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Scottish Economic Statistics 2002

Definitions, Methodologies and Sources

Corporate Sector

The estimates given have been constructed using data from the Inter Departmental Business Register (IDBR), Labour Force Survey (LFS) and the 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 the number of unregistered enterprises, from people employed as sole traders and in partnerships, who do not appear on the IDBR.

It should be borne in mind that there are a significant number of enterprises within the zero employee size-band which are not registered on the IDBR. Due to the aforementioned methods of estimation, the smallest employee size-band (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 size-band between years should be regarded with extreme caution.

The estimates:

• Include enterprises that operate in Scotland irrespective of whether their head office is located in Scotland or elsewhere;
• Count enterprises only once (in tables 2.5 and 2.6) or once each in each of the local areas they operate in (in tables 2.7 and 6.2), irrespective of the number of local units they maintain;
• Cover enterprises in the private sector, excluding government, but including charities and voluntary organisations
• Include enterprises from the sources described above, as follows: 120,715 enterprises were registered for VAT and 28,830 for PAYE only; to this 144,120 enterprises with zero employees are added, estimated on the basis of LFS and SPI figures

Employment and turnover values were calculated for all included enterprises, however turnover values for Financial Intermediation enterprises have been excluded, as these are not available on a comparable basis.

Turnover in unregistered businesses will generally be lower than that of registered businesses of the same size, as turnover in the former would usually be below the VAT threshold. Turnover for the unregistered enterprises was imputed from turnover per head of registered enterprises with zero employees in that industry division and then scaled down by a factor of a half. For a few 2-digit industry divisions, this still left average annual turnover per unregistered business above the VAT threshold. In these cases, the unregistered turnover total was adjusted until turnover per unregistered business was under the VAT threshold of £52,000. This imputation is different from the 1999 analysis but is similar to the Department of Trade and Industry's Small and Medium Enterprises Statistics.

The geographical analyses now use a postcode index file from the General Register Office for Scotland. Unregistered enterprises are not included in the geographical analyses. Hence, the allocable totals for Scottish employment and turnover in these tables do not equate to those in the tables containing full estimates for the zero employee size-band.

Enterprises in Tables 2.1, 2.2, 2.3, 2.5, 2.6a-c and 6.2 are classified by employee size-bands on the basis of their total number of employees in the UK. 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 employee size-bands based on their total Scottish employment has not been included. This type of analysis is available on request from the Scottish Executive.

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

In the components of change analysis in chapter 2 , the enterprises were matched between years by their enterprise reference. Some enterprises may have changed their enterprise reference between years, this can be caused by enterprises changing their name, relocating or restructuring. Such enterprises appear as closures and re-openings, which means that these enterprises could not be included in the analysis of consistent growth or high growth, and that there may be some overstatement of the degree of churning (of enterprises and jobs). It is not currently possible to quantify the numbers of such enterprises.

In addition, enterprises that opened in Scotland after November 1997 but closed before November 2000 are not included in this analysis.

Production, Construction & Service Sectors

Background & Methodology

The Scottish Production Database (SPD), Scottish Construction Database (SCD) & Scottish Services Database (SSD) are constructed from an annual sample survey, the Annual Business Inquiry (ABI), carried out by the Office for National Statistics (ONS). The Scottish data are augmented, where appropriate, by additional information from separate ONS inquiries or other sources. From the actual returns, 'average per head' figures for each database are created, for homogenous strata defined by SIC92, employment size-band, Unitary Authority area 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.

Since 1998, the Scottish Executive has paid for an enhanced ABI sample in Scotland, to improve the quality of Scottish figures in the services, production and construction sectors. Around 3,000 extra firms in Scotland are sampled annually as a result of this "boost", giving a total annual sample size in Scotland of around 9,000 firms.

Since the creation of the 1998 Scottish databases, some revisions to the raw data have been received. In addition, some extra SIC codes are now available for inclusion, and there has been a re-definition of which parts of the public sector should be included. It is intended to produce revised 1998 databases in Spring 2002. Figures for 1998 should therefore be regarded as provisional at present.

Industrial groupings used in this publication

The Production Sector is defined as codes 10 to 41 of the 1992 Standard Industrial Classification.

The Construction Sector is defined as code 45 of the 1992 Standard Industrial Classification.

Groupings Division (2 digit SIC92)

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

Although the tables 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. Broadly, this does not include some of the public sector and excludes other industries such as the financial sector. The table below outlines which SIC groups are included.

