Businesses in Scotland: 2023

The latest figures relate to a snapshot of the business stock as at March 2023. These were released on 6 December 2023.

We will publish 'Businesses in Scotland 2024' in late 2024. This will follow the release of the UK Business Activity publication. The Office for National Statistics will publish this in autumn 2024.

Any changes as a result of the coronavirus (COVID-19) pandemic are first reflected in the data for 2021.

The 2011 and 2012 publications introduced several methodological changes:

• All data are now published using the Standard Industrial Classification (SIC) 2007 only.
• In 2011 we made methodological changes. This was to the methodology used to estimate the number of unregistered businesses. See section on Unregistered Businesses for more details.
• In 2012 HMRC made improvements to their computer systems. This resulted in the addition of 2,340 extra businesses to the IDBR for Scotland in 2012. The Inter-Departmental Business Register (IDBR) should have included these extra businesses in previous years also.
• The 2018 publication also introduced a new methodological tweak. This was to constrain the estimates of unregistered jobs to the Scotland total.

The latest 2023 publication tables are consistent for the years 2010 to 2023. i.e. they include all methodological changes above back to 2010.

We have constructed high level time series for 2000 to 2023. One time series is for all businesses (registered and unregistered). A further time series is for registered businesses only. We have produced these long time series on a consistent basis as far as possible – as follows:

We adjusted the registered time series upwards. This was to take account of the 2,340 extra businesses added to the IDBR in 2012. Note that this back revision was based on businesses that were in operation in 2012. We could make additions to the stock estimates for back years by using the birth dates of the businesses. See Table below.

We adjusted the unregistered time series upwards. This was to take account of the improved unregistered businesses estimation methodology. See Table below.

Constructed Back Series

* Adjusted for HMRC additions.
** Adjusted based on relationship between estimates under old and latest methodology in 2010.

Please go to the Tables Archive for data on a SIC 2003 basis for 2000 to 2010. Please note the Tables Archive is not consistent with the latest tables for 2010 to 2023, as we have not updated the Archived Tables with the following:

• The number of unregistered businesses was not estimated using the latest methodology.
• There has been no upward revision of the registered business count. There were extra registered businesses added to the IDBR in 2012. This was as a result of improvements made to HMRC computer systems.

Source

The Office for National Statistics (ONS) maintains the Inter-Departmental Business Register (IDBR). This is a database of all registered businesses operating in the UK. i.e. businesses registered for VAT and/or PAYE. It covers 99% of economic activity in the UK. It excludes small sole traders. It also excludes partnerships with:

• no employees, and
• an annual turnover of less than the VAT threshold.

Information on when a business registers/de-registers for VAT/PAYE with HMRC feeds through to the IDBR. But the reporting of de-registrations can be subject to some time delays. For example, when a business closes there may be a delay before HMRC become informed. There may be delays to the closure of the VAT record until all liabilities are settled. There may also be lags in recording PAYE data.

Time Period Covered

The basis for the estimate of registered businesses is a snapshot of the IDBR taken in March of each year. (Before 2005 we used a November snapshot). A Scottish extract provides a count of the IDBR businesses that were “live” at the snapshot date. Time lags often occur in recording de-registrations. e.g. an extract of the IDBR may include a business which had ceased trading by March but still had outstanding business with HMRC. This introduces some error into the data. But this lag impacts on each year, so the extracts are consistent over time.

Scope

Almost all tables in this publication are for the private sector (excluding Table A, Table 4 and Table 12). The private sector includes:

• companies
• sole proprietors
• partnerships
• public corporations/nationalised bodies, and
• not for profit organisations.

It excludes central and local government. This differs from the headline estimates from the ONS publication “UK Business: Activity, Size and Location”. That includes the public sector.

Employment

Before 2009, the employment information held on the IDBR was for the most part drawn from two sources:

• the Business Register Survey (BRS), 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. In each March extract, the majority of employment information was two years out of date. i.e. employment estimates for 2009 were generally based on data from 2007. For some businesses, the employment data was even more lagged than this.

The Business Register and Employment Survey (BRES) replaced and integrated the BRS and ABI/1 in 2009. The regional and local estimates of employment from BRES are more accurate. Data reported at site level provide these directly. This is instead of producing data by an apportionment model. Employment data is now updated on the IDBR on a monthly basis on the return of completed surveys. This is instead of annual updates. So employment data on the IDBR is as accurate and up to date as possible.

But year on year comparisons made using point in time extracts of the IDBR will be less accurate. 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 2023’ tends to be based on data from BRES 2022. (BRES 2022 asks businesses for their level of employment as at September 2022). For some businesses 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. A greater impact applies to the March 2009 and March 2010 extracts. These were particularly influenced by the change in BRES reporting.

BRES (and previously BRS/ABI1) is based on a sample of businesses. As a result, estimates from previous returns and other ONS surveys are also used to update employment on the IDBR. For the smallest businesses, it uses either PAYE jobs or employment imputed from VAT turnover.

