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Structure of the Scottish Corporate Sector
At the end of November 1998, there were an estimated 299,110 enterprises1 (excluding the public sector) with employment in Scotland, which employed a total of 1,828,120 people in Scotland2. Approximately 192,000 of these enterprises were sole traders or partnerships without employees (Table 2.1). The ONS's Inter Departmental Business Register (IDBR) - from which these data are derived - provides a new opportunity to conduct analysis of the corporate structure of the Scottish economy.
There was an estimated increase of 2,465 in the number of enterprises operating in Scotland between November 1997 and November 1998. However, due to the level of sampling error both within and between years in the estimation of those enterprises which are not registered for VAT or PAYE, there are difficulties associated with comparing overall totals between years. A more reliable comparison can be made if sole traders and partnerships are excluded from the totals. Excluding such enterprises, there was an increase of 10,070 in the number of registered enterprises operating within Scotland during the same period. Over the same timespan, total Scottish employment within these enterprises rose by 63,090.
Chart A: Proportion of Enterprises and Scottish Employment in Small, Medium and Large Enterprise Categories
Source: Office for National Statistics
The results for 1998 show that the overwhelming majority of enterprises operating in Scotland are small (see Table 2.1). Of the 299,110 enterprises operating in Scotland, 293,705 (98 per cent) had less than 50 employees. These enterprises accounted for 45 per cent of total Scottish employment. At the same time, whilst there were only 2,130 large enterprises (250 or more employees) operating in Scotland (1.0 per cent of the total), these represented 42 per cent of total Scottish employment.
In terms of the standard industrial classification groupings, wholesale, retail and repairs accounted for the largest number of enterprises (50,045 enterprises - 17 per cent), shortly followed by business services (49,025 enterprises - 16 per cent). However, the profile is different when analysed by employment. Although wholesale, retail and repairs still accounts for the largest share (20 per cent), manufacturing is the next largest sector (also 20 per cent) while the business services account for a smaller share (13 per cent) (table 2.2). The distribution of small, medium and large enterprises varies considerably within different sectors. Agriculture, forestry and fishing has the largest share of small enterprises, manufacturing the largest share of medium-sized enterprises, and electricity, gas and water supply has the largest share of large enterprises.
Chart B: Share of Employment in Small, Medium and Large Enterprises by Industry
Source: Office for National Statistics
In terms of the geographic breakdown of the enterprises operating in Scotland and their associated employment (Table 2.3), the greatest concentration is naturally in the major population centres. The LEC area with the highest share of both total enterprises and associated employment is Lothian & Edinburgh with 15.3 per cent of total enterprises and 17.4 per cent of employment in 1998. In terms of the share of total enterprises, Grampian comes next with 13.3 per cent, whilst Glasgow has the second highest share of employment with 15.5 per cent. Glasgow has the highest number of large enterprises of any LEC area. It should be noted that just under half of all enterprises could not be allocated geographically due to insufficient data. These are the smallest unregistered enterprises.
The majority of Scottish employment in 1998 lies within Private Companies, accounting for 68 per cent of allocable Scottish employment (Table 2.4). The vast majority of unallocable enterprises are assumed to be unregistered Sole Traders and Partnerships. However, even if the unallocable enterprises were added to the percentages for Sole Traders and Partnerships, employment in Private Companies would still dominate.
Activity in the Industrial Sectors
In 1997 for the first time, detailed figures on key variables such as sales/turnover, gross value added, and net capital expenditure are available for Scotland for both the manufacturing and service sectors3 of the economy. This means that, for the first time, some comparisons can be made about the relative size of these sectors, and about relative productivity levels and other indicators.
Chart C: Manufacturing & Service Sectors 1997 Shares of Gross Value Added
Source: Scottish Executive
In 1997, total sales (turnover) of the manufacturing and service sectors in Scotland amounted to £114 billion. Around 40 per cent of this related to manufacturing (£43 billion) (Table 2.8), and 60 per cent (£71 billion) to the service sector (Table 2.12). The industries making the largest contributions to this total were wholesaling and service trades, both with turnover of over £21 billion. The largest contribution within manufacturing was made by the electrical and instrument engineering industry, at around £13 billion.
Gross value added per employee (a measure of productivity) in the manufacturing sector is almost twice the level of the service sector (Tables 2.9 and 2.12). Within manufacturing, the highest gross value added per employee is found in the petroleum products, nuclear fuel, chemicals and mineral products industries. The only service sector industry with a higher gross value added per employee than the average for manufacturing as a whole is wholesaling.
Gross value added per employee is on average 60 per cent higher in overseas owned manufacturing units than in UK owned units (Table 2.10). Many reasons have been put forward to attempt to explain this difference. These include the possibility that overseas owned firms may be concentrated in higher productivity sectors, that they may have a higher capital intensity than other units, and that they may employ a more highly skilled workforce.
However, gross value added as a proportion of gross output (a measure of the value added intensity of production) is on average 9 percentage points lower in overseas owned manufacturing units than in UK owned units. This may indicate that overseas owned units are more likely to be involved in the final stages of production, or are more intermediate intensive, than UK owned units.
The figures for wages and salaries per employee in the manufacturing sector and for employment costs per employee in the service sector are not directly comparable, since the latter include employers' National Insurance and other contributions. Nevertheless, it is clear that wages and salaries are lower on average in the service sector compared to the manufacturing sector. The lowest employment costs per employee are found in the retailing and catering industries - both industries where there is a high level of part-time working. The highest wages and salaries are found in the petroleum products, nuclear fuel, chemicals and mineral products industries.
In 1997, agriculture industries accounted for 1.7 per cent of total Scottish Gross Domestic Product (Table 2.15). This sector experienced substantial decreases in output value in 1997 as a result of the strength of sterling creating lower prices.
Regional Selective Assistance
Regional Selective Assistance is a grant available to companies situated within the Assisted Areas. Until the end of 1999, the Assisted Areas were defined to be those areas shown in the map. Regional Selective Assistance is available to companies of all sizes, in most sectors, for investment projects which involve expansion, modernisation or rationalisation and which create or safeguard jobs4.
Over the period 1995-1999, around 270 businesses in Scotland applied for RSA each year (Table 2.5). These applications resulted in accepted offers of RSA worth £615 million over the whole period. These offers related to projects involving planned investment of £6.2 billion and the planned creation and safeguarding of over 80,000 jobs.
During the same time period, UK-owned businesses in Scotland accepted offers of RSA worth £224 million (Table 2.6). These offers related to projects involving planned investment of £1.3 billion and the planned creation or safeguarding of over 39,000 jobs. UK-owned companies therefore represented 77% of the total number of cases, 36% of the total value of offers made and 49% of potential jobs.
RSA grant is normally paid in instalments based on agreed capital expenditure and job targets. Experience suggests that overall, around two-thirds of the value of offers accepted will be paid out in grant. Expenditure on RSA has averaged £74 million each year for the last 5 years.
Around four-fifths of RSA offers accepted are to manufacturing companies (Table 2.7). Of these, the largest number relate to companies manufacturing electrical and optical equipment. These accounted for 42% of the total value of RSA offers accepted over the last 5 years.
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