Scottish Annual Business Statistics 2022

Scottish Annual Business Statistics (SABS) is largely based on data from the Annual Business Survey (ABS) conducted by the Office for National Statistics (ONS). The ABS was formerly the Annual Business Inquiry (ABI).

The ABS is the UK’s key resource for understanding the detailed structure and performance of businesses across the UK, classified to the UK Standard Industrial Classification (SIC) system. In SABS, Scotland level data is compiled by aggregating data into industries according to the SIC code of each individual business site (e.g. factory, shop etc). A SIC code is allocated to a business site according to its main activity. 

Within SABS, estimates by industry sector for a range of financial and employment variables are published for Scotland, Scottish local authority areas and business ownership groups. These estimates are presented mainly as monetary values at current prices, and give a snapshot of business activity that can be used to understand the level of contributions to the Scottish economy.

More detail is available in ONS ABS quality and methodology information and also in ONS ABS background information. 

Reduced ABS response due to Coronavirus (COVID-19) pandemic

Usually, the data for Scotland is based on ABS returns from around 8,000 businesses. However, the returns for 2019 and 2020 were lower at approximately 6,000 returns – this was because the COVID-19 pandemic made it more difficult to contact respondents in order to process survey returns. This means that the 2019 and 2020 estimates are subject to more uncertainty than usual. The ABS returns were around 7,800 businesses in 2021 and returned to pre-pandemic levels of around 8,000 businesses in 2022.

However, steps were taken to strengthen the estimates for 2019 by incorporating Value Added Tax (VAT) turnover data. More information on the 2019 estimation process is available, please see SABS 2019 under Time Series Analysis Caveats.

The Annual Business Survey (ABS) is an annual survey of businesses registered for Value Added Tax (VAT) and/or Pay As You Earn (PAYE). This covers the primary industries, manufacturing, construction and service industries (including distribution) which represent the UK Non-Financial Business Economy. This is about two thirds of the UK’s whole economy in terms of Gross Value Added. Broadly, this covers:

Services – includes motor trades, wholesale, retail, transport, accommodation, food services, information, communication, real estate, professional, scientific, technical, administrative, private sector health, private sector education, entertainment.

Primary Industries – includes agriculture support services, hunting, forestry, fishing, oil & gas extraction, energy generation & supply, water & waste management.

Manufacturing – includes manufacture of food, beverages, textiles, wood products, refined petroleum, chemicals, pharmaceuticals, plastic products, metals, metal products, machinery, computers, electrical/optical products, transport equipment, furniture, repair & installation of machinery/equipment.

Construction – includes civil engineering, construction of buildings and specialised construction trades such as plumbers, electricians and plasterers.

Exclusions

The statistics do not cover the whole economy, omitting the financial sector, parts of agricultural sector and parts of the public sector.

The following sub-classes of Standard Industrial Classification (SIC) code 1 (Crop and animal production, hunting and related service activities) are omitted:

01.1 – Growing of non-perennial crops 
01.2 – Growing of perennial crops 
01.3 – Plant propagation
01.4 – Animal production
01.5 – Mixed farming

Within Scottish Annual Business Statistics (SABS), the services sector is defined as division codes 45 to 96 of Standard Industrial Classification 2007 (SIC07). Although the publication refers to the services sector for simplicity, it should be noted that the figures quoted do not relate to the entire services sector, but only to those sectors covered by the ABS. The main industries excluded from the services sector are:

• Financial and Insurance activities (Section K);
• Public Administration and defence (Section O);
• Education (public provision in Section P); and
• Health (SIC 86.2, public provision in SIC 86.1 and 86.9 in Section Q).

Oil & Gas

ABS data relating to Oil & Gas extraction (SIC 6) is allocated to UK regions (including Scotland) according to the address at which the business is registered - onshore and offshore Oil & Gas extraction and activities are allocated in this way. GVA associated with off-shore activity, under UK regional accounts procedures, is normally allocated to a separate ‘Extra Regio’ category rather than allocated to a region within the UK.

