant degree of control over the company (that is, less than 10 per cent of the equity capital) fall within portfolio investment, otherwise it falls within direct investment. Equity securities include mutual fund shares.

  • Euro/European Currency Unit (ECU)

    The ECU was officially introduced in 1979 in connection with the start of the European Monetary System ( EMS). In the EMS, the ECU served as the basis for determining exchange rate parities and as a reserve asset and means of settlement. It was a composite currency which contained specified amounts of the currencies of the member states of the European Union. The currencies making up the ECU were weighted according to their economic importance and use in short-term finance. As from September 1989 the weightings of the ECU were revised to include both the Spanish peseta and Portuguese escudo. The ECU was converted into the euro at the start of European Monetary Union on 1 January 1999, with Greece joining on 1 January 2001. From 1 January 2003, the euro became the currency of the member states of the European Monetary Union.

  • Euro area

    The euro area encompasses those Member States of the EU in which the euro has been adopted as the single currency and in which a single monetary policy is conducted under the responsibility of the decision-making bodies of the European Central Bank. As from 1 January 2011 the euro area comprises Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Malta, the Netherlands, Portugal, the Slovak Republic, Slovenia and Spain.

  • Eurocurrency market

    All borrowing and lending by banks in currencies other than that of the country in which the banks are situated.

  • European Central Bank (ECB)

    The Monetary Authority for the euro currency, based in Frankfurt. The ECB, together with the national central banks of the Member States, manages monetary policy and the banking system across the European Monetary Union area.

  • European Investment Bank (EIB)

    This was set up to assist economic development within the EU. Its members are the Member States of the EU.

  • European Monetary System (EMS)

    The EMS was established in March 1979. Its most important element was the mechanism known as the ERM (Exchange Rate Mechanism) whereby the exchange rates between the currencies of the participating Member States were kept within set ranges. The UK joined the ERM on 8 October 1990. On 16 September 1992 the UK’s membership of the ERM and the EMS was suspended. The EMS was superceded by the single currency when eleven of the participating member states joined European Monetary Union on 1 January 1999, with Greece joining on 1 January 2001.

  • Eurosystem

    The Eurosystem comprises the European Central Bank (ECB) and the national central banks of the Member States which have adopted the euro in Stage Three of Economic and Monetary Union (EMU). In 2011 there are 17 national central banks in the Eurosystem. The Eurosystem is governed by the Governing Council and the Executive Board of the ECB and has assumed the task of conducting the single monetary policy for the euro area since 1 January 1999. Its primary objective is to maintain price stability.

  • Exchange control

    A legal control imposed by governments on the ability of persons, businesses and others to hold, receive and transfer foreign currency. The extent of the Exchange Control Act of 1947 was considerably reduced in June and July 1979 and the Act was repealed in 1987.

  • Exchange cover scheme (ECS)

    A scheme first introduced in 1969 whereby UK public bodies raise foreign currency from abroad, either directly or through UK banks, and generally surrender it to the Exchange Equalisation Account (EEA) in exchange for sterling for use to finance expenditure in the UK. HM Treasury sells the borrower foreign currency to service and repay the loan at the exchange rate that applied when the loan was taken out. The transactions relate to net borrowing by British Nuclear Fuels plc and repayment by HM Government following the privatisation of other former public corporations (see Novations).

  • Exchange Equalisation Account (EEA)

    The government account with the Bank of England in which transactions in reserve assets are recorded. These transactions are classified to the central government sector. It is the means by which the Government, through the Bank of England, influences exchange rates.

  • Export credit

    Credit extended abroad by UK institutions, primarily in connection with UK exports but also including some credit in respect of third country trade.

  • Export Credit Guarantee Department (ECGD)

    A non-ministerial government department, classified to the public corporations sector, the main function of which is to provide insurance cover for export credit transactions.

  • External debt

    A measure of balance sheet liabilities owing to non-residents. Liabilities relating to trade credit, debt securities, and loans and deposits (including inter-company liabilities within direct investment) are included. Equity liabilities are excluded.

  • f.o.b (Free on Board)

    An f.o.b price excludes the cost of insurance and freight from the country of consignment but includes all charges up to the point of the exporting country's customs frontier. Trade in goods exports are valued on a f.o.b basis in the balance of payments accounts.

