Business demography, quarterly experimental statistics, UK: April to June 2020

Experimental quarterly statistics on business creations or births and closures or deaths from the Inter-Departmental Business Register (IDBR) with high-level breakdowns by industry and region.

This is the latest release. View previous releases

Contact:
Email Josh Martin

Release date:
6 August 2020

Next release:
To be announced

1. Main points

  • The number of businesses removed from the Inter-Departmental Business Register (IDBR) (business closures) in the UK in Quarter 2 (Apr to June) 2020 was slightly lower than the average in Quarter 2 of the past three years.

  • Business closures do not appear to have yet increased as a result of the coronavirus (COVID-19) pandemic; this is because of the time it takes for a business to close, delays in the reporting process and government support for businesses.

  • The number of businesses added to the IDBR (business creations) in the UK in Quarter 2 2020 was slightly lower than in Quarter 2 of the past three years.

  • Business creations tend to experience shorter lags than business closures, so the slowdown in Quarter 2 2020 relative to previous years is more likely to be a result of the coronavirus pandemic as well as a slowdown in processing.

  • Consistent with the data in this release, other indicators also suggest that the number of business creations and business closures in the UK were lower than usual in Quarter 2 2020.

  • Indicators from other countries also show no increase in business closures or insolvencies relative to previous years.

  • Data in this release are experimental and produced rapidly to support understanding of the impact of the coronavirus pandemic on the economy; our annual business demography publication remains the best source of information on business demography.

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Quarterly data in this release are not entirely consistent with the annual business demography publication, which is a more accurate reflection of business births and deaths. The quarterly data in this release are broadly in line and provide new evidence using new methods.

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4. Business demography, quarterly experimental statistics data

Business demography, quarterly experimental statistics, UK
Dataset | Released 6 August 2020
Experimental quarterly statistics on business creations or births and closures or deaths from the Inter-Departmental Business Register (IDBR) with high-level breakdowns by industry and region.

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5. Glossary

Business

For 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 Value Added Tax (VAT) and/or Pay As You Earn (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 also be a sole legal unit.

Business creations

Often referred to as business births, we refer to enterprises added to the Inter-Departmental Business Register (IDBR) as business creations in this release. Enterprises are added to the IDBR when a new business is identified from administrative sources, usually the VAT or PAYE systems.

Business closures

Business closures are removals from the IDBR. A business is removed from the IDBR if its turnover and employment are zero for several periods or the Office for National Statistics (ONS) is notified the business has ceased trading through an administrative source. These are referred to as business deaths in our annual business demography publication and other data.

This should not be confused with temporary business closures resulting from the coronavirus (COVID-19) pandemic, whereby a business pauses trading but is still an active business.

Inter-Departmental Business Register (IDBR)

The IDBR is a database of all businesses in the UK registered for VAT and/or the PAYE Income Tax system. There are approximately 2.7 million businesses on the IDBR. The IDBR is the register of UK businesses used as a sampling frame for ONS business surveys.  

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6. Measuring the data

This section outlines important information about the data in this release. This is a new release of experimental statistics, and the information in this section is important to correctly interpret it.

Time of recording

Business creations and closures in these data are based on the date on which the action occurs on the Inter-Departmental Business Register (IDBR). Data for this release are extracted from the IDBR weekly and are allocated to quarters according to the date of the Friday of that week, since most major updates to the IDBR occur at the end of the working week. This may lead to some misallocation between quarters.

The date a business is added to the IDBR is generally on the same day, or within a few days, of the legal creation of the business as a company with Companies House. However, this can be several weeks after the effective birth of the business.

For business closures, the registration process can take a little longer, as the death of a business may be long and complex. The “effective” death of a business may occur several months before its actual death from a legal perspective. A business is removed from the IDBR if information from HM Revenue and Customs (HMRC), Office for National Statistics (ONS) business surveys, Companies House or The Insolvency Service indicates it is no longer active. The ONS proves deaths by contacting companies if necessary.

Frequency of data

The IDBR is updated from four main sources:

  • Value Added Tax (VAT)
  • Pay As You Earn (PAYE)
  • ONS business surveys
  • Companies House

The updates occur in various frequencies from daily to annual. Because the important PAYE update is quarterly, a shorter time period analysis of business creations and closures would be very volatile. As such, this source is best suited to quarterly publications.