Note that the employment estimates refer to the number of employee jobs. This is rather than the number of individual employees. A person who has more than one job is counted once in each business they work for. Furthermore, it makes no distinction between full-time and part-time employees. Both count as one employee.

Turnover

On the IDBR, the basis for turnover is VAT returns for a 12 month period. This is the case for the majority of registered businesses. For 2023, these tend to relate to two 12 month periods, depending on the reporting pattern of the trader. Either the 12 months ending in December 2021, or January/February 2022. For other records, turnover may relate to an earlier period or survey data. This is the case in particular members of VAT group registrations. Turnover for traders who have registered more recently differs. For these, it represents the estimates made by traders at the time of registration. The turnover figures on the IDBR generally exclude VAT. But they include other taxes, such as the revenue duties on alcoholic drinks and tobacco.

Making Comparisons over Time

The main purpose of this publication is to provide information about the number of businesses operating in Scotland. This is as per the time of the IDBR snapshot in March. But the estimates also include information about businesses’ employment and turnover. It was previously explained that these variables get updated on the IDBR via several sources and at different times. This makes it difficult to get accurate employment/turnover estimates on the IDBR. This is because the figures for each business may not relate to the same point in time. This needs consideration if comparing employment and turnover estimates over time. The employment/turnover data should be treated as ‘auxiliary variables’. Legitimate uses of these are:

• to compare shares across industrial sectors, or
• to determine how shares have changed over a period of several years.

You can get more detailed comparisons for employee jobs via BRES. You can get more detailed comparisons for turnover via Scottish Annual Business Statistics.

Comparisons of business counts can be made robustly. The IDBR is a live register. It is continually updated each time a business registers/de-registers for VAT/PAYE. It is a reliable estimate of the number of businesses in operation at any point in time. ‘Businesses in Scotland’ data is always based on a March extract of the IDBR. So comparisons of business counts from year to year can be considered reliable.

Exclusions

Excluded businesses are:

• businesses with no UK activity
• dummy businesses created to help with clerical procedures
• businesses which have zero employment and zero turnover. This is because they are holding companies whose activity is recorded elsewhere. Or they are businesses not contributing to the economy at the time of the estimates.

There were a few instances where several registrations for a single company occurred at the same address. (This is usually VAT registrations). 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. This is because it would overstate the actual number of businesses in existence and their associated employment. Please note the estimates for 2000 and 2001 are not amended to reflect these changes.

Major Reclassifications

Historic 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). It was a former Public Corporation and moved it into the private sector. For more information, see Classification of Lloyds Banking Group and Subsidiaries.

On 17th December 2013, the ONS announced the reclassification of Network Rail. ONS reclassified it as a Central Government body in the public sector from 1st September 2014. This change is most visible in Table 4 of the ‘Businesses in Scotland’ publication. Public sector employment in the ‘H Transportation and storage’ sector increased by 2,850 (+87%) between 2014 and 2015. For more information see Classification of Network Rail.

ONS reclassified Colleges of Further Education to the public sector in October 2010. This was for the purposes of National Accounts. The change transferred 35 businesses from the business sector to the public sector. This applied from the March 2011 results onwards. Previous years’ estimates do not show this reclassification.

ONS reclassified Primary Care NHS Trusts to the public sector in 2001. ONS reclassified all remaining NHS Trusts to the public sector in 2003. This was to bring the 2003 Standard Industrial Classification in line with international guidelines for National Accounts. The change transferred 54,200 jobs from the business sector to the public sector in 2001. It also transferred 95,530 jobs from the business sector to the public sector in 2003. This has led to a discontinuity between tables as they included this employment before.

The Inter-Departmental Business Register (IDBR) excludes a large number of very small firms. This is because they are small sole traders/partnerships with:

• no employees, and
• an annual turnover of less than the VAT threshold.

This section describes the method used to estimate the number of unregistered businesses in Scotland.

Estimation

The Labour Force Survey (LFS) provides data on the self-employed (with no employees). It provides the number of people who are self-employed in their first or second jobs. The estimates from 2010 onwards apply a new methodology. This enables a better estimate of the self-employed. It reclassifies people who have misclassified their employment status.

Data from the Family Resources Survey (FRS) augments the LFS figure for second jobs. The data is on people who are self-employed in a third job. This is to get an estimate of the total number of self-employed jobs (with no employees). This estimate is compared to the level of self-employment that is already registered on the IDBR. This applies to businesses (sole traders/partnerships) with no employees. Many self-employed people are not required to pay VAT or register for PAYE. So the figure from the LFS/FRS is generally higher.

The difference between these two figures represents self-employed jobs in unregistered businesses. This is the starting point for estimating the number of additional sole traders and partners with no employees. The ratio between sole traders and partners is different in each industry. HMRC Self Assessment (SA) data provides this. We used the Survey of Personal Incomes (SPI) before for this purpose. But it was necessary to use a different source. This was due to delays with updated data. It was also due to more stringent disclosure control processes.

We use the ratios to derive the number of unregistered sole traders and partners in each industry. This then allows us to derive the number of sole proprietorships and partnerships.

