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Births and Deaths of Enterprises in Local Enterprise Partnerships, 2004–11

Released: 09 August 2013 Download PDF

Abstract

This article provides analysis of business demography statistics at the Local Enterprise Partnership (LEP) geographical level, using registered enterprise birth and death rates in England for the years 2004 to 2011. It provides a change over time analysis of registered enterprise birth and death rates and net changes for LEPs and England as a whole. The primary purpose of this article is to promote the use of LEP level statistics, some of which can be found in the ONS LEP Profiles.

Acknowledgements

ONS would like to thank the Department for Business, Innovation and Skills for their input into this article.

Key points

  • The most recent recession had a negative effect on enterprise birth rates1 (decrease) and enterprise death rates2  (increase).

  •  Enterprise birth rates were negatively affected by the recession in 2008, sooner than enterprise death rates which began to show the negative effects in 2009.

  • The enterprise death rate exceeded the enterprise birth rate in England in 2009 and 2010, a negative net rate3. In all other years between 2004 and 2011, the enterprise birth rate exceeded the enterprise death rate, a positive net rate.

  • The Cumbria LEP4 had the largest negative enterprise net rate of any LEP in 2011 having had the largest positive enterprise net rate in 2004.

  • Amongst all LEPs, the London LEP had consistently high enterprise birth rates from 2004 to 2011, which coincided with investment in the Olympic Games. London also had the highest enterprise death rate between 2004 and 2007.

  • LEPs predominantly made up of local authorities which are classified as rural generally had lower enterprise death rates than LEPs with local authorities which were predominantly classified as urban. However these LEPs containing predominantly rural local authorities also generally had lower enterprise birth rates than LEPs with local authorities mostly classified as urban.

 

Notes for Key points

  1. The enterprise birth rate is the number of births per 100 active enterprises in an area for the given year (see background note 1 for information about the periods covered by the data and the definitions section for more information about enterprises and rates).
  2. The enterprise death rate is the number of deaths per 100 active enterprises in an area for the given year (see background note 1 for information about the periods covered by the data and the definitions section for more information about enterprises and rates).
  3. The net rate has been calculated as the enterprise birth rate minus the enterprise death rate for each LEP. The net increase or decrease is expressed as a rate per 100 active enterprises in an area. Therefore if an area has a net increase, it means that its birth rate exceeded its death rate in a given year. Likewise, if it had a negative net rate then its death rate exceeded its birth rate.
  4. A Local Enterprise Partnership (LEP) is a voluntary partnership between local authorities and businesses in a given area.

Introduction

This article starts with an analysis of the registered enterprise birth rates, death rates and net rates in England and then focuses on change from 2004 to 2011 at Local Enterprise Partnership (LEP) level. Although differences may exist in practice, the terms 'business' and 'enterprise' are used interchangeably in this article.

Analysis in this article applies specifically to registered businesses. Very small businesses and non-profit making organisations which fall below the threshold for registration do not form part of the registered enterprise stock nor are they included as business births or deaths. This includes businesses with no registered employees or turnover below the VAT threshold; for instance, this threshold was £73,000 in the 2011/12 financial year. However, such businesses are estimated to make up a relatively small proportion of Gross Domestic Product (GDP) (see Definitions – Active enterprises for more information).

This work will be of particular interest to policy analysts in the development of economic strategies within their respective enterprise partnership areas or local authorities. It may also be of use to business owners and future business start ups who seek to better understand the effects of the recent economic climate on enterprises in England.

More LEP level data covering Demography, Employment, Enterprise, Housing, Inclusion and Skills can be found in the ONS LEP Profiles

Business birth rates, death rates and net rates, England, 2004–11

This section looks at the business demography for England as a whole. By looking at enterprise birth and death rates for England, potential reasons behind any changes in the rates that may have occurred between 2004 and 2011 can be analysed.

Figure 1 shows the birth, death and net change for enterprises in England between 2004 and 2011.

Figure 1: Business birth rate, death rate and net rate change, England, 2004–11

Figure 1: Business birth rate, death rate and net rate change, England, 2004–11
Source: Office for National Statistics

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In 2011, England had a total stock of active enterprises of 2,040,980 which is an increase from the 2004 figure of 1,885,265. This increase is consistent with the birth rate having been higher than the death rate for the majority of years from 2004 to 2011. Note that a birth rate that is higher than the death rate or vice versa in a given year does not necessarily mean that the stock of active enterprises increased or decreased as a result (see background note 4).

