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Britain: Prostitution, Drugs and GDP

For the first time the value of illegal activities such as prostitution and drug dealing will be recorded as part of the UK economy – but how do you measure them and what are they worth? How do you compare two economies, when the same thing happens in both, but is illegal in one?

That’s the question that’s been vexing the European Union, because the rules on narcotics and prostitution vary widely between  places like Germany, Britain and the Netherlands. As a result, from now on the value of prostitution and narcotics will have to be included in official figures – and that’s just given our economy a £10 billion boost.

The scale of the industry

Based on 2009 prices, the Office for National Statistics estimates prostitution will add £5.3 billion to the UK’s Gross Domestic Product (GDP), while drugs will boost the economy by £4.4 billion. In all the years between 1997 and 2009 the impact ranges from £7 billion to £11 billion, statisticians said.

The ONS calculated that there were at least 58,000 prostitutes in Britain in 2004 – based on a charity’s estimate of the number of prostitutes in London – and that numbers since then had increased in line with demand, which it based on the growing number of British men aged over 16.

How do you measure illegal activity?

To measure the contribution of “prostitution services”, statisticians assed the value of rental of brothels, sales of condoms and sales of clothes worn by sex workers.

The ONS turned to Dutch research on the number of clients a typical prostitute has each week, as well as how much she or he spent on job-specific clothing and condoms to help with estimates – €125 a year and 50 cents per client respectively. Prices were taken from a website where customers review British prostitutes and were inflation-adjusted using rates for lap-dancers and escorts already collected by the ONS.

When Looking at illegal drugs, the ONS worked from data looking at production and sales of crack cocaine, powder cocaine, heroin, cannabis, ecstasy and amphetamines using government estimates of the number of drug users. The data will class growing drugs or importing them as “production”, buying them for home use as “expenditure”, and selling them as “income”.

Figures for an average drug user’s consumption proved more problematic. Two sources used for the price and purity of drugs – a United Nations survey and a government forensics laboratory – were no longer available, the ONS said.

Of course, being against the law, these remain only estimates.

“The estimates are based on data of variable quality, with the estimates of illegal drugs activity markedly stronger than those of prostitution, but both definitely weaker than the estimates of legal activity,” the ONS said.

Impact on the economy

A £10billion boost adds about 1% to British GDP, and with half of cannabis assumed to be grown in Britain, also offers a small boost to Britain’s farming and pharmaceuticals sectors

However the inclusion of drugs in official data also widens Britain’s trade deficit, as the ONS assumes almost all drugs are imported.

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