ANNEX 3 THE PROCESS OF ESTIMATING THE CONTRIBUTION TO GDP
The estimate of the contribution of MEBs is based on a number of assumptions. The process is explained in more detail in this annex. As indicated in the report, the estimate must be treated with caution as each stage in this process contains assumptions, which are detailed as follows.
Estimate of the number of MEBs.
A3.1 This is based on the using the proportion of minority ethnic self-employed as proxy for the proportion of all MEB owners. The proportion of self-employed is calculated at 3 per cent, however, it was noted that the method of recording self-employed may under-estimate the proportion of all self-employed, this is due to the age range that is used in Census data to calculate the numbers of self-employed.
A3.2 Using the figure of 149,300 for all registered enterprises in Scotland during 2001, gives a figure of 4,400 registered MEBs. It can be argued that there are more small or medium-sized enterprises ( SMEs) in total. One estimate is over 234,000 enterprises in Scotland. However, 4,400 can be used as a conservative estimate of the number of MEBs in Scotland.
GDP in Scotland in 2001
A3.3 The next stage is to use a figure for GDP for 2001. The latest revised figures for GDP put this at £64,000 million for 2001.
Estimate of MEBs contribution to private sector's share of GDP.
A3.4 According to the DTI, SMEs account for 52 per cent of private sector turnover. It can be argued that turnover cannot be used in calculating GDP, since it is value-added that contributes to GDP. However, it is a reasonable assumption that SMEs also contribute 50 per cent of value-added and hence the private sector's contribution to GDP. Although, it should be noted that correlation between turnover and contribution to GDP will vary over time and by industrial sector, so inter alia such estimates may vary over time.
Contribution to GDP: estimating the range
A3.5 The final step in the calculation is to assume that the share of private sector turnover and value-added will be in a range which is less than half of this, that is 1 to 1.5 per cent of GDP.
A3.6 Strictly, 1 to 1.5 per cent would give a contribution in a range from £600 million to £900 million. To be more conservative the estimate has been reduced to £500 to £700 million.