UK business; activity, size and location: 2017

• The number of Value Added Tax (VAT) and/or Pay-As-You-Earn (PAYE) businesses in the UK continued to grow to 2.67 million in March 2017 compared with 2.55 million in March 2016, which is consistent with the performance of the broader UK economy.
• The number of companies and public corporations has continued to rise and represents 70.7% of total UK businesses, which has offset a gradual fall in sole proprietors and partnerships.
• The largest industry group is professional, scientific and technical, making up 17.9% of all registered businesses in the UK.
• London remained the region with the largest number of businesses, representing 18.9% of the UK total.

UK business: activity, size and location, 2017 is produced from an extract taken from the Inter-Departmental Business Register (IDBR) recording the position of units as at 10 March 2017.

This publication represents the businesses registered with HM Revenue and Customs (HMRC) for Value Added Tax (VAT) and/or Pay-As-You-Earn (PAYE). The Department for Business, Energy and Industrial Strategy (BEIS) produces Business Population Estimates, which seek to provide full coverage of all types of businesses in the UK including an estimate of the unregistered business population.

In 2015, we extended the coverage of businesses in this release to include a population of solely PAYE-based businesses that were previously excluded because of a risk of duplication. In total 105,000 businesses were added in 2015. Improvements in matching of administrative data and research into those units excluded has indicated that the risk of duplication is very small. The addition of these businesses brings the publication in line with Business Demography and the BEIS Business Population Estimates publication. A more detailed note explaining these changes is available. These businesses have been included in the previous years’ estimates shown in this statistical bulletin to provide a comparable time series.

For the purpose of this release the term “business” is used to represent an enterprise. An enterprise can be defined as the smallest combination of legal units (generally based on VAT and/or PAYE records) that is an organisational unit producing goods or services, which benefits from a certain degree of autonomy in decision-making, especially for the allocation of its current resources. An enterprise carries out one or more activities at one or more locations. An enterprise may be a sole legal unit.

Please note the figures in the tables use disclosure methods and are rounded individually. Therefore the sum of component items may be slightly different to the totals shown.

To support this release, datasets are available in an Excel Workbook and at NOMIS in greater geographical and industrial detail. However, for various reasons, multiple business registrations can be recorded at a single address and this can distort data for smaller geographical areas.

The increasing number of Value Added Tax (VAT) and/or Pay-As-You-Earn (PAYE) businesses has continued its upward trend from the previous year, consistent with the performance of the broader UK economy (Figure 1). In the 12 months to Quarter 1 (Jan to Mar) 2017, gross domestic product (GDP) rose by 1.8% following growth of 1.9%. in the 12 months to Quarter 1 2016.

Similarly, the labour market strengthened with the employment rate rising from 74.2% in the three months to March 2016 to a then record high of 74.8% in the three months to March 2017. Alongside the employment rate, the redundancy rate has fallen from 4.2 per 1,000 employees in the three months to March 2016 to 3.5 per 1,000 employees in the three months to March 2017. This figure is based on the amount of people who were made redundant out of all workers employed. Higher retention of jobs within the labour market may indicate a stronger and more productive workforce, consistent with the increase of VAT and/or PAYE businesses.

In August 2016 the Bank of England made the decision to decrease the already historically low base rate from 0.5% to 0.25%. As this decision reduces commercial loan rates, it could encourage more businesses to set up, as they can take advantage of cheaper repayments of capital investments.

A notable development is sterling’s sharp depreciation in mid-2016 following the EU referendum vote. While sterling’s depreciation has contributed to a pickup in Consumer Prices Index (CPI) inflation and weighed on household real income growth, it has also supported margins for exporters. Alongside increased strength in global demand, this is likely to encourage the set-up of export-oriented businesses.

Between March 2016 and March 2017, there was an increase of 7.4% in corporate businesses, while there was a reduction of 2.6% in the number of sole proprietors and partnerships.

Corporate businesses (companies and public corporations) represented 70.7% of total businesses, up 1.9 percentage points from 68.8% in 2016; of the corporate business figure, 47.1% is made up of single employee limited companies, which have increased by 72,000 between 2016 and 2017. Single employee limited companies have always been prevalent in the construction industry but recent years have also seen a marked increase in the transport and storage, health and education sectors.

Sole proprietors represented 17.5% of total businesses, down 1.2 percentage points from 18.7% in 2016. Partnerships represented 8.1% of total businesses, down 0.7 percentage points from 8.8% in 2016.

General government and non-profit making bodies represented 3.8% of total businesses, the same percentage as shown in 2016.

In 2017, the professional, scientific and technical sector accounted for the largest number of businesses, with 17.9% of all registered businesses in the UK; however, this only contributed 7.3% to overall gross domestic product (GDP). Wholesale, retail and repair of motor vehicles was the second largest sector, with 14.1% of all businesses registered. This represented 10.7% of the overall service industry’s contribution to GDP of 78.8%.

The professional, scientific and technical sector had the largest growth in numbers between 2016 and 2017, an increase of 20,000 businesses. This was followed by business administration and support services, which also increased by 19,500.

Between 2016 and 2017, all regions saw an increase in the number of businesses, with the East experiencing the greatest percentage increase of 6.8%, representing nearly 17,000 businesses.

London accounted for the largest number of businesses in March 2017, with 18.9% of the UK total. The growth of businesses in London accounts for 25.2% of total growth in the UK.

The region with the next largest share of businesses was the South East, at 15.1%.

Between 2015 and 2017, the number of Value Added Tax (VAT) and/or Pay-As-You-Earn (PAYE) businesses in London as a proportion of all regions increased by 0.7 percentage points, from 18.2% in 2015 to 18.9% in 2017. Whereas the number of VAT and/or PAYE businesses in Scotland decreased as a proportion from 6.9% in 2015 to 6.5% in 2017.

Table 2 provides the number of businesses in every region and the percentage contribution of each region to the UK total.

Local units are sites that belong to a business. In March 2017, there were 3.13 million local units belonging to Value Added Tax (VAT) and/or Pay-As-You-Earn (PAYE) based businesses, compared with 3.01 million in March 2016, a rise of nearly 119,000 (4.9%). Out of the 2.67 million VAT and/or PAYE businesses, only 59,000 (2.2%) operate from more than one site. These operated a total of 519,000 local units.

The UK business: activity, size and location Quality and Methodology Information report contains important information on:

• the strengths and limitations of the data and how it compares with related data
• users and uses of the data
• how the output was created
• the quality of the output including the accuracy of the data