Thursday 29 May 2014 9:24 pm

Vice adds £10bn to UK economy

PROSTITUTION and drugs are worth £10bn per year to the British economy, officials said yesterday, the first time they have put a figure on black market activity.

The boost forms part of an extra £33bn of economic activity across the UK revealed yesterday by the Office for National Statistics. When this round of re-evaluation is complete in September, the ONS expects to have found the economy is as much as five per cent bigger than previously thought.

Prostitution adds around £5.3bn to GDP, the ONS estimated, based on calculations that looked at surveys of the number of prostitutes, the changing UK male population and average prices charged.

The statistic body used some data from countries where the sex industry operates more openly, like the Netherlands.

Meanwhile illegal drugs add around £4.4bn to the economy.

Crack is the biggest contributor, at £1.5bn, followed by powder cocaine, which added £1.04bn to the economy, while cannabis added £828m and heroin £536m.

The smallest drugs studied were amphetamines – which added £468m to the economy – and ecstacy, which contributed around £26m to economic output.

However, consumption levels are even higher than those headline numbers suggest because of the way that officials calculate international trade in the GDP numbers.

For instance, £2.92bn of crack is thought to be bought each year – but the sales do not add as much to GDP as some are offset by imports, and the purchases from overseas add to those countries’ economies, not Britain’s.

As a result the £7.27bn of drugs sales only add £4.4bn to the economy, because £2.87bn-worth is imported.

By contrast, no prostitution is imported because it is considered a service industry.

The ONS is updating its analysis of the economy to make British numbers more comparable with those published by countries across the European Union.

The estimates are likely to be below the true figure, as illegal activity is hard to measure and the ONS has not gathered its own figures on the industries.

Other changes will add even more to GDP.

Up to £25bn of activity has been added from charities and volunteers donating time and goods like food to households.

And people building and repairing their own homes could add another £4bn that was not previously included in the official numbers.

But changes to the way capital formation and firms’ inventories are measured could knock up to £9bn off GDP, as well as making those sectors’ numbers less volatile.