Groupings Division (2 digit SIC92)

Definition of Terms

Total turnover

Turnover is defined as Total sales and work done. This is calculated by adding to the value of Sales of goods produced, Goods purchased and resold without further processing, Work done and industrial services rendered and Non industrial services rendered.

Purchases of goods & services

This represents the value of all goods and services purchased during the year.

Gross Value Added

Approximate gross value added represents the income generated by businesses out of which is paid wages and salaries, the cost of capital investment and financial charges, before arriving at a figure for profit. It includes taxes on production (e.g. business rates), net of subsidies but excludes subsidies and taxes on products (e.g. VAT and excise duty).

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.

Increase in Total stocks

This represents the increase during the year for materials, stores and fuel and goods on hand for sale. Amounts for materials which have been partially processed but which are not usually sold without further processing are also included.

Wages & Salaries

This includes gross wages and salaries (excluding National Insurance contributions and contributions to other pension and welfare schemes) and redundancy and severance payments to employees. Payment to working proprietors, travelling expenses, lodgings allowances etc. are excluded.

Total employment

For 1995-97, 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. In 1998 and 1999, it represents the number of full time and part time employees, the number of working proprietors and the number of other unpaid workers in employment in mid-December.

Other Information

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.

All figures are given at current prices.

Labour Market

Sources

Estimates for economic activity, ILO unemployment and total employment, as used in tables 4.1, 4.2, 6.7, 6.8 and 6.10 are taken from the Labour Force Survey. Figures from tables 4.1 and 4.2 are taken from the spring 2001 quarter of the survey. Figures in tables in Chapter 6 are from the LFS local area database. This survey is subject to sampling error, with information for areas based on relatively small samples. Therefore figures should be treated with caution.

Estimates of employee jobs from table 4.3 are from the quarterly employee jobs series, whereas the estimates in table 6.9 are taken from the 2000 Annual Business Inquiry. The employee jobs figures for unitary authorities are taken from the NOMIS database, and due to confidentiality constraints, exclude employee jobs in Agriculture. This survey is subject to sampling error, with information for areas based on relatively small samples. Therefore figures should be treated with caution.

The source of figures for tables 4.7, 4.8, and 6.10 on unemployment is the claimant count. This measures the number of people claiming unemployment related benefits. Only information on computerised claims is available for age and duration analysis, however these make up 99 per cent of all claims nationally.

Figures on earnings shown in tables 4.5, 4.6, and 6.11 are taken from the New Earnings Survey. This is run each year by the Office for National Statistics, but due to the size of the sample, cannot give reliable information for all Local Authority areas of Scotland.

Industries shown for employee jobs are based upon the 1992 Standard Industrial Classification (SIC)

SIC group SIC codes Description

Definitions

Employment

Working age is 16 to 64 for men and 16 to 59 for women.

Economic activity means people in employment, and those actively seeking work i.e. ILO unemployed.

People in employment means those working for at least one hour in a typical week.

Economic activity, inactivity and employment rates the proportion of working aged people who are economically active, inactive or in employment.

Full time workers are employed for 30 hours or more during a typical week, and part time workers employed between 1 and 30 hours.

Unemployment

The government's preferred measures of unemployment use the International Labour Organisation (ILO) definition. This is people who are either:

1) Out of work and want a job, has actively sought work in the last 4 weeks and are available to start work in the next 2 weeks

Or

2) Out of work, have found a job and are waiting to start in the next two weeks.

The Labour Force Survey (LFS) collects information on ILO unemployment but is not large enough sample to give reasonable estimates at small geographical areas such as ward level. However the estimates of economic activity are reasonably robust at ward level.

The claimant count data is used to estimate the numerator of the unemployment rate. This is currently the count of claimants of Jobseeker's allowance or National Insurance Credits. People claiming JSA must declare that they are out of work, capable of, available for and actively seeking work during the week in which the claim is made.

The denominator is a measure of economic activity for working aged people (ages16-59 for females and 16 to 64 for males), which is a residence-based rate. Economic activity rates for local areas are estimated from the LFS and then multiplied by a current working age population estimate obtained from the General Registrar's Office for Scotland (GRO).

The level of unemployment and information on age and duration of claimants in table 4.8 use the October figures each year, and are not seasonally adjusted.

The unemployment rates for local authorities shown in table 6.10 and for wards in maps 2a-b are calculated using claimant count as the numerator

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