Scottish Government

Scottish GDP (in constant basic prices) grew each year since 1998 reaching a peak in Q2 of 2008. Scotland then entered recession, which lasted 5 quarters, in Q3 of 2008. Another period of economic contraction started in Q4 2011 with contractions of 0.1% in the quarter, 0.2% in Q1 2012 and 0.4% in Q2 2012. Data for Q3 2012 in Scotland will be available in January 2013. UK GDP for Q3 2012 rose by 1.0 per cent ^[1].

As at March 2012, there were an estimated 341,360 private sector enterprises operating in Scotland. Almost all of these enterprises (98.3%) were small (0 to 49 employees); 3,635 (1.1%) were medium-sized (50 to 249 employees) and 2,250 (0.7%) were large (250 or more employees). These percentage shares have remained relatively stable since 2000 (the earliest point in the time series).

As at March 2012, there were 339,110 Small and Medium-sized Enterprises (SMEs) operating in Scotland, and employing an estimated 1.09 million people.  SMEs accounted for 99.3% of all private sector enterprises and accounted for 54.5% of private sector employment and 37.7% of private sector turnover.

Small (0 to 49 employees) enterprises alone accounted for 42.2% of private sector employment and 25.3% of private sector turnover as at March 2012 (see Chart 1).    
 
The 2,250 large (250+ employees) enterprises operating in Scotland, as at March 2012, accounted for 45.5% of private sector employment and 62.3% of private sector turnover (see Chart 1). 

Chart 1: Share of enterprises, employment and turnover by size of enterprise, 2012

As at March 2012, enterprises with no employees – that is sole proprietors/partnerships comprising only the owner-managers or companies comprising only the employee director – accounted for 70.0% of all private sector enterprises in Scotland, 13.3% of private sector employment and 4.5% of private sector turnover. 

The total number of enterprises operating in Scotland comprises of those that are registered for VAT and/or PAYE, and those that are not (so called unregistered enterprises).  Unregistered enterprises are sole proprietorships and partnerships that are not large enough to be VAT or PAYE registered.  The majority of private sector enterprises in Scotland are unregistered.  As at March 2012, unregistered enterprises represented 53.3% of all private sector enterprises in Scotland.         

As at March 2012, there were an estimated 341,360 private sector enterprises operating in Scotland - the highest estimate since 2000 (the earliest point in the time series) (see Chart 2).

Between 2000 and 2012, the total number of enterprises increased by an estimated 42.2% (101,385 enterprises).  As shown in Chart 2 below this increase was driven by an increase in the smallest unregistered enterprises – the number of unregistered enterprises in Scotland has almost doubled since 2000 (up from 91,310 in 2000 to 181,775 in 2012).  However, the number of registered enterprises increased between 2000 and 2012 also, from 148,665 to 159,580 - driven by an increase in the number of small (0 to 49 employees) registered enterprises.  

Chart 2: Estimated number of private sector enterprises operating in Scotland, 2000 to 2012

Despite the recent challenging economic conditions, the estimated number of enterprises in Scotland has increased in each year since 2006.  Between March 2011 and March 2012 the estimated number of enterprises increased by 9.9% (30,835 enterprises) – this is the highest annual increase in the series.

Unregistered enterprises (the smallest businesses that have an annual turnover below the VAT threshold of £73,000 and do not have employees) accounted for the majority of the rise in the total number of enterprises between 2011 and 2012.  The number of unregistered enterprises increased from 156,155 in 2011 to 181,775 in 2012 – an increase of 25,620 micro businesses (16.4%).

After falling for the last two years, the number of registered enterprises (those registered for VAT and/or PAYE) increased by 3.4% (5,215 enterprises) between 2011 and 2012.  The rise in registered enterprises over the latest year was driven by an increase in the number of small (0 to 49 employees) registered enterprises – up 3.5% (5,190 enterprises) between 2011 and 2012.

After falling in the previous year, the number of medium-sized (50 to 249 employees) enterprises increased between 2011 and 2012 to 3,635 enterprises – representing an increase of 10 enterprises since 2011 and an increase of 285 since 2000, but the 2012 estimate is still lower than the medium-sized enterprise peak level of 3,655 enterprises experienced in 2010.

After falling for the last two years, the number of large (250 or more employees) enterprises increased between 2011 and 2012 to 2,250 enterprises – an increase of 20 since 2011 and an increase of 5 since 2000, but the 2012 estimate is still lower than the large enterprise peak level of 2,345 enterprises experienced in 2001 and lower than the more recent high point of 2,315 large enterprises that were in operation in Scotland in 2009.