  • Financial account

    The financial account records transactions in external assets and liabilities of the UK, for example, the acquisitions and disposals of foreign shares by UK residents. The financial account consists of direct investment, portfolio investment, other investment, financial derivatives and reserve assets.

  • Financial auxiliaries

    Auxiliary financial activities are ones closely related to financial intermediation but which are not financial intermediation themselves, such as the repackaging of funds, insurance broking and fund management. Financial auxiliaries therefore include insurance brokers and fund managers.

  • Financial corporations

    All bodies recognised as independent legal entities whose principal activity is financial intermediation and/or the production of auxiliary financial services.

  • Financial derivatives

    Any financial instrument that derives its value from other financial instruments (known as the underlying), events or conditions. Financial derivatives include options (on, for example, currencies, interest rates, commodities, and indices), traded financial futures, warrants, and currency and interest swaps. Under BPM5, transactions in derivatives are treated as separate transactions, rather than being included as integral parts of underlying transactions to which they may be linked as hedges. Estimates for foreign exchange, interest rate, equity and commodity and credit derivatives are included.

  • Financial gold

    See Gold.

  • Financial Leasing

    See Leasing.

  • Financial surplus or deficit (FSD)

    The former term for Net lending (plus)/ Net borrowing (minus), the balance of all current and capital account transactions for an institutional sector or the economy as a whole.


    Financial Intermediation Services Indirectly Measured. It represents the implicit charge for the service provided by monetary financial institutions paid for by the interest differential between borrowing and lending rather than through fees and commissions.

  • Foreign

    In this publication, ‘foreign’ denotes residence outside the UK rather than nationality. In some contexts ‘external’, ‘abroad’ or ‘non-resident’ are used with the same meaning (see Residency).

  • Forwards

    In a forward contract, the counterparties agree to exchange, on a specified date, a specified quantity of an underlying item (real or financial) at an agreed-upon contract price (the strike price). If a future exchange of currencies is carried out in a forward contract, the counterparties exchange, in accordance with prearranged terms, cash flows based on the reference prices of the underlying items. Forward rate agreements and forward foreign exchange contracts are common types of forward contracts.

  • Futures

    Futures are forward contracts traded on organised exchanges. They give the holder the right to purchase a commodity or a financial asset at a future date.

  • Gilts

    Bonds issued or guaranteed by the UK government. Also known as gilt-edged securities or British government securities.

  • Gold

    In the accounts, a distinction is drawn between gold held as a financial asset (financial gold) and gold held like any other commodity (commodity gold). Transactions in commodity gold are recorded in the trade in goods account and include foreign trade in finished manufactures together with net domestic and foreign transactions in gold moving into or out of finished manufactured form (that is, for jewellery, dentistry, electronic goods, medals and proof – but not bullion – coins).  Banking-type assets and liabilities denominated in gold, including reserve assets are treated as financial gold transactions and included in the financial account. The distinction between commodity and financial gold differs from that drawn by the IMF, in its Balance of Payments Manual (5th edition, 1993), between non-monetary and monetary gold. The UK has obtained an exemption from adopting the BPM5 recommendations on treatment of gold in order to avoid distortion of its trade in goods account by the substantial transactions of the London Bullion Market.  The treatment of non-monetary gold was reviewed as part of the worldwide process to revise the IMF Balance of Payments Manual Sixth Edition. The proposal is that the concept of non-monetary gold is replaced by two categories – allocated gold (a commodity) and unallocated gold (a financial instrument). UK balance of payments will continue current practice until the treatments defined in the revised manual are implemented. 

  • Gross

    The separate identification of both credit/debit, export/import for any particular transaction.

  • Hedging

    Hedging is accomplished by the temporary purchase or sale of futures/swaps contracts to offset movements in the position or anticipated position in the cash markets. For example, this may benefit banks, financial institutions, pension funds and corporate treasuries who hold interest rate, exchange rate or stock price sensitive assets or liabilities.

  • Holding companies

    A holding company is a company that usually confines its activities to owning stock in and supervising management of other companies. A holding company usually owns a controlling interest in the companies whose stock it holds. Holding companies exist for legal, commercial and tax reasons. In line with international standards, holding companies are classified as other financial intermediaries.