Figure 1 shows that for all years from 2004 to 2008 the business birth rate was greater than the business death rate in England. Over the period from 2004 to 2008, both the birth and death rates had declined. However this changed in 2009 when the death rate noticeably spiked. This, combined with the general downward movement in birth rates until 2010, led to the death rate being higher than the birth rate in 2009 and 2010. Therefore in 2009 and 2010, England had a negative net rate.

The decline of birth rates and the spike in death rates which caused death rates to exceed birth rates for two years in 2009 and 2010 was related to the recession which began in the UK in 2008. Figure 2 shows the quarterly Gross Domestic Product (GDP)1 change and the GDP value in millions in the UK between 2004 and 2011.

Figure 2: Quarterly GDP change and GDP, United Kingdom, 2004–11

Figure 2: Quarterly GDP change and GDP, United Kingdom, 2004–11
Source: Office for National Statistics

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Figure 2 shows that growth in GDP was slowing from Q4 2007 and became negative in Q2 2008. GDP growth remained negative until Q3 2009 and therefore the recession lasted five quarters from Q3 2008 to Q3 2009.

'This meets the convention that a recession is defined by two consecutive quarters of falling output. 

However there is no universally agreed definition of recession. Determining when an economy is in recession necessarily involves an element of judgement, taking into account relevant factors such as the scale of the fall in output, the normal margins of error around the statistics, and the presence of special factors which might have influenced the figures'.2         

Despite not entering a recession until Q3 2008, GDP growth was slowing from Q4 2007. This was partly the result of a breakdown in interbank lending3 across borders following the housing market crash in the United States. As a result, banks were more risk averse and less willing to lend to individuals and businesses domestically before the UK entered a recession in 20084. This had an effect on enterprise births and deaths as the availability and supply of finance for business start ups (affecting enterprise births) and individual consumers (affecting enterprise deaths) decreased.

By comparing Figure 1 with Figure 2, one can suggest that the effects of the recession had an immediate negative impact on business births in England. This is because the birth rate fell from 12.4 enterprises per 100 active enterprises in 2007 to 10.1 in 2010. However, the main effects of the recession on the death rate occurred in 2009.

The recession may have affected birth rates before death rates due to the differences in nature between a business birth and a business death. Firstly, it is likely that many potential business start ups were unable to gain access to finance from the latter months of 2007 and therefore were immediately unable to start a registered business. Secondly, very small businesses that are not found on the Inter-Departmental Business Register (IDBR5) in a given year because they do not fit the criteria of a registered business may grow and become registered in future years. The prospect of falling consumer demand from an economy entering recession would have affected the potential growth of such small unregistered businesses6. This may have therefore affected the extent to which small unregistered businesses grew into registered businesses, compared with the level that might have been expected if the general GDP growth between 2004 and 2006 had continued.

The enterprise death rate was negatively affected by the recession from 2009 as the death rate in England increased from 9.7 enterprises per 100 active enterprises in 2008 to 12.1 in 2009. The effects on the death rate may have become evident later than the effects on the birth rate as businesses attempted to survive the recession and the problems associated with it (such as a reduction in turnover as a result of reduced consumer spending) through freezing employment, making redundancies and/or cutting the hours of staff. This could have led to businesses surviving 2008, the first year that the UK was officially in recession over the period covered. However as the crisis deepened, businesses which previously were able to cover short term cash flow problems through bank loans, were no longer able to compete due to banks limiting their funding. This was despite businesses having previously made cost saving efficiencies as GDP growth started to slow.

In 2010, the death rate amongst businesses in England declined from the high level in 2009. However, it still remained above the birth rate for new businesses, showing no improvement from the birth rate in the previous year.

In 2011, England recorded a net increase of 1.5 enterprises per 100 active enterprises. This was the result of the birth rate increasing from 10.1 in 2010 to 11.4 in 2011, and the death rate decreasing from 12.1 in 2009 to 9.9 in 2011.  This means that in 2011, the business demography picture in England had returned to a similar pattern as the 2004 to 2008 period with business birth rates once again exceeding death rates.

 

Notes for Business birth rates, death rates and net rates, England, 2004–11

  1. GDP is an estimate of total economic activity in the UK. It is constructed by balancing the estimates from the output, income and expenditure approaches to measuring GDP which in theory are all equal.
  2. Perry F, 2013 ‘Economic Review, May 2013’
  3. The interbank lending market is one whereby banks provide short term loans to each other in order to cover short term cash flow requirements. 
  4. As an illustration of this point, the bank run on Northern Rock occurred in September 2007.
  5. Very small businesses that do not fit the criteria of a registered business on the Inter-Departmental Business Register in a given year may grow and become registered in future years. The IDBR is based on inputs from three administrative sources: traders registered for Value Added Tax (VAT) purposes with HM Revenue and Customs (HMRC), employers operating a Pay As You Earn (PAYE) scheme - registered with HMRC - and incorporated businesses registered at Companies House. Other surveys are used to supplement these sources. More details can be found on the ONS website.
  6. According to the Business Population estimate for the UK and regions, there were an estimated 4.8 million UK private sector businesses of which 2.6 million were not registered for either VAT or PAYE in 2012.