The total stock of private sector registered enterprises per 10,000 resident adults in Scotland is the basis of the Scottish Government National Indicator: “Increase the number of businesses”.  The indicator will be updated in June 2013 when the 2012 mid-year population estimates, needed to form the ‘per 10,000 adults’ rate, will become available. Further information can be found at: http://www.scotland.gov.uk/About/Performance/scotPerforms/indicator/businesses

As at March 2012, private sector enterprises in Scotland, as per the ‘Businesses in Scotland’ definition, fell into the following categories:

Sole Proprietors/Partnerships      (73.0% of enterprises, 23.3% of employment)
Companies/Public Corporations   (24.8% of enterprises, 69.1% of employment)
Non-Profit Making Bodies             (2.1% of enterprises, 7.6% of employment)

Note that the Sole Proprietorships/Partnerships legal status group (above) includes unregistered enterprises.

Information on the ownership of enterprises operating in Scotland is only available for enterprises registered for VAT and/or PAYE.

Within the ‘Businesses in Scotland’ publication enterprises can be either Scotland owned, Rest of the UK owned or Abroad owned.

As at March 2012, registered private sector enterprises with ultimate ownership outside Scotland (RUK or Abroad owned) represented 3.0% of enterprises and accounted for 35.0% of employment and 55.4% of turnover.  Within large firms (250+ employees) they represented 82.7% of enterprises and accounted for 63.3% of employment and 75.8% of turnover.

As at March 2012, 35.0% of private sector employment was in enterprises with ultimate ownership outside Scotland.  Breaking this down, 18.7% of Scottish private sector employment was in enterprises with ultimate ownership in the RUK with the remaining 16.3% of employment in enterprises with ultimate ownership Abroad (outside the UK).  The share of employment by Abroad owned enterprises varies by industry sector.  For example, as at March 2012, 30.7% of Scottish manufacturing employment was in Abroad owned enterprises, compared to 6.6% of Scottish construction employment (see Chart 4). 

Chart 4: Share of employment by ownership, by industry sector, 2012

The publication ‘Businesses in Scotland’ now includes a breakdown of the Scottish registered business stock by urban and rural areas.  The new data show that:

• SMEs account for a larger share of private sector employment in rural areas, compared to urban areas.  As at March 2012, SMEs accounted for 80.2% of private sector employment in remote rural areas compared to 69.1% in accessible rural areas and 45.1% in the rest of Scotland.
• In terms of industry breakdowns – 34.8% of businesses in remote rural areas are in the ‘Agriculture, Forestry & Fishing’ industry, compared to 26.1% in accessible rural areas and 2.4% in the rest of Scotland.  

Business stock estimates for the UK as a whole are published by the Department for Business Innovation and Skills (DBIS).  The DBIS Business Population Estimates 2012 show that for the UK as a whole the total number of businesses (registered and unregistered) increased by between 4.4% and 5.6% between the start of 2011 and start of 2012.  This compares to an increase in total number of businesses of 9.9% for Scotland between March 2011 and March 2012 (as per the Businesses in Scotland 2012 results). 

Although the DBIS figures are on slightly different basis to the Scotland results ^[2] , it is clear that Scotland’s business stock, between 2011 and 2012, has increased at a higher rate compared to the UK as a whole. 

However, it is important to note that Scotland has a very different business stock make-up, compared to the UK as a whole.  Table 1 below shows that, in 2012, Scotland had a business stock rate of 769 enterprises per 10,000 adults, compared to 935 enterprises per 10,000 adults in the UK as a whole. 

Despite Scotland’s relatively higher increase in small enterprises, between 2011 and 2012, Scotland still has a lower rate of small businesses (757 small enterprises per 10,000 adults) compared to the UK as a whole (928 small enterprises per 10,000 adults). 

And conversely Scotland has a higher rate of medium and large businesses, compared to the UK as whole – see Table 1 below.  Furthermore, large businesses account for a higher share of Scotland’s private sector employment (45%), compared to the UK as a whole (41%).  

Table 1 – Private sector business stock (registered and unregistered) per 10,000 adults, by size, UK and Scotland

			Private Sector per 10,000 adults
			Enterprise Size (number of employees)
Country	Resident Adults Mid-year 2011	Private Sector Enterprises	Small (0-49)	Medium (50-249)	Large (250+)	All Sizes
UK	51,269,800	4,794,105	928	6	1	935
Scotland	4,341,500	334,025	757	8	5	769

Source:  UK - Business Population Estimates 2012, DBIS.  Scotland – Businesses in Scotland 2012. Note that the Scotland data, in the table above, is restricted to enterprises that are companies, sole proprietorships, partnerships or public corporations to ensure as much consistency as possible between the UK and Scotland results. 

^[2] Information on how the methodology used in the ‘Businesses in Scotland’ publication differs from the DBIS Business Population Estimates publication can be found at:  http://www.scotland.gov.uk/Topics/Statistics/Browse/Business/Corporate/ukbusiness