6. Registered Enterprises
The Inter-Departmental Business Register (IDBR) is maintained by the Office for National Statistics (ONS) and is a database of all registered enterprises operating in the UK i.e. enterprises that are registered for VAT and/or PAYE. It covers 99% of economic activity in the UK. Those excluded are small sole traders or partnerships with no employees and an annual turnover of less than the VAT threshold.
When an enterprise registers/de-registers for VAT/PAYE with HMRC, this information is fed through to the IDBR. The reporting of de-registrations, however, can be subject to a number of time delays. For example when an enterprise closes there may be a delay before HMRC are informed. Closure of the VAT record may then be delayed until all liabilities are settled. There may also be lags in recording PAYE data.
6.2 Time Period Covered
The estimate of registered enterprises is based on a snapshot of the IDBR taken in March of each year (prior to 2005 the November snapshot was used). A Scottish extract provides a count of the IDBR enterprises that were “live” at the snapshot date. However, due to the time lags that often occur in recording de-registrations, an enterprise which had ceased trading by March but had outstanding business with HMRC may still be included on the IDBR at the time the extract is taken. Whilst this introduces some error into the data, this lag impacts on each year so the extracts are consistent over time.
All tables in the ‘Businesses in Scotland’ Publication (excluding Table A, Table 4 and Table 12) focus on the private sector - that is companies, sole proprietors, partnerships, public corporations/nationalised bodies and not for profit organisations - and exclude central and local government. This differs from the headline estimates from the ONS publication “UK Business: Activity, Size and Location” which includes the public sector. Further information about other sources of business information is available in the information note UK Business Data Sources.
Prior to 2009, the employment information held on the IDBR was mainly drawn from the Business Register Survey and the employment part of the Annual Business Inquiry (ABI/1). The use of these sources caused a considerable time lag in the employment data, so that in each March extract, the majority of employment information was two years out of date i.e. employment estimates for 2009 were mainly based on data from 2007. For some enterprises, however, the employment data was more lagged than this.
The Business Register and Employment Survey (BRES) replaced and integrated the BRS and ABI/1 in 2009. For businesses that are surveyed by BRES, the regional and local estimates of employment are more accurate because, rather than producing data by an apportionment model, they are obtained directly from data reported at site level. Employment data is now updated on the IDBR on a monthly basis rather than annually, as updates are made as completed surveys are returned. This means that, at any point in time, employment data on the IDBR will be as accurate and up to date as possible, based on the survey returns that have been received at that time.
However, it also means that year on year comparisons made using point in time extracts of the IDBR will be less accurate as businesses are unlikely to return their forms at precisely the same time each year.
The most up to date employment information in ‘Businesses in Scotland 2018’ tends to be based on data from BRES 2017 (which asks businesses for their level of employment as at September 2017). For some enterprises the employment data will be more lagged than this.
It is important for users to be aware that time lags exist in the employment estimates in every year. However, the difference between the March 2009 and March 2010 extracts were particularly influenced by the change in BRES reporting.
Because BRES (and previously BRS/ABI1) is based on a sample of enterprises, estimates from previous returns and other ONS surveys are also used to update employment on the IDBR. For the smallest enterprises, either PAYE jobs or employment imputed from VAT turnover is used.
Note that the employment estimates refer to the number of employee jobs rather than the number of individual employees. A person who has more than one job will be counted once in each enterprise they work for. Furthermore, no distinction is made between full-time and part-time employees – both count as one employee.
On the IDBR, turnover for the majority of registered enterprises is based on VAT returns for a 12 month period. For 2018, these tend to relate to a 12 month period ending in December 2016, or January/February 2017, depending on the reporting pattern of the trader. For other records, in particular members of VAT group registrations; turnover may relate to an earlier period or survey data. For traders who have registered more recently, turnover represents the estimates made by traders at the time of registration. The turnover figures on the IDBR generally exclude VAT but include other taxes, such as the revenue duties on alcoholic drinks and tobacco.
6.6 Making Comparisons
The main purpose of the ‘Businesses in Scotland’ publication is to provide information about the number of enterprises which were operating in Scotland at the time of the IDBR snapshot in March but the estimates also include information about enterprises’ employment and turnover. Sections 6.4 and 6.5 explained that these variables are updated on the IDBR via a number of sources and at different times. This makes it difficult to obtain accurate employment/turnover estimates on the IDBR because the figures for each enterprise may not relate to the same point in time. This should be considered if employment and turnover estimates are compared over time. The employment/turnover data should really be considered to be ‘auxiliary variables’ that can be used to compare shares across industrial sectors or to determine how shares have changed over a period of several years.
However, comparisons of enterprise counts can be made robustly. As the IDBR is a live register that is continually updated each time an enterprise registers/de-registers for VAT/PAYE, it can be taken as a reliable estimate of the number of enterprises in operation at any point in time. Since ‘Businesses in Scotland’ data is always based on a March extract of the IDBR, comparisons of enterprise counts from year to year can be considered reliable.
Enterprises with no UK activity or dummy enterprises created to help with clerical procedures are excluded. Enterprises which have zero employment and zero turnover are also excluded as they are holding companies whose activity is recorded elsewhere or are enterprises not contributing to the economy at the time of the estimates.
There were a few instances where several registrations for a single company (usually VAT registrations) occurred at the same address. This may be a result of a legal loophole created as a result of changes in legislation. The Office for National Statistics now exclude these from their publications as the figures would overstate the actual number of businesses in existence and their associated employment in local area tables. Please note the estimates for 2000 and 2001 have not been amended to reflect these changes.
6.8 Major Reclassifications
The number of public corporations in Scotland decreased from 60 businesses in 2014 to 35 businesses in 2015 – this was largely as a result of the reclassification of Lloyds Banking Group plc. On 30th April 2014, the Office for National Statistics (ONS) announced the reclassification of Lloyds Banking Group plc. (and subsidiaries) as a former Public Corporation into the private sector. More information on this can be found in Classification of Lloyds Banking Group and Subsidiaries.
On 17th December 2013, the Office for National Statistics (ONS) announced that from 1st September 2014, Network Rail would be reclassified as a Central Government body in the public sector. This change can be most clearly seen in Table 4 of the Businesses in Scotland publication, where public sector employment in the ‘H Transportation and storage’ sector increased by 2,850 (+87%) between 2014 and 2015. More information on this can be found in Classification of Network Rail.
Colleges of Further Education were re-classified by the Office for National Statistics to the public sector in October 2010 for the purposes of National Accounts. The change transferred 35 enterprises from the business sector to the public sector from the March 2011 results onwards. This reclassification has not been applied back to previous years’ estimates.
Primary Care NHS Trusts and all remaining NHS Trusts were re-classified by the Office for National Statistics to the public sector in 2001 and 2003 respectively. This was done to bring the 2003 Standard Industrial Classification in line with international guidelines for National Accounts. The change transferred 54,200 and 95,530 jobs from the business sector to the public sector in 2001 and 2003. This has led to a discontinuity between tables as tables previously included this employment.