Business birth and death rates, Local Enterprise Partnerships, 2004–11

Local Enterprise Partnership (LEP) overview

This section focuses on the enterprise birth and death rates for Local Enterprise Partnerships (LEPs). As at August 2013, there are 39 LEPs in England. Each LEP is comprised of between two and 33 local authorities (the number of local authorities within each LEP varies) and some local authorities belong to more than one LEP. Every local authority belongs to at least one LEP.

This article is focused on enterprises and therefore enterprise partnership areas are a natural geography for analysis to explore the variation across such partnership areas in England. For a range of LEP level data, visit the ONS’ LEP Profiles page

Business birth rates and death rates

Fluctuations in the enterprise birth and death rates for LEPs between 2004 and 2011 were broadly similar. Map 1 shows the overall change in the birth rate between 2004 and 2011 for the 39 LEPs in England. It is labelled 1 to 39, in alphabetical order. To identify a specific LEP, refer to the map reference table in Annex 1.

Map 1: Change in enterprise birth rates, LEPs, 2004 and 2011

Change in enterprise birth rates, LEPs, 2004 and 2011

Notes:

  1. This map has been produced to aid the visualisation of LEP data and is not a true geographical representation of England. Each LEP has been separated from the boundaries of neighbouring LEPs to account for some local authorities being included in two LEPs.

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Map 1 shows that comparing enterprise birth rates for 2004 with 2011, every LEP in England had an overall decline in enterprise birth rate. For the majority of LEPs this was mainly because of the large birth rate declines between 2007 and 2009. The map shows the overall change from 2004 to 2011 and this is generally representative of the yearly change for LEPs for the years between 2004 and 2011. LEPs with darker shades would still generally have darker shades if there was a map for each year on year change despite the fluctuations between the years (the annual data for each LEP can be found in the reference table download (135.5 Kb Excel sheet) ) . Despite this, 37 local authorities within England had an overall birth rate increase between 2004 and 2011.

The North West contains the Cumbria and Lancashire LEPs which had, respectively, the largest and second largest birth rate declines of all LEPs between 2004 and 2011. This is reflected in Map 1 as it shows that LEPs in the North West generally had larger overall birth rate declines between 2004 and 2011 than LEPs in other areas of England.

In 2011, the London LEP had the highest enterprise birth rate (14.6 enterprises per 100 active enterprises) and did so for all years between 2004 and 2011 apart from 2007. In 2007, the Tees Valley LEP recorded a birth rate of 15.7 enterprises per 100 active enterprises which was the highest birth rate for any LEP between 2004 and 2011. The London LEP had the largest stock of active enterprises of any LEP for all years between 2004 and 2011. Therefore a business birth will have a lower proportionate effect on the rate in the London LEP than in LEPs with lower active enterprise stocks such as the Tees Valley LEP which had the lowest stock of active enterprises for all years between 2004 and 2011. However this is counterbalanced by more business births expected in the larger economies such as London, and supported by the data1.

The London LEP had a consistently high birth rate between 2004 and 2011 (average birth rate of 13.9 for each year) which would have been influenced by the London region having the highest levels of household income and spending, as analysed in the Family Spending, 2012 Edition, and higher growth in economic output than other regions, as analysed in Regional Economic Indicators, March 2013. Entrepreneurs may be encouraged to start a business in the London LEP due to the higher levels of income, spending and economic output amongst other factors that are characteristics of London.

Similar to the change in birth rates between 2004 and 2011, the change in the death rate for LEPs in the North West was generally less favourable than the death rate change for LEPs in other regions of England. A lower enterprise death rate is regarded as a positive outcome on the whole and a higher death rate as a negative. This is despite the fact that in the long run a business death can lead to more competitive markets as inefficient firms are replaced by more competitive ones. High death rates combined with high birth rates can also be desirable since it can be linked to greater innovation and market efficiency. However, comparing the change in the death rates from year to year, a fall is considered to be a favourable outcome.

Map 2 shows the overall change in the death rate between 2004 and 2011 for the 39 LEPs in England.

