Scottish Economic Statistics 2000

Definitions, Methodologies and Sources

Corporate Sector

Enterprises in this analysis are classified by employment sizebands on the basis of their total UK employment. The rationale behind this approach is that the size of the overall enterprise determines its behaviour as an economic agent. An enterprise with a large number of employees in the UK as a whole is likely to behave like a large enterprise, irrespective of its level of Scottish employment.

An alternative approach involving the allocation of enterprises to employment sizebands based on their total Scottish employment has not been included. This type of analysis is available on request from the Scottish Executive.

The estimates given have been constructed using data from the Office for National Statistics' Inter Departmental Business Register (IDBR) and Labour Force Survey (LFS), and the Inland Revenue's Survey of Personal Incomes (SPI). The IDBR extract provides an estimate of the number of enterprises registered for VAT and/or PAYE. Both the LFS and SPI were used to estimate those people employed as sole traders and partnerships within the UK, who do not appear on the IDBR. The employment figures in sizeband zero (no employees) are therefore somewhat unreliable.

It should be borne in mind that there are a significant number of enterprises within this zero employee sizeband, which are not registered on the IDBR. Due to the aforementioned methods of estimation, the smallest employment sizeband (enterprises with zero employment) contains the largest potential source of error. The level and nature of this error can fluctuate between years. For this reason, comparisons of this sizeband between years should be regarded with extreme caution.

"Unallocable" figures in the LEC and legal status tables are the estimates of the unregistered companies outlined above. It is not possible to provide a further breakdown of these figures as geographical/legal information is unavailable.

The sectors presented in this article are classified, at publication level, as defined by the 1992 Standard Industrial Classification (SIC) and in line with other related publications.

Manufacturing Sector

Background & Methodology

The Scottish Production Database (SPD) is constructed from an annual sample survey, the Annual Business Inquiry, carried out by the Office for National Statistics (ONS). The Scottish data are augmented, where appropriate, by additional information from separate ONS inquiries or supplied by companies directly to the Scottish Executive. From the actual returns, 'average per head' figures for each survey variable are created, for homogenous strata defined by SIC92, employment sizeband, region and ownership. These averages are then used in conjunction with employment figures from the Inter Departmental Business Register (IDBR) to estimate data for units without actual returns.

Groupings used in this publication

The Manufacturing Sector is defined by the 1992 Standard Industrial Classification.

Definition of Terms

1. Total Sales - Sales of goods produced, receipts for work done and services rendered and sales of goods which have been merchanted or factored.

2. Gross Output - This is calculated by adjusting the value of total sales and work done by the change during the year of work in progress and goods on hand for sale and for 1997 only, work of a capital nature by own staff.

3. Total Purchases - These include the cost of raw materials, components, semi-manufactured goods and workshop materials, replacement parts and consumable tools not charged to capital account, packaging materials of all types, stationery and printed matter, fuel, electricity and water, materials of all types used by the businesses or given out to others, for the production of machinery or other capital items used in the business, and materials used when working on goods supplied by customers. The figures exclude VAT, purchases of machinery and plant, which are included in capital expenditure, and amounts payable to transport firms or credited to the business's own transport departments for delivery of materials.

4. Net Output - This is calculated by deducting from gross output the cost of purchases and the cost of industrial services received and is adjusted for net duties and levies etc. where applicable. Purchases are adjusted for changes during the year of stocks of materials, stores and fuel.

5. Gross Value Added at Factor Cost - This is calculated by deducting from net output the cost of non-industrial services received. This is the definition used for the 1993 figures.

6. Gross Value Added at Basic Prices - This is calculated by adding to gross value added at factor cost the cost of local authority rates. It is thus a measure of gross value added adjusted for taxes and subsidies incurred during production. This definition is ESA95 consistent, and is used for the 1997 figures.

N.B. The difference between GVA at Factor Cost and GVA at Basic Prices figures is small. For example, the disparity between the two figures in 1997 is around 2%.