Data on purchases for 2012 onwards has been produced using a new Purchases Apportionment Methodology (PAM) for the apportionment from the reporting unit purchases to the local unit level. This new method was introduced to preserve the additivity of purchases components values to the total purchases. This has introduced a discontinuity in the purchases and GVA data series with 2008 to 2011 still calculated using the original method.

The change in the calculation of purchases (and hence GVA) has minimal impact for the large majority of sectors. However, the industry affected to the greatest extent is 'Gambling and Betting (SIC 92)' where there is volatility for a small number of multi-site businesses. The sampled businesses within this Division provide details of the “amounts payable to winning customers” as part of their purchases. The new apportionment method has led to volatile local estimates of payments to winning customers which then also affects other associated variables, like total purchases and GVA. Additional work and analysis is required by the Office for National Statistics (ONS) to identify further improvements to the methodology, and estimates, to reduce this impact while maintaining the additivity. Until this is completed, regional Purchases and GVA figures for Division 92 (Gambling and betting activities) should be viewed with caution.

More detail of PAM change can be found in this Information Paper.​​​​ ​​A detailed 2012 region by industry impact assessment has also been published by the ONS.

Where necessary, figures have been rounded to the nearest final digit shown. Consequently, there may be slight discrepancies within a table between totals and the sums of constituent items.

The following symbols are used within the Scottish Annual Business Statistics (SABS)  data:

[w] none recorded in survey

[c] Information suppressed to avoid disclosure

[x] data is not available

The sampling frame used for the Annual Business Survey (ABS) is the Inter Departmental Business Register (IDBR), which consists of companies, partnerships, sole proprietorships, public authorities, central government departments, local authorities and non-profit making bodies. The main administrative source for updating the IDBR is the HM Revenue and Customs (HMRC) for Value Added Tax (VAT) and Pay-As-You-Earn (PAYE)  details.

Each legal unit is classified to a single activity, whether it is wholly or mainly engaged in that activity. The nature of a business can change with time, possibly because another business has been absorbed in a take-over. Some businesses have a very significant secondary activity, perhaps completely different from their main activity, and a small change of direction can lead to a new main activity and to the reclassification of the business. Other changes may arise from improvements to classification data held on the IDBR as a result of new information received about individual businesses. The reclassification of businesses for reasons such as these contributes to the year on year changes in the figures published.

The Statistics of Trade Act 1947 prohibits the disclosure of any information relating to an individual undertaking without the consent of the person carrying on that undertaking. Rigorous checks have been made to ensure that information relating to individual businesses has not been disclosed, either directly or by deduction, in any of the figures released. Similar precautions will be taken in safeguarding the confidentiality of returns in the preparation of any ad-hoc analyses.

Factors are produced to enable estimates for all businesses classified to each Standard Industrial Classification (SIC 2007) code to be compiled from data provided by responding businesses. These factors are calculated for each employment size-band within each SIC  and are equivalent to the ratio of responding businesses to the total number of businesses. Northern Ireland and Scotland are sampled and estimated for separately, England and Wales are sampled separately but are combined for the estimation procedure.

Returns for the few large non-responders are estimated for individually. This estimation is normally based on summary data received from the business, or on the business's return to the survey in the previous year adjusted to take account of the likely change in the value of trading over the period.

Regional Estimation

The business unit to which Annual Business Survey (ABS) questionnaires are sent is called the reporting unit. For ABS, the reporting unit represents an enterprise, which may consist of one or more sub-units (called local units). For example, an enterprise might be the head office for a group of shops. An enterprise may therefore have local units at different locations, and may carry out more than one type of economic activity.

To produce the regional estimates, the reporting unit data returned by each business are divided amongst its local units. Each local unit’s allocation depends on the size of its employment, the industry it is in and its geographical location. This is achieved using a standard statistical modelling technique called regression analysis.

Local unit employment is obtained from the Business Register and Employment Survey (BRES), which collects data from local units, rather than enterprises. Results are then aggregated for each region /country and industry, using the industry classification of the local units. Each local unit is assigned a single SIC code, which corresponds to the unit’s principal activity. Where more than one type of economic activity is carried out by a local unit or enterprise, its principal activity is the activity which contributes most to the value of the unit. Hence, although the sum of the regional results for the whole business economy will match the total for the national results, the sum of the regional results by industry will not necessarily match the UK industry totals, as local units might not all share the same industry classification as their parent units.

