A Trading Nation: analytical methodology note

5. Analysis of Scottish exporter characteristics

Scotland’s business profile

89. The export plan uses a number of official data sources to help understand Scotland’s business profile. This section explains the sources for the statistics used in the main export plan document, which this methodology note accompanies.

Number of businesses

90. This is sourced from the Businesses in Scotland^[19] publication which provides information on the number of enterprises (businesses) operating in Scotland.

91. The data is based on business counts from the IDBR, which provides the number of enterprises registered for VAT and/or PAYE in Scotland. However there is a substantial number of very small enterprises which have no employees and are therefore not included on the IDBR. A modelling procedure that combines data from the IDBR with estimates derived from the Labour Force Survey, Family Resources Survey and Self-Assessment data is used to estimate the number of unregistered enterprises. As a result, this provides the most comprehensive estimate of business counts for Scotland.

92. Data from the 2018 publication was used in the plan to provide a baseline for the number of companies in Scotland. Using the breakdown by employee size band also provides an estimate on the number of companies with zero employees and the number of micro-business (1 to 9 employees).

Number of exporters

93. This is sourced from the ONS Importers and Exporters by Regional Breakdown data^[20] which provides an estimate for the number of companies exporting goods and services by region of the UK, including Scotland.

94. This data is based on the Annual Business Survey (ABS) which is a sample survey of 62,000 businesses in Great Britain and includes all large businesses (those with 250 or more employees). However this survey excludes parts of the agriculture sector and also the financial services sector.

95. This ONS data relating to the number of exporters and importers by region is currently classed as experimental statistics which are defined as official statistics in the testing phase that are not fully developed. Despite this, it is the only official source for the number of exporters in Scotland that includes trade in both goods and services^[21].

96. The latest available figure is for 2017 and this was used in the plan to provide an estimate for the number of those companies in Scotland (from the Businesses in Scotland figure mentioned above) that are exporting. The published number is 10,700 businesses. Given the ABS excludes some sectors (as mentioned above), the actual number of exporting companies in Scotland is likely to be higher than this. As a result, the number was rounded up to 11,000, although this is still likely to be an underestimate.

Number of non-exporters

97. There is no official source on the number of non-exporting businesses in Scotland. As a result, the two sources explained above were used to estimate this. We start with the total number of businesses in Scotland, 346,000 and exclude the 238,000 zero-employee businesses (although in reality some of these businesses will be exporters). This gives an estimated 108,000 businesses that could be exporting. However, if we assume that 11,000 of these businesses are known exporters, it follows that the rest are non-exporters. This means there are an estimated 97,000 businesses in Scotland that do not export.

Company level export data

98. As well as the analysis carried out to help understand Scotland’s current and future export growth opportunities, analytical work was undertaken to examine key exporting businesses and their characteristics. This company-level analysis was done to help understand who the top exporting companies are, what sectors they are in as well as other factors such as their size, location, ownership as well as their export performance over time. This analysis helped to understand where trade promotion can have the most impact on boosting Scotland’s exports.

99. The main source for this analysis is the Export Statistics Scotland data. Further information on how this data is compiled is covered in section 3. This data estimates the value of international exports for individual companies in Scotland which allows companies to be ranked and grouped based on this value, for example by the top 100 or top 500 exporters.

100. This company-level export data can be linked to data from the IDBR by reporting unit number which allows export performance to be analysed against other business characteristics, including country of ownership and size of business.

Country of ownership

101. 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 of 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. It is assume that a UK-owned company that only has sites in Scotland is a Scottish owned company. However manual amendments are also made to ensure the country of ownership data is as accurate as possible.

Size of business

102. The IDBR also contains information on the number of employees for each business and this is used to determine the size of the business. In this analysis, ‘small’ businesses are defined as those with fewer than 50 employees; ‘medium’ are defined as those with 50 to 249 employees and ‘large’ are defined as businesses with 250+ employees. This is based on the total employment for their Scottish sites only.

Export concentration

103. As mentioned above, individual companies in the ESS data can be ranked by their estimated value of international exports. This is used to measure the level of export concentration. For example, this shows that in Scotland, it is estimated that the top 100 exporters account for around 59% of all international exports. The next 400 exporters account for 23% of all international exports, meaning over 80% of all international exports are delivered by just 500 businesses. Dividing this number by the total number of businesses in Scotland (346,000) gives the 0.1% figure mentioned in the report.