Business investment rose sharply in 2023 and early 2024, but how do we actually measure it?
Business investment grew by more than expected in 2023. This was due, in part, to companies starting to invest again after a series of crises marked by uncertainty (the Covid-19 pandemic, the war in Ukraine, and rising inflation). On the other hand, financing conditions were less favourable, for example higher interest rates on bank loans.
A dive into our data reveals that this growth was broad-based. Business investment increased in various sectors, with rental and leasing services, financial services and manufacturing being the key drivers. Growth would have been even stronger had it not been for the restructuring of a Belgian maritime company, which significantly dampened total business investment in 2023.
The business investment rate, defined as gross investment divided by gross value added of non-financial corporations, also rose sharply in 2023 and is above the average of other European Union countries.
What is business investment?
Business investment is a component of gross domestic product (GDP), the indicator used to calculate economic growth. It is the sum of all expenditure by companies on inputs they will use for more than one year in order to grow, innovate or rationalise.
In other words, it refers to investments in what are called assets, for example machinery, software and buildings. In this regard, a distinction is made between tangible assets – such as machinery – and intangible assets – such as research. Financial assets do not fall within business investment as they do not form part of real (or physical) transactions in the economy.
And how do we measure it?
It isn’t possible to pinpoint all business investment in Belgium. In addition, we wish to keep the administrative burden for companies low. Therefore, we use existing data, drawn from sources such as annual accounts, VAT returns and various surveys.
However, not all of these sources are published with the same frequency. Some data are available on a quarterly basis, while others are released annually, biannually or even every five years. This means that we measure business investment at different times, based on different data sources and with different methodologies. We therefore revise our estimates regularly, as soon as more detailed information becomes available. This is done in accordance with a fixed schedule.
Some key moments are set out below:
What data sources do we use?
Our sources include annual accounts, VAT returns, the survey on the structure of businesses, the R&D survey, etc. What does the use of these sources entail? How do we collate the data? In practice, we put together a complex data puzzle, which changes over time.
Initial quarterly estimates (60 and 90 days)
A key source for our initial quarterly estimates is VAT returns, more specifically the section with data on “purchases of business assets”. These figures include purchases intended for long-term use within a company, such as a tools or operating assets, as well as those that cost more than €1 000.
We therefore have at our disposal information on purchases of machinery, cars, lorries and buildings, as companies are obliged to report these data to the VAT authorities. However, at this stage, we don’t yet have information on intangible investments, such as in research and development or software. In addition, we lack information on divestments or sales of fixed assets. Moreover, not all businesses are required to file VAT returns.
In short, VAT returns are a good source of readily available data but are not without their limitations. One such limitation is that, for our first estimate (60 days), only returns for the first two months of the quarter are available. Moreover, certain (smaller) companies are only required to file VAT returns on a quarterly basis, meaning there is as yet no data available for them. To overcome these limitations – temporarily – we use specific statistical and forecasting techniques.
Initial annual estimate (y+1)
In October y+1, we can use the first available annual accounts as an additional data source. These financial statements contain information on both intangible and tangible assets and shed light on matters such as acquisition values, downgradings, and capital gains and losses.
However, at the time of producing this estimate, not all annual accounts are available. In addition, many other sources are missing. We use statistical techniques to temporarily bridge this data gap.
Second annual estimate (y+2)
A year later, we prepare a new estimate of business investment using a final methodology and data sources. By now, all annual accounts should have been filed, the VAT data completed and the results of various surveys, such as that on the structure of businesses, available. The estimate is thus refined.
What happens next?
This isn’t the end of the story. Three years on, we revise our estimates to incorporate new information, such as on investment in research and development. For example, Belspo – the Belgian Science Policy Office – organises a survey every two years on firms’ expenditure on R&D. The survey also makes it possible to refine the estimate of investment by multinational enterprises (MNEs) operating in Belgium. These investments are often very complex to identify, given the many intra-group transactions between entities based in different countries.
Our work doesn’t stop here as the world of statistics is constantly evolving. For instance, we conduct a thorough methodological review every five years. We also follow international standards, such as the System of National Accounts (UN) and the European system of national and regional accounts (Eurostat). If changes are made to these systems, we adjust our methodology and data accordingly. As a result, we maintain not only the quality but also the international comparability of the statistics we produce. For instance, we expect to carry out a major review in 2029, further to the introduction of the System of National Accounts 2025 which is designed to better take into account aspects such as digitalisation, artificial intelligence and sustainability. This will undoubtedly make it possible to refine and enrich the measurement of business investment across our country.