Changes to the regional weighting methodology were introduced to ABS from the 2009 regional results onwards.  Further information on the methodology of the approach and analysis of the impact can be found in the ONS published note Weighting in the Regional System  - September 2011

Note that, as BRES is not carried out at the same time as ABS, differences in the timing of responses from ABS and BRES can lead to some reduction in the quality of the apportionment method.

More information on methodology used to compile regional ABS statistics is available in ONS technical report under Section 5.8.

Within Scottish Annual Business Statistics (SABS), business ownership is defined as:

• UK (Scotland registered)
• UK (registered in RUK)
• Abroad

Country of ownership is either UK or Abroad (outside the UK). Business country of ownership is determined by the nationality of the ultimate parent of the business (i.e. the institutional unit, proceeding up a business’ chain of control, which is not controlled by another institutional unit). Where control of the business is shared, country of ownership is determined by the country of residence of the majority ultimate owner. Enterprise groups with foreign ownership are identified using data provided by Dun & Bradstreet. All businesses that do not belong to an enterprise group, and are therefore not under the control of another institutional unit, are classified as UK-owned. 

Once it is determined that an enterprise is UK owned, the next step is to classify businesses into whether they are Scotland registered or registered in the Rest of the UK (RUK). Enterprises, and their associated local units, are classified as Scotland registered if the enterprise’s Value Added Tax (VAT) / Pay-As-You-Earn (PAYE) registered office address is in Scotland. Enterprises, and their associated local units, are classified as registered in RUK if the enterprise’s VAT/PAYE registered office address is, outside Scotland, elsewhere in the UK.  

Scottish Annual Business Statistics (SABS) figures are largely based on annual surveys of businesses. In the context of overall Scottish figures, year-on-year differences are sometimes less obvious as they can be compensated for by other changes. However, at a more disaggregate level, such as sectoral or local authority area, changes in a small number of large companies can have a have a very marked effect on figures from one year to the next.

The business economy is constantly evolving as businesses merge, are taken over, or simply change the main focus of their business. These changes can result in the industry classification of a business changing.

For example, if a business undertakes both manufacturing and wholesale activities, but most of its employment is within manufacturing, it will be classified to manufacturing. If the employment were to change substantially so that the majority worked in wholesale then the industry classification would change and the whole of the businesses turnover, for example, would move from manufacturing to wholesale. In industries where movements are common, or where large businesses are involved, these changes can themselves sometimes cause large changes in Annual Business Survey (ABS) estimates. This should be taken in to consideration when changes over time are being assessed.

Estimates derived from samples invariably produce results which differ from those that would have been obtained from a complete census of all businesses. If a number of different samples were selected then each would produce a different result. Sampling errors measure the extent to which these estimates can be expected to differ from the 'true' value. The standard error is the estimated value of the sampling error – the closer the standard error to zero, the more reliable the estimate.

Standard Errors at Local Authority area level for 2012 to 2018 and 2020 to 2022 are available in the Tables published in Scottish Annual Business Statistics (SABS) 2022. Note there are no Standard Errors for 2019 estimates, it has not been possible to produce these on account of the change in the estimation process which incorporates Value Added Tax (VAT) turnover data as detailed in “SABS 2019” under “Time Series Analysis Caveats” heading.

The employment and employee estimates are largely based on Business Register and Employment Survey (BRES) data, sampling errors for BRES estimates are provided at a regional and local level within Tables by the Office for National Statistics (ONS).

In addition to sampling errors there is the potential for non-statistical errors which cannot be easily quantified. Examples where these errors may occur are deficiencies in the sampling frame (Inter Departmental Business Register) and errors made by respondents in completing the survey forms. More information on methodology used to compile regional ABS statistics is available in ONS technical report.

In general, Scottish Annual Business Statistics (SABS) follows the Revisions Policy for the Office for National Statistics (ONS) Annual Business Survey (ABS) results i.e. the latest results are provisional until the following year when they may be revised as a result of late returns or information received in the course of the following year's inquiry.

