U.K. Adds Illegal Drug Sales and Prostitution to GDP

Economy

Published: May 30, 2014 10:25 am

Last Updated: April 28, 2020 8:52 am

When the United Kingdom reports its gross domestic product (GDP) for 2014 in September, the figure for the first time will include an estimate that covers the importation, production and sale of illegal drugs and a “provision for prostitution services.” The country’s Office for National Statistics reckons that a total of £10 billion of U.K. GDP for the year comes from illegal drugs and prostitution, with about £5.3 attributable to prostitution and £4.4 attributable to illegal drugs.

The inclusion of the estimates is the result of an audit by the European Union’s statistical office (Eurostat) done in 2012 that identified a number of areas for “improvement” in member nations’ reporting. One of the improvements is counting the income from drug sales and prostitution. The U.K. previously counted only alcohol and tobacco smuggling in its estimate of national income, while other EU nations, including Austria, Estonia, Finland, Norway, Slovenia and Sweden, included estimates for drug sales and prostitution.

The U.K. will use a demand-side estimate for illegal drug activity and a supply-side estimate for prostitution activity.

The calculation of illegal drugs’ impact on GDP includes an estimate of drug imports that are all assume to be consumed by households with estimated prices and volumes, including an estimate for home-grown production of cannabis.

The supply-side prostitution estimate uses an estimate of the number of active prostitutes, the number of “client episodes per week” and the “average charge per client.” Volume is extrapolated from the male population aged 16 and older, while price is extrapolated using the consumer price index for personal services, as well as other sources “used to estimate intermediate consumption.”

U.K. GDP in 2013 totaled about $2.54 trillion. An illegal addition total of about $16.7 billion means that “enhanced” GDP would have been $2.56 trillion, of which illegal activities would have accounted for about 0.6%.

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