  • Households

    Individuals or small groups of individuals as consumers and in some cases as entrepreneurs producing goods and market services.

  • Import credit

    Credit extended to UK institutions by non-residents, primarily in connection with UK imports.

  • Income

    The income account forms part of the current account and consists of compensation of employees and investment income, both of which have separate entries in this glossary.

  • Inter-company accounts

    Accounts recording transactions between parent and subsidiary or associated companies, and balances owed by one to the other.

  • Interest rate swaps

    An obligation between two parties to exchange interest-related payments in the same currency from fixed rate into floating rate, or vice versa, or from one type of floating rate to another. A swap can be used to reshape the coupon payments of either new or existing debt. The only movement of funds is a net transfer of interest payments between the two parties. The interest payments are calculated on an agreed principal amount, which is not exchanged. The settlement receipts/payments on UK banks’ interest rate swaps appear in the financial account under financial derivatives.

  • International Investment Position (IIP)

    The international investment position records end of period balance sheet levels of UK external assets and liabilities. The IIP consists of direct investment, portfolio investment, other investment and reserve assets. In 2010 and 2011 editions, for the first time, financial derivatives business of UK banks and securities dealers respectively have been incorporated into main aggregates of th IIP. Data for insurance companies, pension funds, unit trusts, investment trusts, open-ended investment companies, finance leasing companies, credit grantors, factoring companies and building societies are not includedin the main aggretates for the UK's international investment position.  The financial derivatives balance sheet for all sectors is published separately in table FD of the Pink Book.

  • International Monetary Fund (IMF)

    A fund set up as a result of the Bretton Woods Conference of 1944 and which began operations in 1947. It includes most of the major countries of the world. The Fund was set up to supervise the fixed exchange rate system agreed at Bretton Woods and to make available to its members a pool of foreign exchange resources to assist them when they have balance of payments difficulties. Further definitions relating to the IMF are given in the IMF section in the 1981 and earlier editions of this publication (see also Special Drawing Rights). 

  • Intervention Board for Agricultural Produce (IBAP)

    The UK government agency which used to operate the support arrangements of the EU Common Agricultural Policy within the UK. It has now been replaced by the Rural Payments Agency (RPA).

  • Investment

    In a balance of payments context this is categorised as either direct, portfolio or other investment. See appropriate headings for definitions.

  • Investment income

    All investment income accruing to UK residents from non-residents or payable abroad by UK residents after allowing for depreciation. The balance on credits and debits equals ‘net property income from abroad’ as shown in the National Accounts.

  • Investment trust

    See 'Trusts'.

  • Leasing

    In the balance of payments accounts all financial leases and some long-term operating leases (for example, for aircraft) are regarded as loans to finance the purchase of goods. The lessor thus, makes a loan to the lessee who subsequently repays this with interest. The lessee is regarded as the purchaser of the goods.

  • Liabilities

    In balance of payments terminology, liabilities are the financial claims of non-residents in the UK.


    London Interbank Offered Rate. The rate of interest at which banks borrow funds from other banks, in marketable size, in the London Interbank market.

  • Local authorities

    Elected councils responsible for the administration of certain services in particular areas within the UK.

  • Merchanting

    Merchanting is defined as the purchase of a good by a resident from a non-resident and the subsequent resale of the good to another non-resident, without the good entering the compiling economy. The difference between the purchase and sale price is recorded as the value of merchanting services provided.

  • Monetary authorities

    Institutions (usually central banks) that control the centralised monetary reserves and the supply of currency in accordance with government policies, and which act as their governments’ bankers and agents. In the UK this is equivalent to the Bank of England and part of the Treasury (the Exchange Equalisation Account). Data are not separately available in the UK accounts for monetary authorities.

  • Monetary financial institutions (MFIs)

    Banks and building societies.

  • Monetary gold

    See Gold.

  • Money market

    The market in which short-term loans are made and short-term securities traded. ‘Short-term’ usually applies to periods up to one year but can be longer in some instances.