Map 2: Change in enterprise death rates, LEPs, 2004 and 2011

Change in enterprise death rates, LEPs, 2004 and 2011

Notes:

  1. This map has been produced to aid the visualisation of LEP data and is not a true geographical representation of England. Each LEP has been separated from the boundaries of neighbouring LEPs to account for some local authorities being included in two LEPs.

Download map

 

Comparing 2004 and 2011, 38 out of the 39 Local Enterprise Partnerships (LEPs) in England had an overall decline in their enterprise death rate. Map 2 shows that LEPs in areas of the North West, East of England and Yorkshire and The Humber had a smaller fall in death rates (in the case of the Cumbria LEP a death rate increase) between 2004 and 2011 than LEPs in other areas of England. This is highlighted in Map 2 by the LEP being represented by a lighter shade.

Only the Cumbria LEP, which is in the North West, had a death rate increase between 2004 and 2011 (0.9 enterprises per 100 active enterprises) and this was mainly the result of the death rate increasing between 2004 and 2008, a time frame within which the majority of LEPs had a fall in death rates. This is despite the Cumbria LEP being the only LEP not to have an increase in their death rate between 2008 and 2009.

From 2004 to 2011, the London LEP had the largest overall death rate decline of any LEP. It declined from 13.4 enterprises per 100 active enterprises in 2004 to 10.4 in 2011. This was partly due to the fall in the London LEP’s death rate being greater than in any other LEP between 2004 and 2008, a period when 35 of the 39 LEPs had a fall in death rates.

In 2011, the Oxfordshire LEP had the lowest death rate of all LEPs. Of the five local authorities within the Oxfordshire LEP, only Oxford had an urban status according to the ONS urban/ rural classification. When the top five LEPs with the lowest enterprise death rates in 2011 are observed, a similar pattern emerges in that the LEPs are dominated by local authorities that have been classified as rural. Between 2004 and 2011, most LEPs with local authorities that are classified as rural had a relatively low death rate.

The opposite is true for LEPs in 2011 that had the highest death rates. All 10 local authorities in the Greater Manchester LEP, which had the second highest death rate in 2011, had an urban classification of 1 (indicating a major urban local authority).  Generally, LEPs containing local authorities that are classified as urban recorded relatively high death rates between 2004 and 2011. Between 2004 and 2007, the London LEP had the highest death rate and all 33 boroughs in the London LEP had an urban classification of 1. The fact that rural areas generally had a lower death rate than urban areas suggests businesses in rural areas were more stable than in urban areas.

The business birth rate is also related to the urban/rural status of the local authorities within LEPs. LEPs with local authorities that are mostly classified as being urban generally have higher birth rates, whereas LEPs with local authorities that are mostly classified as being rural generally have lower birth rates. The result of this combination of birth and death rate trends within urban and rural LEPs is that the urban/rural status has little effect on the net rate change for LEPs.

The LEP network has classified LEPs with high birth and death rates as having a ‘high churn’ and LEPs with low birth and death rates as having a ‘low churn’. They suggest that LEPs with a ‘high churn’ tend to have more competition whilst ‘low churn’ rurally dominated LEPs have fewer large employers and a higher number of smaller sized businesses2.

 

Notes for Business birth and death rates, Local Enterprise Partnerships, 2004–11

  1. The birth rates are broadly similar across all LEPs and not noticeably lower for LEPs with larger enterprise stocks compared to those with smaller stocks of active enterprises. This can be observed in the Tables, figure and maps: ‘All LEP data’ (135.5 Kb Excel sheet) .
  2. The LEP Network - Creating Successful Local Economies.

Net rates, Local Enterprise Partnerships, 2004–11

Local Enterprise Partnership (LEP) overview

This section focuses on the enterprise net rates for Local Enterprise Partnerships (LEPs). As at August 2013, there are 39 LEPs in England. Each LEP is comprised of between two and 33 local authorities (the number of local authorities within each LEP varies) and some local authorities belong to more than one LEP. Every local authority belongs to at least one LEP.

This article is focused on enterprises and therefore enterprise partnership areas are a natural geography for analysis to explore the variation across such partnership areas in England. For a range of LEP level data, visit the ONS’ LEP Profiles page

Business net rates

Table 1 shows the birth rate, death rate and net rate in 2004 and 2011 for all LEPs and is ranked from the largest net increase to the largest net decrease in 2011.

