Scottish Employer Perspectives Survey 2019: research report

2. Employer Characteristics

Introduction

This chapter describes the profile of employers in Scotland in terms of the following key characteristics:

• Size, business sector and region;
• Length of time in operation; and
• Business outlook.

This provides context to help understand employers’ experiences and practices presented in the rest of the report.

Firmographic data, about the size, sector and location of the employers, are based on establishment population counts provided by the Office for National Statistics (ONS), and those on the tenure and business outlook are based on (weighted) data from the survey. The footnotes to each table and figure detail the source(s).

The employer population in Scotland

Size and sector

ONS figures estimate that in March 2018^[7] there were approximately 151,200 establishments in Scotland that had at least 2 people working there (including any owners and working proprietors).^[8] Between them these establishments employed over 2.43 million people.

As Figure 2.1 shows, the employer population is predominantly made up of small establishments with fewer than 10 employees, indeed, half (50%) have fewer than 5. However the majority of people employed in Scotland work within larger establishments: those with 100 or more staff make up just 2% of all establishments but employ 43% of employees. In contrast the 50% of establishments fall into the 2-4 sizeband account for just 8% of total employment.

Figure 2.1: Employer and employment profile by size

Source: Inter-departmental Business Register (IDBR), Office for National Statistics, March 2018

Looking at the employer profile by sector (presented in Figure 2.2), the largest sectors in terms of number of establishments are Business Services and Wholesale & Retail. Between them these two sectors account for around four in ten of all establishments and employ around three in ten of all employees. 

However the single sector employing the most staff is Health and Social Work (accounting for 16% of total employment). This in part reflects the fact that establishments in this sector are larger than in other sectors: 4% have 100 or more staff (compared to 2% overall) and just 26% have fewer than 5 staff (compared to 50% overall).

Other sectors characterised by a higher than average proportion of large establishments include Public Administration and Education, and this is reflected in the relatively large proportions of overall employment they account for when compared to the number of establishments they represent.

Conversely the Construction sector accounts for 9% of all establishments but just 5% of the employment population; 63% of establishments in this sector have fewer than 5 employees.

Figure 2.2 shows the profile of establishments and employment by sector.

Figure 2.2: Employer and employment profile by sector

Source: Office for National Statistics, March 2018

Changes to the size and sector distribution of establishments over time

Where possible this report presents time series data against previous iterations of the Scotland findings from the UK-wide Employer Perspectives Survey, run most recently in 2016 (and which used business population data from March 2015). It is useful therefore to explore and understand any changes in the employer profile over this period, in order to provide context from any significant changes in the survey data over time.

As shown in Table 2.1, there has been a slight increase in the overall number of establishments between the two surveys, from 150,900 to 151,200. The increase is mainly a result of an increased number of the smallest establishments with 2-4 staff.

By sector, the largest proportionate increases compared with 2016 have been in Public Administration (an increase of 11.9%) and Transport, Storage and Communications (an increase of 4.6%). Conversely the largest proportionate decreases have been in the number of establishments in Education (a decrease of 6.4%) and Financial Services (a decrease of 5.0%).

Table 2.1: Changes to the Scotland establishment populations by size and sector since 2016

	2016	2019	Relative change from 2016 (p.p.)[9]
All Scotland	150,900	151,200	+0.2
2 to 4	75,000	76,000	+1.3
5 to 9	35,100	34,300	-2.3
10 to 24	24,700	24,800	-0.5
25 to 49	8,600	8,500	-0.4
50 to 99	4,200	4,200	+0.9
100+	3,300	3,300	+0.4
Primary Sector and Utilities	13,300	13,300	-0.2
Manufacturing	7,000	7,100	+1.6
Construction	12,900	13,300	+2.9
Wholesale and Retail	29,600	28,700	-3.1
Hotels and Restaurants	15,500	15,900	+2.6
Transport, Storage and Communications	8,800	9,200	+4.6
Financial Services	2,900	2,700	-5.0
Business Services	29,700	30,100	+1.3
Public Administration	2,400	2,700	+11.9
Education	4,700	4,400	-6.4
Health and Social Work	11,300	10,900	-3.3
Arts and Other Services	12,800	12,800	+0.2

Source: IDBR Business Register, Office for National Statistics (March 2018, March 2015).
Populations have been rounded to the nearest 100. Note the percentage changes in the final column use the ‘absolute’ numbers not the rounded figures shown in the first two columns.

Region

The largest regions (Regional Outcome Agreement (ROA) region) in terms of establishments and employment proportions were unsurprisingly those encompassing the large cities of Edinburgh (within Edinburgh and Lothians 14% of establishments, 16% of employment), Glasgow City (Glasgow City 12% and 16% respectively) and Aberdeen (within Aberdeen and Aberdeenshire 11% and 11% respectively). Highlands and Islands also accounted for 12% of all establishments but a much smaller percentage of employment (9%) reflecting the smaller size profile of establishments in this region (see Table 2.2).^[10]

Table 2.2: Employer and employment population by ROA region

Region	Establishments	Employment
Aberdeen and Aberdeenshire	11%	11%
Ayrshire	6%	5%
Borders	3%	2%
Dumfries and Galloway	4%	3%
Edinburgh and Lothians	13%	16%
Fife	6%	6%
Forth Valley	5%	5%
Glasgow	14%	18%
Highlands and Islands	13%	9%
Lanarkshire	11%	11%
Tayside	8%	7%
West	6%	7%
West Lothian	3%	3%

Source: Office for National Statistics (IDBR March 2018). Note that the percentages sum to >100% as some local authorities appear in more than one ROA region. These figures are taken directly from the IDBR, rather than the EPS survey. 

