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Chapter 6 - Business
Enterprises in London
(Tables 6.1, 6.13 and Figures 6.2 to 6.4, 6.12)
Data on enterprises in London is taken from two Office for National Statistics sources; its new business demography dataset and its recently expanded ‘UK Business: Activity Size and Location’ publication.
The new Business Demography dataset is used for Tables 6.1.and 6.12 The ‘UK Business: Activity Size and Location’ publication is used for Table 6.13 and Figures 6.2, 6.3, 6.4 and 6.14.
Both sources use data from the Inter Departmental Business Register (IDBR). The IDBR combines administrative information on VAT traders and Pay As You Earn (PAYE) employers with ONS survey data in a statistical register comprising over two million enterprises. These comprehensive administrative sources combined with ONS survey data contribute to the coverage on the IDBR representing nearly 99 per cent of UK economic activity. The IDBR only misses some very small businesses without VAT or PAYE schemes.
The Business Demography dataset has a higher number of active businesses than the ‘UK Business: Activity Size and Location’ publication. This is because the Business Demography methodology takes into account businesses that were active at any time during the reference year, whereas the ‘UK Business: Activity Size and Location’ publication is based on a snapshot taken from the Inter-Departmental Business Register at a point in time in March.
Additionally, Business Demography includes a group of non-corporate PAYE businesses, which are excluded from ‘UK Business: Activity, Size and Location’ due to a small risk of duplication.
The 2008 publication of ‘UK Business: Activity, Size and Location’ was enhanced to include enterprises based on PAYE employers that are not also registered for VAT, extending the scope from the previous VAT based enterprise publication. This has been a major improvement to the scope of the publication and has enabled the data to be used in this publication for the first time.
ONS Workforce Jobs Series
The workforce jobs (WFJ) series provides estimates for the number of jobs in the UK economy and is the source recommended by the Office for National Statistics for the number of jobs. The regional data measures civilian workforce jobs and include the sum of employee jobs, self-employment jobs and government-supported trainees.
The WFJ series is compiled by combining several sources, including both household and business surveys. Figures for employee jobs are derived from the Short Term Employer Surveys and centralised returns. Self-employment figures are provided by the Labour Force Survey, as are figures for the construction industry and agriculture.. Statistics on government-supported trainees are from the DfES, DWP, National Assembly for Wales and the Scottish Executive. The series is bench-marked annually to the Annual Business Inquiry (ABI).
(Figures 6.6 to 6.8 & 6.15)
Employee jobs are the largest component of workforce jobs (approximately 85 per cent of all jobs are employee jobs). They provide an estimate of the number of jobs filled directly by employers but exclude the self-employed. For estimates of employee jobs by industry and by geographical area, the Annual Business Inquiry dataset is used.
The Annual Business Inquiry Part 1 (ABI/1) is a survey of employment information from businesses and other establishments in most industry sectors of the economy. Businesses receive a questionnaire which asks for a profile of its employees at a specified date in the year. This profile includes working patterns (full- or part-time), gender, and whether the employee is a working proprietor.
Methodological changes to ABI/1 caused a discontinuity in the data between December 2005 and September 2006. Users should note that estimates of change across 2005 to 2006 are therefore unreliable.
Those who own and operate their own business or professional practice, sometimes in conjunction with a partner, are considered as self-employed. However, it is also possible to be classed as self-employed when on the government-sponsored New Deal scheme. This scheme provides funds for unemployed people to help them start up as self-employed.
The Labour Force Survey (LFS) asks a number of questions to establish a person’s employment status. This is based on a respondent’s own opinion of whether they are an employee or self-employed. A question on assisted self-employment is asked specifically of people who have said that they are on the New Deal scheme.
It is also possible to establish an occupational classification for self-employed people. Occupation questions are asked separately and require respondents to say what their main job is and what they do in that job.
The data used in this publication is on the basis of residence, not workplace. It therefore measures the total number of London residents who are considered self-employed. It does not account for any commuting in or out of London of self-employed workers. Note that it is this residence based total that the ONS use to compile the workforce jobs series (see above).