Table 1: Birth rates, death rates and net rates, LEPs, 2004 and 2011

Birth rate (rate per 100 active enterprises) Death rate (rate per 100 active enterprises) Net rate
Local Enterprise Partnership 2004 2011 2004 2011 2004 2011
London 14.9 14.6 13.4 10.4 1.6 4.2
Thames Valley Berkshire 12.7 12.4 11.3 9.3 1.4 3.1
Tees Valley 13.3 12.4 11.7 9.9 1.6 2.5
Enterprise M3 11.8 11.0 10.9 9.3 0.9 1.8
West of England 12.1 11.0 10.8 9.3 1.3 1.7
Hertfordshire 12.4 11.5 11.0 9.8 1.5 1.7
Swindon and Wiltshire 12.2 10.3 10.4 8.6 1.8 1.6
Coast to Capital 12.7 11.0 11.8 9.7 0.9 1.3
South East Midlands 12.7 10.7 11.2 9.5 1.5 1.2
Greater Manchester 12.9 12.1 12.4 10.9 0.5 1.2
Northamptonshire 12.0 10.6 11.7 9.4 0.3 1.1
Leicester and Leicestershire 12.0 11.0 11.7 10.0 0.4 1.1
South East 13.0 10.8 11.1 9.8 1.9 1.1
Oxfordshire 12.1 9.5 9.5 8.5 2.6 1.0
Black Country 13.0 10.6 12.3 9.6 0.8 1.0
Cheshire and Warrington 11.9 10.9 11.3 10.0 0.7 0.9
Leeds City Region 12.8 10.6 10.8 9.7 2.0 0.9
North Eastern 13.5 10.8 11.2 9.9 2.3 0.9
Buckinghamshire Thames Valley 11.8 10.1 11.0 9.2 0.8 0.9
Liverpool City Region 13.9 11.6 12.1 10.8 1.8 0.8
Worcestershire 11.1 9.9 10.2 9.2 0.8 0.7
Greater Cambridge Greater Peterborough 12.5 9.9 9.8 9.2 2.7 0.7
Coventry and Warwickshire 13.4 11.0 10.8 10.4 2.6 0.6
Greater Birmingham and Solihull 12.7 11.1 11.5 10.7 1.2 0.5
Greater Lincolnshire 13.4 10.8 10.5 10.4 2.9 0.5
Gloucestershire 11.7 9.4 10.2 9.1 1.5 0.4
York, North Yorkshire and East Riding 12.7 9.2 9.7 8.9 3.0 0.4
Stoke-on-Trent and Staffordshire 13.2 10.0 11.1 9.7 2.1 0.3
Solent 12.7 10.0 11.2 9.9 1.5 0.1
Dorset 12.5 9.7 10.7 9.6 1.8 0.1
Humber 13.8 10.7 10.9 10.6 2.9 0.1
Derby, Derbyshire, Nottingham and Nottinghamshire 13.3 9.9 10.6 9.9 2.6 0.0
Sheffield City Region 13.7 10.4 11.3 10.5 2.4 0.0
The Marches 12.4 8.7 9.7 8.8 2.7 -0.1
Heart of the South West 12.7 8.7 10.4 9.1 2.3 -0.4
New Anglia 12.3 9.1 10.2 9.6 2.2 -0.5
Cornwall and Isles of Scilly 11.6 8.6 11.0 9.2 0.7 -0.6
Lancashire 14.8 10.2 11.4 11.1 3.4 -0.9
Cumbria 14.6 8.3 8.5 9.4 6.1 -1.1

Table source: Office for National Statistics

Table notes:

  1. Cells have been formatted to 1 decimal place therefore the net rate figures displayed in Table 1 may not equal the birth rate minus the death rate.

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Table 1 shows that in 2011, 31 of the 39 LEPs had a positive net rate (meaning that their birth rates were greater than their death rates), six LEPs had a negative net rate (meaning that their death rates were greater than their birth rates) and the Sheffield City Region LEP and Derby, Derbyshire, Nottingham and Nottinghamshire LEP had no net rate change (meaning that their birth rates equalled their death rates).

The Cumbria LEP’s death rate exceeded its birth rate by a greater amount than for any other LEP in 2011 despite having had the highest net rate in 2004. This was the result of a birth rate that fell and a death rate that increased, both by the largest amount of any LEP over the period 2004 to 2011. From 2004 to 2011, the net decrease of 1.1 enterprises per 100 active enterprises was the largest decrease of any LEP in 2011.

Figure 3 shows the net rate change in enterprises for the Cornwall and Isles of Scilly LEP, the Cumbria LEP and the Lancashire LEP from 2004 to 2011. The death rate exceeded the birth rate by a greater amount for these three LEPs in 2011 than for any other LEP.