Employer characteristics from the survey

In addition to the size, sector and region of the employer, this report analyses the data by a number of key characteristics gathered from the survey, with data weighted to be representative of employers across Scotland.

Broad classification (private, voluntary or public sector)

The vast majority of employers in Scotland (83%) fall into the private sector, that is, they seek to make a profit. One in eight (11%) classify themselves as a charity or voluntary sector organisation, and the remaining 6% are public sector (split 3% local government and 3% central government).

In the majority of sectors at least 90% of establishments reported they were seeking to make a profit (see Figure 2.3). The exceptions were:

• Public Administration where 84% classified themselves as public sector;
• Health and Social Work, where the majority (54%) classified themselves as charity and voluntary sector and 18% as in the public sector; and
• Education (32% private), where 48% classified themselves as public sector and 18% as charity or voluntary sector organisations.

Larger employers were more likely to be classified as public sector than smaller. Just 2% of the smallest establishments (with 2-4 staff) fell into this category, compared to a quarter (26%) of employers with 100 or more staff.

Figure 2.3 shows the full classification breakdown by size and sector.

Figure 2.3: Broad classification by size and sector, 2019

Source: Scotland Employer Perspectives Survey 2019
For base sizes see Table A.1.1

Length of time in operation

The majority (95%) of Scottish employers have been in operation for over 5 years, compared with just 3% operating for less than 3 years. This varies by sector:

• Primary Sector and Utilities employers had all been in operation for more than 5 years; and
• Employers in the Hotels and Restaurants sector were least likely to have been operating for 5 years or more (84%).

The smallest employers with 2-4 employees were less likely and the largest establishments with 100+ employees were more likely than the overall average to have been in operation for 5 years or more (94% and 98% compared to an overall average of 95%).

Figure 2.4: Length of time in operation, overall and by sector and size, 2019

Base: All establishments. See Table A.1.1 for individual base sizes for sizeband.

Source: IFF Research, Scottish Employer Perspectives Survey 2019

Business outlook 

Among employers who had been in operation over 12 months, around one in six (17%) had increased their number of employees in the previous 12 months (down from 20% in 2016). This was more common in Fife (27%), and least common among employers in the Forth Valley (12%).

Employers with over 100 employees were at least three times more likely than the very smallest employers with 2-4 employees to have had recent increases in employee numbers. Around one in ten (9%) employers with 2-4 employees had increased the number of people they employed, compared to 36% of employers in the 100+ employees size band. 

Figure 2.5 Proportion of establishments who had increased the number of people employed in the last twelve months overall and by sector and size, 2019

By sector, Public Administration (25%), Financial Services (23%), Manufacturing (22%) and Health and Social work (22%) had the highest proportions of employers reporting an increase in employee numbers in the previous 12 months. Employers in Hotels and Restaurants were least likely to report an increase in the number of people they employed (12%).

Figure 2.5: Proportion of establishments who had increased the number of people employed in the last twelve months overall and by sector and size, 2019

Base: All establishments in operation for more than a year. See Table A.1.2 for base sizes by sizeband.

Source: IFF Research, Scottish Employer Perspectives Survey 2019

Expected growth in the next twelve months

In addition to the increase in employee numbers over the previous 12 months, employers in the private sector were asked whether they expected their operations to grow, contract or remain the same over the next twelve months. These responses give a basic measure of business confidence over the next year. Nearly two-fifths (39%) of Scottish private sector establishments expected to grow in the next 12 months. In contrast one in ten expect to contract (10%), leaving around half expecting no change (47%) or unsure (4%).

By size, establishments with 50+ employees had the most positive outlook, with 65% expecting growth in the next 12 months. The smallest employers (with 2-4 employees) were less confident, with three in ten (29%) expecting to grow, though with 13% expecting to reduce staff numbers. Private sector employers in Manufacturing (51%) and Financial Services (49%) were most likely to expect growth in employee numbers, this at twice the level in Construction (25%) where a high proportion expected to stay at the same size (61%). In Transport, Storage and Communications a high proportion expected to contract (17%), though the proportion expecting growth was also a little above average (42%), suggesting quite a polarized outlook in this sector.

Results varied by region: confidence was highest among employers in West Lothian (49%) and Lanarkshire (46%) expected their establishment to grow, statistically significantly higher than the proportion in Ayrshire (30%).

Figure 2.6: Proportion of private sector establishments who expect to grow in the next twelve months overall and by sector and size, 2019

 

Base: All private sector empolyees. See Table A.2.2 for base sizes by sizeband.

Source: IFF Research, Scottish Employer Perspectives Survey 2019

Public admin companies were not asked the question on business outlook and are therefore excluded from this chart.