Employment by Firm Size
This table was compiled for the first time in 2008 by GLA Economics using data sourced from the Inter Departmental Business Register (IDBR) of the Office for National Statistics (ONS).
The IDBR combines administrative information on VAT traders and Pay As You Earn (PAYE) employers with ONS survey data in a statistical register comprising over two million enterprises. These comprehensive administrative sources combined with ONS survey data contribute to the coverage on the IDBR representing nearly 99 per cent of UK economic activity. The IDBR only misses some very small businesses without VAT or PAYE schemes.
The IDBR has facilities to provide statistical samples at enterprise and at local unit level where the enterprise address is generally the head office and an individual site (factory, shop etc.) in an enterprise is called a local unit. Therefore, one enterprise may consist of one or many local units. Previous estimates of London employment by firm size have only focused on the enterprise data alone.
However, Table 6.9 has utilised a methodology that uses both the enterprise and local unit data together. Table 6.9 is therefore considered to provide the most robust dataset on private sector employment by firm size in London currently available.
Private sector firms are defined as those enterprises on the IDBR that are registered as either a company, a sole proprietor, or a partnership.
• Large enterprises are defined as those employing 250 or more people in the UK;
• Medium enterprises are defined as those employing 50-249 people in the UK;
• Small enterprises are defined as those employing 0-49 people in the UK.
• Ultra Large enterprises are a subset of Large enterprises and are defined as those employing 2,500 or more people in the UK.
More information is available in GLA Economics Working Paper 31 – Analysis of employment in London by Firm Size (2008).
Business start ups and closures
(Figure 6.10, 6.11)
Responsibility for the compilation of data on business demography is currently in the process of being transferred from the Department for Business, Enterprise and Regulatory Reform (BERR) to the Office for National Statistics. For 2008, both BERR and the ONS produced data.
In summary, the key difference between the BERR statistics and the new ONS Business Demography publication is the inclusion of PAYE registered units in addition to the VAT registered firms covered by the BERR data. Therefore the ONS statistics additionally include the births and deaths of employing businesses, which are not VAT-registered, providing a more comprehensive view of overall business start-up activity.
In this publication, Figures 6.10 and 6.12 are sourced from the ONS demography data and Table 6.11 from the BERR data. The reason for still including a table from the BERR statistics is that it provides a longer time-series of data than is possible using the ONS data. However, for more recent data the ONS data is used as it is more comprehensive in its coverage.
A fuller explanation of the changeover from BERR to ONS can be found in the following document. It includes a discussion of the differences in methodology between the two sources of data.
Chapter 7 - Income and Lifestyles
Expenditure and Food Survey
(Tables 7.3, 7.7 and 7.8 and Figures 7.5, 7.6, 7.7, 7.9, 7.10 and 7.13)
The Expenditure and Food Survey (EFS) (formerly the Family Expenditure Survey) is a sample survey of private households in the United Kingdom. The sample is representative of all regions of the UK and of different types of households. The survey is continuous with interviews spread evenly over the year to ensure that estimates are not biased by seasonal variation. The survey results show how households spend their money; the proportion spent on food, clothing and so on; and how spending patterns vary depending on income, household composition, and regional location of households.
Households selected for the EFS are asked to complete an interview covering information about the household, regular items of household expenditure and details of household income. Following this, all adults within the household are asked to keep a diary to record all items of expenditure in the following two weeks. Children aged 7-15 years are also asked to keep a diary of their personal expenditure.
Since 2001/02, the Classification of Individual Consumption by Purpose (COICOP) system has been used to classify expenditure on the EFS. COICOP is the internationally agreed standard classification for reporting household consumption expenditure within National Accounts. COICOP is also used on Household Budget Surveys (HBS) across the European Union.
