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UK economic output will get near five percent boost from data changes

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[June 10, 2014]  LONDON (Reuters) - British gross domestic product is likely to be revised up by almost 5 percent in September because research and development costs, black-market activities and other changes will be included, the country's statistical agency said on Tuesday.

Countries across Europe are implementing new European Union statistical rules - which among other things require estimates of the profits from prostitution and drug-dealing to be included in national accounts.

The Office for National Statistics estimated last month that drugs and prostitution would add almost 1 percent to British GDP, and said the total changes would raise GDP by 4-5 percent.

On Tuesday, the ONS gave a more detailed estimate of the impact, saying that for 2009 the changes would increase GDP by 4.6 percent or around 65 billion pounds ($109 billion). Estimates for 2010-2012 will come in August and the new statistical methods will come fully into force in September.

The biggest boost comes from counting research and development as investment, which will add 1.6 percent to GDP.

Previously, research was treated as a pure cost for companies, and its value was reflected in the prices they charged, rather than counting as output in its own right.

Changes to the calculation of defense spending and pensions will add around 0.2 percent each to GDP.

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The impact of the changes on the years before 2009 is smaller, raising GDP on average by around 2.3 percent. This will affect growth rates over the period, and the ONS will publish an estimate of this on June 30.

(Reporting by David Milliken; Editing by Larry King)

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