How to quantify the economic impact of the UK’s heritage

By tracking the flow of goods and services, the UK national accounts framework provides a clear picture of the linkages between different sectors of the UK economy. Each industry requires inputs for production (incurring costs) and turns these inputs into outputs (generating income).

National accounts follow the structure of Standard Industry Classification (SIC) codes, with businesses in each SIC code sharing common characteristics based on the goods/services produced as well as the production process and delivery system. This framework allows the scale and scope of individual industries, including their wider impact on the UK economy, to be quantified through statistics such as Gross Value Added (GVA), employment, total imports/exports and number of businesses.

In recent years, a methodology known as satellite accounts has been developed by economists and statisticians to produce these statistics for activities linked to the economy but not part of the core UK national accounts.

The Office for National Statistics (ONS) has developed environmental, tourism and household satellite accounts, with other countries developing accounts for arts and culture, health care and the digital economy. These activities are all spread out over multiple economic sectors and sub-sectors, making it challenging to capture their economic impact using individual SIC codes alone.

Heritage is another example of a sector that has a wide reach across the UK economy. The National Lottery Heritage Fund has defined heritage as ‘anything from the past that [individuals or communities] value and want to pass on to future generations’. This includes the built historic environment (such as historic monuments and buildings) as well as landscapes, archaeology, collections and moveable heritage.

This broad definition makes it difficult to define the boundaries of the heritage sector, which is the first step required to understand the sector’s economic impact. This challenge can potentially be addressed by developing a heritage satellite account, which has not been developed by any national statistics authority to date.

A significant proportion of the heritage sector’s impact occurs through activities such as construction work, civil engineering, architecture and town planning. However, not all of these activities relate to heritage specifically. In investigating the potential for developing a heritage satellite account in our feasibility study, one key challenge our research team investigated was how best to separate the heritage and non-heritage components of these activities to avoid overcounting.

One common approach for apportionment is through employment: industries that have a sufficiently high proportion of heritage occupations relative to total industry employment can be considered heritage (this is the approach taken by the dynamic mapping methodology).

Alternatively, instead of fitting industries within the binary classification ‘heritage’ or ‘not heritage’, the proportion of heritage occupations can be used to proxy the heritage share of the industry (this is the approach taken by the SIC-SOC mapping methodology). For specific industries, additional apportionment may be required: for example, the SIC code 43.3 (building completion and finishing) is multiplied by the percentage of individuals involved in heritage building craft skills (31%) based on a 2013 English Heritage report.

However, employment-based apportionment requires the assumption that the percentage of heritage businesses or heritage-driven GVA in an industry is equivalent to the percentage of heritage employees in the industry. Alternative approaches have been proposed, such as (i) conducting surveys of businesses to determine their share of turnover/employment related to heritage, and (ii) using machine learning models to classify individual businesses into heritage or not heritage based on text found on business websites. These alternative approaches have not yet been tested, and further research is required to understand their feasibility, replicability and robustness.

As part of a future heritage satellite account, the most comprehensive approach likely involves mixing and matching different methodologies, with a specific apportionment method tailored to the different sector statistics published by DCMS in its Sector Economic Estimates.

Our full report can be found here.