  • Money market instruments

    Money market instruments, within portfolio investment, generally give the holder the unconditional right to receive a stated, fixed sum of money on a specified date. These are short-term instruments usually traded at a discount, the discount being dependent upon the interest rate and the time remaining to maturity. Included are such instruments as acceptances, treasury bills, commercial paper and certificates of deposit.

  • MTIC

    VAT missing trader intra-Community fraud. A systematic, criminal attack on the VAT system, which has been detected in many EU Member States. In essence, fraudsters obtain VAT registration to acquire goods VAT free from other Member States. They then sell on the goods at VAT inclusive prices and disappear without paying over the VAT paid by their customers to the tax authorities.

  • Navy, Army and Air Force Institute (NAAFI)

    A body which provides goods and services for use by the UK Armed Forces abroad.

  • Net

    In this presentation of the balance of payments accounts, the term ‘net’ is generally applied only to transactions in financial assets or liabilities. Purchases of assets are recorded net of sales, similarly with liabilities. In the current and capital accounts, where the operations of UK and foreign residents are taken together in particular transactions areas, the term ‘balance’ is used.

  • Net Errors and Omissions

    The item included to bring the sum of all balance of payments entries to zero. Also known as the balancing item.

  • Non-monetary gold

    See Gold.

  • Non-produced, non-financial assets

    Non-produced, non-financial assets, within the capital account, include land purchased or sold by a foreign embassy, patents, copyrights, trademarks, franchises and leases and other transferable contracts, but not finance leasing. Only the purchase and sale of such assets are proper to the capital account. Earnings from them are recorded under trade in services.

  • Novations

    This term defines the reassignment of debt (for balance of payments, usually foreign debt) of public corporations to central government following the privatisation of the public corporation. This does not normally change the overall balance of payments situation as the debt is still regarded as a UK liability.


    Non-profit institutions serving households.

  • Official reserves

    See Reserve assets.

  • Offshores

    The economic territory of a country consists of the geographic territory administered by a government. Within this territory, people, goods, and capital circulate freely. In the context of the UK, the offshore islands of the Channel Islands and the Isle of Man are subject to their own fiscal authorities and have their own tax systems, there are impediments to taking up residency, and they are not part of the EU. They are therefore not recognised as part of the economic territory of the UK for BOP purposes and are classified as non-resident in the UK.

  • Operating leasing

    Operational leasing (rental) covers resident/non-resident leasing (other than financial leasing), charter of ships, aircraft and transportation equipment without crew. Leasing of ships, aircraft and transportation equipment with crew are included in the transportation account.

  • Ordinary share

    The most common type of share in the ownership of a corporation. Holders of ordinary shares receive dividends (see Equity).

  • Other Financial Intermediaries (OFIs)

    A diverse group of units constituting all financial corporations other than depository corporations, insurance corporations, pension funds and financial auxiliaries. They generally raise funds by accepting long-term or specialised types of deposits and by issuing securities and equity. These intermediaries often specialise in lending to particular types of borrowers and in using specialised financial arrangements such as financial leasing, securitised lending and financial derivative operations.

  • Other Investment

    Investment other than direct and portfolio investment. Includes trade credit, loans, currency and deposits and other assets and liabilities.

  • Parent

    In a balance of payments context, this means a company with direct investments in other countries.

  • Pension funds

    The institutions that administer pension schemes. Pension schemes are significant investors in securities. Self-administered funds are classified in the financial accounts as pension funds. Those managed by insurance companies are treated as long-term business of insurance companies. They are part of S.125, the Insurance corporations and pension funds subsector. 

  • Portfolio investment

    Investment in equity and debt securities issued by foreign registered companies, other than that classed as direct investment, and in equity and debt securities issued by foreign governments. A portfolio investment, unlike a direct investment, does not entitle the investor to any significant influence over the operations of the company or institution, and represents less than 10 per cent of the equity capital.

  • Preference share

    This type of share guarantees its holder a prior claim on dividends. The dividend paid to preference share holders is normally more than that paid to holders of ordinary shares. Preference shares may give the holder a right to a share in the ownership of the company (participating preference shares). However, in the UK they usually do not, and are therefore classified as bonds.

  • Private sector

    Private non-financial corporations, financial corporations other than the Bank of England, households and the NPISH sector.