Note that each of the sample surveys above are subject to sampling error. For example, a yearly estimate of 300,000 taken from the Annual Population Survey (APS) has a 95% confidence interval of +/- 12,000. (The APS is the annual version of the Labour Force Survey (LFS).) You should consider this sampling error when making year on year comparisons between the number of unregistered businesses. (This is the smallest size band in Tables A-E).

This explanation on Estimating Unregistered Businesses is also demonstrated in the following diagram.

Time Period Covered

The self-employment estimates from the LFS drive the estimate of unregistered businesses. The data used from the LFS covers the period April to March. i.e. the estimate of unregistered businesses for 2023 was derived from annual LFS data covering April 2022 to March 2023.

Estimates for the number of people self-employed in a third job relative to those who are self-employed in a second job use FRS data. The data used are a three year rolling average percentage. i.e. FRS data from 2019/20, 2020/21 and 2021/22 is the basis for the 2023 estimates.

Self-Assessment (SA) data as at 2013/14 were used to get the ratio of sole traders to partners for the 2023 estimates. Normally, we would use the most up to date SA data available, however the quality of the sectoral codes in the SA data has been diminishing for some time. The SA data for 2013/14 is deemed to be the latest most reliable dataset for sectoral analysis. Using the 2013/2014 SA data for the 2023 unregistered business estimates has a limited impact on overall estimates of unregistered businesses, as the unregistered estimates are largely driven by the LFS data.  

Turnover

Turnover in unregistered businesses will generally be lower than that of registered businesses of the same size. This is because turnover in the former would usually be below the VAT threshold. Turnover for the unregistered businesses is imputed from turnover per head in each industry division. We only use registered sole traders and partners with zero employees for this. The resultant figure is then scaled down by a factor of a half. There is a further issue for a few 2-digit industry divisions. For these, the average annual turnover per unregistered business remains above the VAT threshold. In these cases, we reduce the unregistered turnover to the VAT threshold for that year.

For further details on VAT thresholds, see HM Revenue & Customs.

Public sector businesses engage in more varied activities than the majority of those in the private sector. Table 4 (and Table 12) accounts for this by counting each business once in each sector it has activity in. This helps to provide a more realistic impression of public sector activity in each industry. To provide accurate figures at Scotland level, we count each business only once in the total. As a result, the table components do not equal the overall total.

Estimates of public sector employee jobs are available at local authority area level. For these estimates, see the Office for National Statistics publication Business Register Employment Survey.

General Revisions Policy for Unregistered Businesses

Labour Force Survey (LFS) self-employment data is the basis for the estimate of unregistered jobs. This leads to the estimate of unregistered businesses. The Office for National Statistics (ONS) reweight the LFS data according to the latest population estimates. As a result, we will revise the unregistered time series to take account of the reweighted LFS data. These revisions are generally small in magnitude. We will revise to take account of the latest LFS data on a biennial basis (every two years). We may also make improvements to the unregistered business methodology.

Unregistered Businesses – latest revisions

The unregistered estimates have not been revised back this year. The next set of revisions for the unregistered estimates will be in the ‘Businesses in Scotland 2024’ publication. This will take account of the latest LFS reweighted data. It will also take account of any other methodological improvement.

General Revisions Policy for Registered Businesses

In general, the figures for registered businesses should be final. These should not be revised in future. This is because their basis is a snapshot in time from the Inter-Departmental Business Register (IDBR) which cannot change. Sometimes, we may discover errors in the industry, geographical or ownership classifications applied to businesses. This would be when quality assuring the data for the latest year. In which case, we may correct the erroneous business classifications in previous years.

Registered Businesses – latest revisions

There have been some minor revisions to registered estimates – these revisions are limited to the local authority area level data for 2019 and the expansion of country of ownership.

Business Stock Data published by ONS and BEIS

The Office for National Statistics (ONS) and the Department for Business and Trade (DBT) publish business stock estimates for the UK and all regions of the UK (including Scotland). There is a key difference between the UK series for Scotland and the ‘Businesses in Scotland’ publication estimates. ‘Businesses in Scotland’ includes all businesses that operate in Scotland. This is regardless of where the business is based. UK-wide publications differ from this. They tend to publish region/country results according to the registered office (base/head-quarter) of a business. ‘Businesses in Scotland’ goes wider than this. It provides statistics on all businesses operating in Scotland. So it covers those based/head-quartered in Scotland. But it also covers all other businesses with a presence in Scotland.

Scottish Annual Business Statistics

Scottish Annual Business Statistics (SABS) is another publication released by the Scottish Government. The source of SABS is the Annual Business Survey. The main purpose of SABS is to provide information on the performance of detailed industry sectors of the Scottish economy. Predominantly, this is in terms of turnover or gross value added. The ‘Businesses in Scotland’ publication provides employment and turnover estimates. These are not ideal for comparing change in employment or turnover over time. (Section on Registered Businesses discussed this.) SABS is the best source for comparing turnover change over time for detailed industry sectors.