Figure 3: Enterprise net rate change, Cornwall and Isles of Scilly LEP, Cumbria LEP and Lancashire LEP, 2004–11

Figure 3: Enterprise net rate change, Cornwall and Isles of Scilly LEP, Cumbria LEP and Lancashire LEP, 2004–11
Source: Office for National Statistics

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Figure 3 shows that of the three LEPs with the largest negative net rate in 2011, the Cumbria LEP had the largest positive net rate in 2004 but then had the largest negative net rate in 2011. This was partly the result of the Cumbria LEP's net rate change starting to recover from 2010 rather than 2009. The majority of LEPs including the Cornwall and Isles of Scilly and Lancashire LEPs’ net rate change started to recover following the effects of the recession from 2009. The net rate change for five out of the 39 LEPS started to recover in 2010 rather than 2009.

From 2007, the net rate increase for the majority of LEPs began to slow and this continued to a point where the death rate exceeded the birth rate in every LEP in either or both of 2009 and 2010. Figure 4 shows the net rate change in enterprises for the London LEP, the Tees Valley LEP and the Thames Valley Berkshire LEP from 2004 to 2011. The birth rate exceeded the death rate by a greater amount for these three LEPs in 2011 than in all other LEPs.

Figure 4: Enterprise net rate change, London LEP, Tees Valley LEP and Thames Valley Berkshire LEP, 2004–11

Figure 4: Enterprise net rate change, London LEP, Tees Valley LEP and Thames Valley Berkshire LEP, 2004–11
Source: Office for National Statistics

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Figure 4 shows that the general pattern of net change was similar for the LEPs displayed in Figure 4 (that had a birth rate that exceeded the death rate in 2011 by a greater amount than other LEPs) and in Figure 3 (that had a death rate that exceeded the birth rate in 2011 by a greater amount than other LEPs). For the majority of LEPs the net rate increase started to slow in 2007 and then, having become a net rate decrease, began to recover in 2009.

Not all LEPs’ net rate change began to slow in 2007. Figure 4 shows that the London LEP’s birth rate exceeded its death rate by a greater amount in 2008 than in 2007. However the birth rate declined and the death rate increased in 2009 by an amount that was significant enough for the London LEP to have a net rate in 2009 whereby the death rate exceeded the birth rate.

The London LEP’s birth rate exceeded its death rate by a greater amount than for any other LEP in 2011. This was the result of having the largest death rate decline and the second smallest birth rate decline of the 39 LEPs between 2004 and 2011.

In London, both the birth rate and death rate would have been positively affected by the London Olympics in 2012 due to the investment brought into the London area as a result and in particular into the Olympic host boroughs.

Table 2 shows the 15 London boroughs in the London LEP between 2004 and 2011 with the highest overall net rate change. The six Olympic host local authorities are Newham, Barking and Dagenham, Tower Hamlets, Hackney, Greenwich and Waltham Forest.

Table 2: Net rate, 15 London boroughs, 2004, 2005 and 2011

Local authority 2004 2005 2011
Newham 2.8 22.3 10.1
Barking and Dagenham 2.2 3.3 8.9
Hounslow 2.0 4.0 8.0
Tower Hamlets 4.7 4.4 7.7
Lambeth 5.2 3.6 7.0
Hackney 1.8 2.6 7.0
Lewisham 4.7 4.5 6.2
Wandsworth 5.8 2.7 6.1
Redbridge 1.0 1.4 5.9
Greenwich 4.1 4.8 5.9
Merton 0.9 2.2 5.6
Haringey 0.8 2.0 5.4
Islington 1.5 3.2 5.3
Waltham Forest 1.0 1.5 5.2
Ealing 2.6 1.9 5.2

Table source: Office for National Statistics

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Table 2 shows that all of the London boroughs that were selected as hosts for the Olympic Games and therefore subject to a greater amount of investment than other areas were in the top 15 performing London boroughs within the London LEP in terms of net change in 2011.

Newham, the location of the Olympic park and the London borough which was subject to the largest amount of business related Olympic investment, had the largest net increase of any London borough in 2011 (10.1 enterprises per 100 enterprises).

In 2005, the year in which it was announced that London would host the 2012 Olympic Games, the net change in Newham increased from 2.8 enterprises per 100 active enterprises in 2004 to 22.3. This was mainly the result of a sudden spike in the number of business births in Newham as the birth rate increased from 18.7 in 2004 to 37.4 in 2005.