  • Promissory note

    A security which entitles the bearer to receive cash. These may be issued by companies or other institutions (see Commercial paper).

  • Public corporations

    These are public trading bodies which usually have a substantial degree of financial independence from the public authority which created them. A body is normally treated as a trading body when more than half its income is financed by fees. A public corporation is publicly controlled to the extent that the public authorities appoint a majority of the board of management or when public authorities can exert significant control over general corporate policy through other means. Since the 1980s, many public corporations (such as British Telecom) have been privatised and reclassified within the accounts as private non-financial corporations.

  • Public sector

    Central government, local authorities and public corporations.

  • Refinanced export credit

    Identified long-term credit extended for UK exports initially by banks and refinanced with the Export Credit Guarantee Department (ECGD), the Trustee Savings Banks and the Central Trustee Savings Bank.

  • Reinvested earnings

    The direct investor’s share of earnings not distributed as dividends (by subsidiaries) or branch profits. As this income remains with the foreign subsidiary or branch (it is reinvested by the parent) an amount will appear in the financial account equal to (and with opposite sign) the corresponding entry within direct investment income.

  • Related companies

    Branches, subsidiaries, associates or parents.

  • Remittances

    Current transfers in cash or in kind sent by households resident in one economy to households resident in another economy. Closely related to BPM5 concept workers remittances which are current transfers sent by migrants who are employed in new economies and are considered to be residents of their new economy to their home economy.

  • Repo/reverse repo

    This is short for ‘sale and repurchase agreement’. One party agrees to sell bonds or other financial instruments to other parties under a formal legal agreement to repurchase them at some point in the future – usually up to six months – at a fixed price. Reverse repos are the counterpart asset to any repo liability. Repo/reverse repo transactions are generally treated as borrowing/lending within other investment, rather than as transactions in the underlying securities. The exception being for banks, where repos are recorded as deposit liabilities. Banks’ reverse repos are recorded as loans, the same as for all other sectors.  

  • Reserve assets

    Short-term assets which can be very quickly converted into cash. They comprise the UK’s official holdings of gold, convertible currencies, Special Drawing Rights (SDRs) and changes in the UK reserve position in the International Monetary Fund (IMF). Also included between July 1979 and December 1998 are European Currency Units acquired from swaps with the European Co-operation Fund, EMI and the European Central Bank (ECB). Reserve assets were referred to as ‘official reserves’ in editions of the Pink Book prior to 1998.

  • Reserve position in the Fund

    The UK’s position in the International Monetary Funds’s (IMF) General Resources Account. This position is the sum of the UK’s reserve tranche purchases, and any indebtedness to the Fund (under a loan agreement) that is readily payable to the UK.

  • Residency

    UK residents are those with a centre of economic interest within the UK of at least one year’s duration – nationality does not play a part in determining residency status. There are a number of exceptions to the standard residency classification: regardless of length of stay, UK personnel of UK embassies and military bases abroad are deemed to be residents of the UK (conversely foreign personnel of other nations’ embassies and military bases in the UK are classed as non-residents), as are students studying abroad or patients being treated abroad who are normally resident in the UK. (See also ‘Offshores’.)  

  • Royalties

    These form part of trade in services. They represent payments for services by, or to, UK residents in respect of the right to use processes and other information, for example, licences to use patents, trademarks, designs and copyrights. Sales and purchases of patents are included within the capital account.

  • Rural Payments Agency (RPA)

    The UK government agency which operates the support arrangements of the EU Common Agricultural Policy within the UK. This replaced the Intervention Board for Agricultural Produce (IBAP).

  • Securities dealers

    Securities and futures dealers are those institutions whose main activity is dealing in securities and futures either on their own account or on behalf of customers and clients. This activity also includes Stock Exchange money brokers, Inter-dealer brokers and dealing in commodities for investment purposes. They should not be confused with monetary financial institutions (Banks and Building Societies) who are licensed as able to take deposits.

  • Security

    Security against loans involves the depositing of a document or asset which is retained by the bank as a charge for an advance. This form of security may include stocks and share certificates, debentures and insurance policies.

  • Smuggling

    Smuggling is the importation of goods acquired duty free or duty paid in another country for resale in the UK without payment of UK duty and (where appropriate) VAT (see MTIC).