So, for example, within SABS 2022 the latest results for 2022 are provisional and will be made final when they are re-published within SABS 2023 - at which point they may be revised due to late returns. Likewise the results for 2021 within SABS 2022, have been revised since SABS 2021 and are now final.

Although the general rule is to only revise back one year, if revisions have a significant impact on estimates for Scotland, then we may revise back the entire time series. Significant revisions of this sort, and their treatment within SABS, will be highlighted at the time of the release.

Gross Value Added (GVA)

The Scottish Annual Business Statistics (SABS) results include approximate Gross Value Added at 'basic prices' (GVA). There are differences between the Annual Business Survey (ABS) approximate measure of Gross Value Added and the GVA measures published in UK and Scottish National Accounts data. It is important to emphasise that ABS GVA does not cover the whole economy and that it does not include all the National Accounting adjustments that reconcile the ABS data with other data sources (especially taxes and subsidies, margins and the 'mixed income' economies).

The Quarterly GDP is the Scottish Government's preferred source for measuring GVA change over time – for the Scottish economy as a whole and for broad sectors of the Scottish economy.

Detailed information of the differences between ABS approximate GVA at 'basic prices' and National Accounts/Regional Accounts GVA is available in Section 8.1 in the ABS Technical Report published by the Office for National Statistics (ONS).

The ONS also published an article in 2014 on A Comparison between Annual Business Survey and National Accounts Measures of Value Added

Business Register and Employment Survey

Employee jobs/employment data, largely sourced from the Business Register and Employment Survey (BRES), are provided in the Scottish Annual Business Statistics (SABS) results. These employment estimates are provided in SABS to enable consistent productivity measures to be calculated.

The employee jobs/ employment estimates in SABS will tend to be lower than those published in BRES since BRES has wider industrial coverage than the Annual Business Survey (ABS) from which SABS is mainly sourced. There will also be differences between the employment estimates in BRES and the employment estimates as published in SABS as a result of differences in the samples selected for each survey.

If employee jobs/employment data by industry only is required (and so not to construct labour productivity measures), then the Business Register and Employment Survey (BRES) is the preferred source for Scotland and local areas within Scotland. 

Businesses in Scotland

Businesses in Scotland (formerly Scottish Corporate Sector Statistics) is another annual business statistics publication, released by the Scottish Government – the source of which is the Inter Departmental Business Register (IDBR).

The main purpose of this publication is to provide information about the number of enterprises operating in Scotland. Like SABS, Businesses in Scotland provides estimates of employment and turnover by industry, local authority area and ownership.

However, the employment and turnover estimates are provided in Businesses in Scotland publication as auxiliary variables that enable users to determine what proportion of employment/turnover generated in the economy can be attributed to businesses of different size. Employment and turnover, as published via Businesses in Scotland, do not relate to a single point in time and can be out of date for some small firms. For this reason, it is not the preferred the source for comparing employment and turnover estimates over time. 

It has been established that the estimation of regional capital expenditure is unreliable, and therefore Net Capital Expenditure figures are not now available in Scottish Annual Business Statistics (SABS).

Office for National Statistics (ONS) has provided the following information on this: Figures on regional capital expenditure are no longer made available on the Annual Business Survey (ABS) website pages. Accurate estimation of regional capital expenditure is dependent on there being a strong correlation between the variable on which any estimation is based, in this case local employment, and the variable for which we are attempting to produce estimates, here regional capital expenditure. It has been established that the relationship between regional employment and regional capital expenditure is, in fact, unreliable.

The Annual Business Survey (ABS) questionnaires are addressed to the individual legal unit, i.e. the individual company, partnership, sole proprietorship, etc.

The forms are designed to ensure the burden on the individual contributor has been kept as low as possible. A number of different form-types are used in the survey:

• Long form-types were sent to nearly all businesses with an employment of 250 or more and also to a proportion of selected businesses with lower employment.
• Short form-types were sent to the remaining selected businesses.