One of the main purposes of the EFS is to define the weights for the ‘basket of goods’ for the Retail Price Index (RPI) and the Consumer Price Index (CPI). The RPI has a vital role in the uprating of state pensions and welfare benefits, while the CPI is a key instrument of the government’s monetary policy. Information from the survey is also a major source for estimates of Household Expenditure in the UK National Accounts. In addition, many other government departments use EFS data as a basis for policy making, for example in the areas of housing and transport. The Department for Environment, Food and Rural Affairs (DEFRA) uses EFS data to report on trends in food consumption and nutrient intake within the UK. Users of the EFS outside government include independent research institutes, academic researchers and business/market researchers.
Family Resources Survey
(Tables 7.1, 7.4, 7.18 and 17.9)
The FRS is a continuous survey with results published annually by the Department for Work and Pensions (DWP). The 2006/07 version surveyed approximately 26,000 households in the UK, including almost 2,200 in London.
The income of a household before housing costs is defined as the total income of all members of the household after the deduction of income tax, National Insurance contributions, contributions to personal pensions, additional voluntary contributions to personal pensions, maintenance/child support payments, parental contributions to students living away from home and council tax.
Income includes earnings from employment and self-employment, social security benefits including Housing Benefit, occupational and private pensions, investment income, maintenance payments, educational grants, scholarships and top-up loans and some in-kind benefits such as luncheon vouchers, and free TV licenses for the over 75’s.
The income of a household after housing costs is derived by deducting a measure of housing costs from the above measure. Housing costs include rent (gross of housing benefit), water rates, community water charges and council water charges, mortgage interest payments (net of tax relief) , structural insurance premiums (for owner occupiers), ground rent and service charges.
When income is given as an equivalised figure it is adjusted for household size and composition by means of the McClement’s equivalence scale (see Table below). This reflects the common sense notion that a household of five will need a higher income than a single person living alone order to enjoy a comparable standard of living. The total equivalised income of a household is used to represent the income level of every individual in that household; all individuals are then ranked according to this level. The adjusted income is then referred to as equivalised income.
McClements equivalence scale
housing costs housing costs
First adult (head) 0.61 0.55
Spouse of head 0.39 0.45
Other second adult 0.46 0.45
Third adult 0.42 0.45
Subsequent adults 0.36 0.40
Each dependent aged:
0 to 1 0.09 0.07
2 to 4 0.18 0.18
5 to 7 0.21 0.21
8 to 10 0.23 0.23
11 to 12 0.25 0.26
13 to 15 0.27 0.28
16 or over 0.36 0.38
Survey of Personal Incomes
The sample survey is based on information held by HM Revenue & Customs (HMRC) tax offices on persons who could be liable to tax. It is carried out annually and covers the income assessable for tax in each year. The table in this section is based on the survey for 2006/07.
Samples were selected from three HMRC operational IT systems, which are as follows:
COP: this covers all employees and occupational or personal pension recipients with a PAYE record;
CESA: this covers the self-assessment population; those with self employment, rent or untaxed investment income, directors and other people with complex tax affairs or very high incomes (over £100k). Some people have both a COP and CESA record, although after the refinement of many higher rate employees out of Self-Assessment this group has reduced.
Claims: this covers people without COP or CESA records who have had too much tax deducted at source and claim repayment.
The approximate sample size for the survey was 570 thousand.
Table 7.2 only includes individuals shown by HMRC records to have some liability to tax. There may be no record if an individual’s incomes is less than the personal allowance (5,035 in 2006/07). No attempt has been made to estimate numbers of cases below the tax threshold or the amount of their incomes.
The population of records is not grouped before the sample is selected. The geographical indicators are attached only to the selected sample based on address and postcode.
The table of expenditure by commodity and service shows total weekly household expenditure in the UK and expenditure by the 12 Classification of individual consumption by purpose (COICOP) headings. COICOP is the internationally agreed classification system for reporting household consumption expenditure.
Housing (net), fuel and power includes: rent, maintenance and repair, water, electricity, gas and other fuels. Mortgage capital payments and amounts paid for the outright purchase of the dwelling or for major structural alterations are not included as housing expenditure under the COICOP classification.