  • Special Drawing Rights (SDRs)

    These are reserve assets created and distributed by decision of the members of the Internation Monetary Fund (IMF). Participants accept an obligation to provide convertible currency, when designated by the IMF to do so, to another participant, in exchange for SDRs equivalent to three times their own allocation. Only countries with a sufficiently strong balance of payments are so designated by the IMF. SDRs may also be used in certain direct payments between participants in the scheme and for payments of various kinds to the IMF.

  • Spread earnings

    Net spread earnings are the part of market-making activities that represent payment for the provision of a service. The value of the spread earning for each transaction is calculated as the margin earned between the transaction price and the mid-market price at the time of the transaction. This represents the ‘added value’ gained from market-making activities. Spread earnings can be made on, for example, foreign exchange, securities and derivatives transactions.

  • Stock lending

    Lending of securities by long-term holders or custodians such as banks, pension funds or insurance companies when securities are in short supply.

  • Subsidiary

    A registered company in which another registered company has ownership of the majority of the voting share capital, that is, greater than 50 per cent.

  • Subsidies

    Current unrequited payments made by general government or the EU to enterprises. Those made on the basis of a quantity or value of goods or services are classified as ‘subsidies on products’. Other subsidies based on levels of productive activity (for example, numbers employed) are designated ‘other subsidies on production’.  

  • Swaps

    See interest-rate swaps and currency swaps.

  • Trade credit

    See Export credit and Import credit.

  • Trade in goods

    Trade in goods covers general merchandise, goods for processing, repairs on goods, goods procured in ports by carriers and commodity gold (see Gold). General merchandise is defined for balance of payments (BoP) purposes as covering, with a few exceptions, all movable goods for which actual or imputed changes of ownership occur between residents and non-residents.

  • Trade in services

    Provision of services between UK residents and non-residents, and transactions in goods which are not freighted out of the country in which the transactions take place. For example, purchases for local use by foreign forces in the UK and by UK forces abroad, and purchases by tourists. Transactions in goods which are freighted into or out of the UK are included under trade in goods.

  • Transfers

    Transfers are payments or receipts where there is no corresponding exchange of an actual good or service. These transfers are split between current transfers, which form part of the current account, and capital transfers which form part of the capital account. Most transfer payments are central government transfers, that is, receipts from and payments to institutions of the EU.

  • Travel

    The travel account gives the earnings from and expenditure on international tourism and business and other travel, but excludes transport between the UK and other countries (included within the transportation account). An international traveller is defined as a resident of one country who visits another country and stays there for a period of less than 12 months. This definition excludes travellers who visit another country to take up prearranged employment or education there, military and diplomatic personnel, merchant seamen and airline crews on duty.

  • Treasury bills

    Short-term securities or promissory notes that are issued by government in return for funding from the money market. In the UK, every week, the Bank of England invites tenders for sterling Treasury bills from the financial institutions operating in the market. European Currency Unit (ECU)/euro denominated bills were issued by tender each month but this programme has now wound down. The last bill was redeemed in September 1999. Treasury bills are an important form of short-term borrowing for the Government, generally being issued for periods of three or six months.

  • Trusts

    See Unit Trusts and Investment Trusts.

  • Unit Trusts

    Unit trusts are institutions through which investors pool their funds to invest in a diversified portfolio of securities. Individual investors purchase units in the fund representing an ownership interest in the large pool of underlying assets, that is, they have an equity stake. The selection of assets is made by professional fund managers. Unit trust units are issued and bought back on demand by the managers of the trust, the value of the unit reflecting the value of the underlying pool of securities. Unit trusts are ‘open-ended funds’ which means the fund gets bigger as more people invest and gets smaller as people withdraw their money.

  • Very short-term financing facility (VSTFF)

    This is a facility available within the European Monetary System (EMS) where a central bank makes short-term credit facilities in its own currency available to another central bank.

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Contact Details

For statistical enquiries about this topic, please contact:

Damian Whittard

Email: bop@ons.gsi.gov.uk

Telephone: +44 (0) 1633 54 5497

Business Indicators and Balance of Payments Office for National Statistics 2001 Government Buildings, Cardiff Road, Newport South Wales NP10 8XG

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