Turnover and employment data

The turnover data on the IDBR is mostly derived from VAT or ONS business survey records. Employment data on the IDBR is derived from PAYE or ONS business survey records. In some cases, values are imputed from administrative data. The turnover data are updated annually, every September, from available data. Employment data are updated more frequently for some businesses but at least annually for all businesses.

The turnover and employment data for business closures are the stored values at the last update while the business was active on the IDBR, often the last annual update. These figures are not adjusted for inflation, so the average turnover would be expected to rise slowly over time in line with inflation.

For business creations, the value for turnover is usually that estimated by the business upon registration with HMRC for VAT. The employment value is the number of actually registered employees on their PAYE scheme if they have one, and it is imputed if they do not. This value is revised on the IDBR when more up-to-date data are received, but it is not revised in these statistics.

Data on turnover and employment on the IDBR should not be used to measure economic growth or the growth of the labour market; other ONS sources are preferred for these purposes. Data points are generally reasonably current for larger businesses, but they are less so for smaller businesses.

Feedback

The ONS welcomes feedback from users on whether they find this release on business creations and closures to be helpful. Please email us at idbrdas@ons.gov.uk regarding whether you would like to see an ongoing quarterly release of these figures.

Other releases

Alongside this release, we have introduced a weekly indicator of company incorporations and dissolutions with Companies House in our weekly faster indicators publication. There is also a blog available that explains some of the important things to bear in mind about these data.

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7. Strengths and limitations

Timeliness

In line with international guidance from Eurostat and the Organisation for Economic Co-operation and Development (OECD), our official statistics on business demography are published a year after the reference period to allow for reactivations before deaths figures are calculated. We have published these quarterly data to provide a more timely indicator of business creations and closures to support understanding of the impact of the coronavirus (COVID-19) pandemic on the UK economy, but these data will not be entirely consistent with our annual publication, and that remains the superior measure of business demography.

More detail about the Inter-Departmental Business Register (IDBR) the annual official statistics on business demography is available.

Relationship with other data

This publication provides the first quarterly estimates of businesses added to, and removed from, the IDBR. However, there are many other publications drawing on other data sources to provide estimates of either business creation or business closures at different frequencies. These are briefly outlined in this section.

Quarterly official statistics from Companies House include the number of company incorporations, dissolutions and removals from their register. Companies and businesses are not the same in these statistics – companies are legal entities, as registered with Companies House; businesses are statistical entities, arranged by the Office for National Statistics (ONS) on the IDBR, which better reflect their economic activity. Some types of company are present with Companies House but not on the IDBR or in Value Added Tax (VAT) returns, such as small single-person limited companies.

We have published new weekly indicators of company incorporations and voluntary dissolutions using data from Companies House in our faster indicators publication, but this covers only one route for a business to be removed from the IDBR.

There are many ways for a business to close or die, of which “insolvency” is only one. Data from the Insolvency Service on company insolvencies therefore do not reflect all business closures – insolvencies typically account for a small fraction of business closures, although they tend to be the highest profile.

Data from the Business Impact of Coronavirus (COVID-19) Survey (BICS) include estimates of the proportion of surveyed businesses that have “temporarily ceased trading”. Businesses that are still active but temporarily ceased trading because of the coronavirus pandemic are not removed from the IDBR and therefore are not reflected in the data in this release.

BICS also reports data on the proportion of responding businesses that have permanently ceased trading. This is based on a filter question in the survey to reduce burden for those businesses that have closed down, as the survey is not relevant for them. As such, those estimates are not intended to capture business closures, so the data in this release are preferred.

The data in this release are most similar to the concepts of business births and deaths in the annual business demography statistics, which are badged as National Statistics. The calculation of business births and deaths in the annual publication is more robust than in this publication and follows international guidance. The data in this release have been created rapidly to provide insight on the coronavirus pandemic, and they should be treated with caution.  

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Contact details for this Statistical bulletin

Josh Martin
josh.martin@ons.gov.uk
Telephone: +44 (0)1633 455425