Household goods and services includes: furnishings, textiles, appliances, tools, and equipment for house and garden, goods and services for routine household maintenance.
Health includes: medicines, prescriptions, health-care products, spectacles, lenses, accessories and repairs and hospital services.
Transport includes: purchase of vehicles; operation of personal transport i.e. fuel, servicing, spares and transport services (including rail, tube, bus and coach fares).
Communication includes: postal services, telephone and telefax and services.
Recreation and culture includes: audio-visual, photographic and information processing equipment (including TV, videos, computers, CD players); games, toys, hobbies, sport equipment, pets, gardens and recreational services (including cinema, TV licenses, TV subscriptions, leisure class fees, internet); newspapers, books and stationery; package holidays (not including spending money).
Miscellaneous goods and services includes: personal care i.e. hairdressing, toiletries, personal effects; social protection, household, medical and vehicle insurances; other services (including moving house costs, banking charges and professional fees).
Other expenditure are those items excluded from COICOP classifications, such as mortgage interest payments; council tax and domestic rates; licenses, fines and transfers; holiday spending; cash gifts and charitable donations and interest on credit cards.
Vehicle Licensing Statistics
Statistics on licensed vehicle stock and vehicles registered for the first time are produced from DVLA licensing records, taken from the DVLA database at 31 December each year.
Vehicle registration is a process to record details of vehicle keepers. The registered keeper of a vehicle is responsible for taxing the vehicle or telling DVLA that it is being kept off-road by making a Statutory Off Road Notification (SORN).
International Passenger Survey
(Table 7.17 and Figures 7.15 and 7.16)
The International Passenger Survey (IPS) is a survey of a random sample of passengers entering and leaving the UK by air, sea or the Channel Tunnel. Over a quarter of a million face to face interviews are carried out each year with passengers entering and leaving the UK through the main airports, seaports and Channel Tunnel. This represents roughly 1 in every 500 passengers.
Data from the survey are used:
• In compiling the travel account of the balance payments;
• In estimating the numbers and characteristics of migrants into and out of the UK; and
• To provide information on International Tourism.
Passengers are sampled on all major routes in and out of the UK, and travellers on these routes make up around 90 per cent of all travellers entering or leaving the UK. The sampling procedures for air, sea and tunnel passengers are slightly different but the underlying principle for each is similar. In the absence of a readily available sampling frame, time shifts or crossings are sampled at the first stage. During these shifts or crossings, the travellers are counted as they pass a particular point (for example, after passing through passport control) then travellers are systematically chosen at fixed intervals from a random start.
The majority of interviews are carried out within the UK terminal, however at some locations it is not practical to do this so interviews take place instead on board the ferry, train or at the quayside overseas. The interview usually takes 3-5 minutes and contains questions about passengers’ country of residence (for overseas residents) or country of visit (for UK residents) the reason for their visit, and details of their expenditure and fares. There are additional questions for passengers migrating to or from the UK. While much of the content of the interview remains the same from one year to the next, new questions are sometimes added or appear periodically on the survey.
As one of the main aims of the survey is to provide information of people migrating to and from the UK, in addition to the main fieldwork, special shifts are carried out to increase the number of migrants interviewed.
United Kingdom Tourism Survey
The National Tourist Boards carries out a survey of trips undertaken by UK residents. The survey covers all trips away from home lasting one night or more for holidays, visits to friends and relatives, business, conferences or any other purpose except such things as hospital admissions or school visits. The main results are the number of trips taken, expenditure, and nights spent away from home.
Data are also available on leisure activities undertaken on the trip, methods of booking or arranging travel, and types of location stayed at. The survey covers the UK and data are available for England, Scotland, Wales, Northern Ireland and at regional level. The survey is carried out continuously, and results are published annually.
Cinema Admissions Data
The Cinema advertising association commissions Nielsen EDI to provide counts of cinema admissions. The admissions data supplied is extremely accurate as it involves Nielsen EDI contacting every cinema/circuit for their actual admissions on a regular basis.
Data are supplied based on geographical television regions rather than Government Office Regions.
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