On the “long” questionnaire, there is a more detailed breakdown of variables such as turnover, purchases and employment costs, while the “short” questionnaire only requires totals. For example, the “short” questionnaire asks for “total employment costs”, whereas the “long” questionnaire breaks this down into gross wages and salaries, employers’ National Insurance contributions, contributions to pension funds and amounts payable through redundancy and severance.

Example questionnaires (of short and long forms) for Production and Services can be found under Section 3 in the Office for National Statistics background information to the Annual Business Survey (ABS).

Number of Units

This relates to the number of individual business sites e.g. a plant, factory, shop etc.

Total Employment

This is the point in time estimate of full and part time employees on the payroll plus the number of working proprietors employed on a set day in September.

Please see under heading "Total Employees/Employment and Per Head variables" for how this data is supplemented from the Inter-Departmental Business Register (IDBR).

Please note that Total Employment is a head count and not a Full Time Equivalent (FTE) measure. This distinction is particularly important for sectors with high levels of part time employment (e.g. Retail and Accommodation & Food Service activities) especially when comparing Per Head figures.

Total employees

This is the point in time estimate of full and part time employees on the payroll on a set day in September.

Please see under heading "Total Employees/Employment and Per Head variables" for how this data is supplemented from the Inter-Departmental Business Register (IDBR).

This is also a head count and not a Full Time Equivalent (FTE) measure (see employment explanation above).

Total turnover

Turnover is defined as the total value of sales. This is calculated by adding together the values of:

• sales of goods produced
• goods purchased and resold without further processing
• work done and industrial services rendered
• non-industrial services rendered

Purchases of goods & services

This is the value of all goods and services purchased during the year.

Gross Value Added at Basic Prices

Approximate gross value added (aGVA) represents the amount that individual businesses, industries or sectors contribute to the economy.

The estimate of approximate Gross Value Added at basic prices (aGVA) represents the income (Turnover) of businesses, less the cost of goods and services consumed in the production process (Purchases).

Generally, this is measured by the income generated by the business, industry or sector less their intermediate consumption of goods and services used up in order to produce their output, labour costs (for example, wages and salaries) and an operating surplus (or loss). The latter is a good approximation for profits, from which the cost of capital investment, financial charges and the payment of dividends to shareholders are met.

There are differences between the approximate measure of aGVA calculated by Annual Business Survey (ABS) and the measure of gross value added (GVA) used in the national accounts (NA). NA carry out coverage adjustments, conceptual adjustments and coherence adjustments. The NA estimate of GVA uses inputs from a number of surveys and covers the whole UK economy. Some industry sectors are not included in the ABS.

Detailed information of the differences between ABS approximate GVA at 'basic prices' and National Accounts/Regional Accounts GVA is available in Section 8.1 in the ABS Technical Report published by the Office for National Statistics (ONS).

The ONS also published an article in 2014 on A Comparison between Annual Business Survey and National Accounts Measures of Value Added

Total Taxes

These are the amounts payable to the government for taxes, levies and duties. Included are rates relating to industrial and commercial property which are payable to the government via local authorities.

Total Taxes from this source excludes VAT, Tax already included in the purchase of goods, materials and services, Corporation tax, Income tax and Capital gains tax.

Increase in Total stocks

This represents the increase during the year for materials, stores and fuel and goods on hand for sale. Amounts for materials which have been partially processed but which are not usually sold without further processing are also included.

Gross Wages & Salaries

This represents the amount paid to employees (in cash or kind). This includes gross wages and salaries and redundancy and severance payments to employees. Payment to working proprietors, travelling expenses etc. are excluded.

Total Labour Costs

This represents the total cost to employers of employing staff. This includes all gross wages & salaries (see above), overtime payments, bonuses, commissions, payments in kind, benefits in kind, holiday pay, employer's national insurance contributions, payments into pension funds by employers and redundancy payments less any amounts reimbursed for this purpose from government sources. No deduction is made for income tax or employee's national insurance contributions. Payment to working proprietors, travelling expenses and lodgings allowances are excluded.

Total Output at Basic Prices

Output is essentially the measure of productive activity and covers - market output, output produced for own final use and other non-market output.