It is therefore likely that Olympic investment had a direct impact on the birth rates in Newham and, to a lesser extent, other London boroughs. This suggests that large scale investment, such as that of the Olympics, into an area may lead to a higher number of enterprise births. 
 

 

Summary

This article is focused on the enterprise birth rates, death rates and net rate changes for England, the LEPs within England and local authorities within LEPs over the period 2004 to 2011.

Overall, in 2011 the London LEP had the largest positive net enterprise rate and the Cumbria LEP had the largest negative net enterprise rate. Cumbria is a predominantly rural area whereas London is classified as an urban area and has a higher rate of enterprise births and deaths than in rural LEPs.

From 2004 to 2011, the enterprise birth rate in England fell from 13.2 to 11.4 enterprises per 100 active enterprises, having fallen as low as 10.1 in 2010. The death rate in England fell from 11.5 in 2004 to 9.9 in 2011, despite having risen to 12.1 in 2009. The combination of the changes in the two rates led to England recording a positive net rate in 2011 (1.5), which was 0.2 lower than in 2004 (1.7). The negative effects of the recession and a reduced availability of finance led to England having a death rate that exceeded the birth rate in 2009 (by 1.9) and in 2010 (by 0.6).

The London LEP had the largest positive net enterprise rate in 2011 and the largest net enterprise rate increase over the period 2004 to 2011. This was likely to be due in part to the investment businesses within some London boroughs received as a result of the London 2012 Olympics.

The business demography data used in this article are only a small fraction of the data available, leaving room for further analysis. Such analysis could include, but is not limited to:

  • An analysis of births and deaths by industry.

  • An analysis of births and deaths by workforce structure.

  • A detailed investigation of factors specific to individual LEPs that may affect enterprise rates.

  • A more detailed analysis of the factors affecting birth and death rates.

Background notes

  1. All enterprise birth and death data used in this article are from the ONS Business Demography, 2011 release. Data for a given year present the counts of births, deaths and active enterprises taken as a snapshot in November. They include business activity from the start of December in the year before the reference year to the end of November in the year being covered. For instance, 2011 data refers to data from the period December 2010 to November 2011. Therefore not all births and deaths in a calendar year will be reported in the Business Demography data for that particular year.

  2. Business Demography data for a given year tends to be released in December of the following year; therefore the most recent year for which data are available is 2011 (released in December 2012).

  3. Counts data are dependent on the size of the populations they refer to, therefore the analysis focuses on rates as a better tool for comparisons.

  4. The active count represents all businesses with activity at any point during the period and therefore, by definition, includes all units born during the period and all units that have ceased to trade. An enterprise may have only traded for a short period during the year and could therefore appear in the births, active enterprises and deaths figures. In addition to this, take-over and merger actions will result in the loss of an enterprise from the active count but not the creation of a death; break-up and split-offs will involve an increase in active enterprise but not the creation of a birth; restructures within enterprises and enterprise groups can affect the count of active units without adding to births or deaths in the same period. Therefore you cannot add/subtract births/deaths from the active figures for year N to estimate active figures for year N+1.

    The Eurostat/OECD manual on Business Demography provides further detail on the concepts and how they should be applied to business registers data.

  5. ONS produces LEP Profiles which are updated biannually. They aim to help LEPs use official statistics to better understand the economic, social and environmental picture for the LEPs and the local authority areas within them. The LEP Profiles are also available directly from the Neighbourhood Statistics website.

  6. Details of the policy governing the release of new data are available by visiting www.statisticsauthority.gov.uk/assessment/code-of-practice/index.html or from the Media Relations Office email: media.relations@ons.gsi.gov.uk

Definitions

Enterprises

An enterprise has been defined for European Union statistical purposes as ‘...the smallest combination of legal units that is an organizational 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.’1  On the Inter-Departmental Business Register (IDBR2), the enterprise is the statistical unit that most closely equates to a business. It holds aggregated information gathered from administrative and statistical sources within that enterprise to give an overall picture of what is going on in the business. The terms ‘businesses’ and ‘enterprises’ are used interchangeably throughout this article.

Local Enterprise Partnerships (LEPs)

‘LEPs are partnerships between local authorities and businesses. They decide what the priorities should be for investment in roads, buildings and facilities in the area’3. They were created by the Department for Communities and Local Government who later stated that ‘our economy is currently too dependent on a narrow range of industry sectors’3. As at August 2013, there are 39 LEPs in England. Each LEP is comprised of between two and 33 local authorities (the number of local authorities within each LEP varies) and some local authorities belong to more than one LEP.