7. Net Capital Expenditure - This is calculated by adding to the value of new building work acquisitions less disposals of land and existing buildings, vehicles and plant and machinery.

8. Wages and Salaries - This represents amounts paid during the year to employees. All overtime payments, bonuses, commissions, holiday pay and redundancy payments less any amounts reimbursed for this purpose from government sources are included. No deduction is made for income tax or employees national insurance contributions etc. Payments to working proprietors, payments in kind, travelling expenses, lodging allowances etc. and employers' national insurance contributions etc. are excluded.

9. Total Employment - This represents the average number of full time and part time employees on the payroll and the number of working proprietors employed during the year.

Service Sector

Background & Methodology

The Scottish Services Database (SSD) is constructed from a family of annual distribution and service inquiries conducted by the Office for National Statistics (ONS). These now come under the umbrella of a single survey, the Annual Business Inquiry.

For 1997, actual returns were supplied by ONS and constructed figures were then produced by the Scottish Executive for the remaining units. This was done by creating from the actual returns an 'average per £ of turnover' for each Inquiry variable, for homogenous strata defined by SIC92 and employment sizeband. These averages were then combined with turnover figures from the Inter Departmental Business Register (IDBR) for the remaining units.

This is the first time that the Scottish Executive has published figures for the Scottish Service Sector. The results should be classed as provisional. The figures may be subject to revision when 1998 results become available.

Groupings used in this publication

The Service Sector is defined by the 1992 Standard Industrial Classification, as codes 50 to 99.

However, although the tables and text refer to the service sector for simplicity, it should be noted that the figures quoted do not relate to the entire service sector, but only to those sectors covered by the Office for National Statistics' Annual Business Inquiry. This does not include the public sector, nor some other industries such as the financial sector. The table below outlines which SIC groups are included.

Definition of Terms (all variables are exclusive of VAT)

1. Total Turnover - Total turnover is the gross takings or total sales and receipts of the business on revenue account.

2. Total Purchases - This covers expenditure charged to revenue account during the inquiry year, including expenditure on goods for resale; energy, water and materials; hiring, leasing and renting of plant, machinery and vehicles; commercial insurance premiums; road transport services; telecommunication services; computer and related services; advertising and marketing services and any other services.

3. Gross Value Added at Basic Prices - This represents the wealth created by businesses and is essentially the difference between income and expenditure on goods and services. Adjustments are made, where data is available, for changes in stock levels (work in progress levels for Service Trades), own account capital expenditure, local authority rates and excise duties.

4. Net Capital Expenditure - Capital expenditure includes all expenditure charged to capital account during the inquiry year, including the total value of goods bought on hire purchase. Capital expenditure is generally valued exclusive of VAT, the exception being the non-deductible VAT and Customs duty payable on imported cars. Lessees are required to capitalise assets acquired under finance leasing arrangements, while lessors are asked to treat assets acquired for letting out on a finance lease as debts. Net capital expenditure is the sum of expenditure on assets covering new building work; the purchase of land and existing buildings; new and second-hand vehicles; plant, machinery and other capital equipment, after deducting any disposals of such assets.

5. Gross margin - This is the difference between the value of sales (for Motor Trades this is adjusted for the cost of parts and accessories used in repair and servicing, where data is available) and the cost of purchases of goods for resale (for Motor Trades it also includes used vehicles), adjusted for stock changes.

6. Employment costs - Employment costs include wages and salaries, national insurance and employers' contributions to other pension and welfare schemes.

7. Total Employment - This represents the number of full time and part-time employees in employment as at 12 December 1997.

Other Information applicable to both Manufacturing & Service Sectors

Figures in the tables have been rounded where necessary and in these instances, the sum of the constituent items may not always agree exactly with the total shown.

The data have been aggregated to groupings to avoid disclosure of company-specific information. Where information at this level is still disclosive, * is shown to indicate that data have been suppressed.

All figures are given at current prices, unless otherwise stated.