This article is focused on enterprises and therefore LEPs are a natural geography for analysis to explore the variation across such partnership areas in England. The business demography data is relevant to the nature of a LEP (being a relationship between businesses and local authorities) and each LEP can discuss and share knowledge through the LEP Network4. For a range of LEP level data visit the LEP Profiles page on the ONS website.

Active Enterprises

The active enterprise stock for an area is recorded as the number of active enterprises in that area for a given reference year. An active enterprise is defined as a business that had either turnover or employment (recorded on the IDBR) at any time during the reference year.

It covers businesses in all sectors of the economy except very small businesses (self-employed, those without employees and low turnover) and some non-profit making organisations. With 2.1 million businesses listed5, the IDBR provides nearly full coverage of UK GDP.

Enterprise Births

Enterprise births are identified by making comparisons of annual active registered enterprise population datasets and identifying those present in the latest dataset, but not the two previous ones. For instance, a cafe that exists on the IDBR in 2011 but is not found on the IDBR in 2010 or 2009 is considered to be an enterprise birth. A merger or takeover involving two or more companies should not lead to a new birth since these are considered as reorganisation of existing businesses. Likewise, a company re-registered under a new trading name is not a new enterprise. The enterprise birth rate is the number of births per 100 active enterprises in an area for the given year (please see background note 1 for information about the periods covered by the data).

Enterprise Deaths

An enterprise death is defined as a business that was on the active registered enterprise dataset in a reference year, but was no longer present in the dataset in the two following reference years.  In order to provide an early estimate of deaths, an adjustment has been made to the latest two years’ deaths to allow for reactivations. A reactivation occurs when a business is de-registered (often due to data linking issues resulting in an administrative unit being killed and a new one created) and requires reinstating back onto the database of active enterprises. The 2011 figures are therefore provisional and subject to revision. The enterprise death rate is the number of deaths per 100 active enterprises in an area for the given year (please see background note 1 for information about the periods covered by the data).

Net Rate

The net rate has been calculated as the enterprise birth rate minus the enterprise death rate for each LEP. It is useful to look at the two rates in this way to determine whether a LEP has seen a net increase or decrease in enterprise rates for a particular year. The net increase or decrease is expressed as a rate per 100 active enterprises in an area. 

 

Notes for Definitions

  1. Department of Enterprise, Trade and Investment - Glossary of IDBR terms and definitions.
  2. The IDBR is based on inputs from three administrative sources: traders registered for Value Added Tax (VAT) purposes with HM Revenue and Customs (HMRC) (Customs), employers operating a Pay As You Earn (PAYE) scheme - registered with HMRC (Revenue) and incorporated businesses registered at Companies House. Other surveys are used to supplement these sources. More details can be found on the ONS website.
  3. Department for Communities and Local Government, Department for Business, Innovation & Skills and Department for Transport. (2012) - Supporting economic growth through local enterprise partnerships and enterprise zones.
  4. The LEP Network is a gateway to news and information that enables Local Enterprise Partnerships to come together to discuss issues of shared importance, engage with Government, and share knowledge and good practice.
  5. Office for National Statistics – Inter-Departmental Business Register (IDBR).

Annex 1 - Map reference table

The following table lists the LEPs 1 to 39 in alphabetical order; the number given to each LEP corresponds to the LEP on both maps 1 and 2 and can therefore be used as a reference.

Map reference numbers for Local Enterprise Partnerships

Map reference  number Local Enterprise Partnership
1 Black Country 
2 Buckinghamshire Thames Valley 
3 Cheshire and Warrington 
4 Coast to Capital 
5 Cornwall and Isles of Scilly 
6 Coventry and Warwickshire 
7 Cumbria 
8 Derby, Derbyshire, Nottingham and Nottinghamshire 
9 Dorset 
10 Enterprise M3 
11 Gloucestershire 
12 Greater Birmingham and Solihull 
13 Greater Cambridge Greater Peterborough 
14 Greater Lincolnshire 
15 Greater Manchester 
16 Heart of the South West 
17 Hertfordshire 
18 Humber 
19 Lancashire 
20 Leeds City Region 
21 Leicester and Leicestershire 
22 Liverpool City Region 
23 London 
24 New Anglia 
25 North Eastern 
26 Northamptonshire 
27 Oxfordshire 
28 Sheffield City Region 
29 Solent 
30 South East 
31 South East Midlands 
32 Stoke-on-Trent and Staffordshire 
33 Swindon and Wiltshire 
34 Tees Valley 
35 Thames Valley Berkshire 
36 The Marches 
37 West of England 
38 Worcestershire 
39 York, North Yorkshire and East Riding 

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