Enterprise Directorate

SME Statistics: Business Survival Rates

Survival rates of VAT registered enterprises,

1995-2004

Guidance and Methodology

1.     The Small Business Service (SBS) has, in recent years, published annual or biennial estimates of the survival rates of new businesses, based on VAT registrations and subsequent de-registrations.  This year, estimates for enterprises registering in 2004 have been published for the first time and previous years’ estimates have been revised.  These figures can be downloaded from www.sbs.gov.uk/survival. 

2.     This paper describes the data sources and methodology used to produced the estimates, along with guidance on their accuracy and how to use the figures.  It accompanies a key results paper summarising the broad patterns in survival rates and an Excel workbook containing the following tables:

Table 1

Three-year survival rates by region and UK country, 1995-2002

Table 2

One-year survival rates by region and UK country, 1995-2004

Table 3

Three-year survival rates by Local Authority/Council Area/District Council Area and region, 1995-2002

Table 4

One-year survival rates by Local Authority/Council Area/District Council Area and region, 1995-2004

Table 5

Three-year survival rates by industry sector (1-digit SIC), 1995-2002

Table 6

One-year survival rates by industry sector (1-digit SIC), 1995-2004

Table 7

Three-year survival rates by Rural and Urban Area Classification[1], 1995-2002, England and Wales

Table 8

One-year survival rates by Rural and Urban Area Classification, 1995-2004, England and Wales

Table 9

Three-year survival rates by Index of Multiple Deprivation[2] quintile and region, 1995-2002, England only

Table 10

One-year survival rates by Index of Multiple Deprivation quintile and region, 1995-2004, England only

3.     A guide to using the data is included at the front of the Excel workbook.

4.     Due to resource constraints, the DTI cannot guarantee that any of these figures will continue to be published in future. They will not be published in 2008 so, at the earliest, the next update will be in early 2009.

Methodology

Data sources

5.     This series is based on data taken from the Office for National Statistics’ (ONS) Inter Departmental Business Register (IDBR) in May 2006.

6.     The IDBR is a comprehensive database of UK businesses based on inputs from three administrative sources: traders registered for Value Added Tax (VAT) purposes; employers operating a Pay As You Earn (PAYE) scheme registered with HM Revenue and Customs (HMRC); and incorporated businesses registered at Companies House.  For more information on the IDBR extract obtained by the SBS see the guidance note accompanying Business Start-ups and Closures: VAT Registrations and De-registrations, which can be found at www.sbs.gov.uk/vat.

7.     VAT registrations and de-registrations are used as a proxy for business start-ups and closures.  However, enterprises registering for VAT are not necessarily new businesses, as enterprises are unlikely to register if their turnover falls below the compulsory VAT threshold (which was £58,000 at the start of 2005).  Similarly, enterprises that de-register may not necessarily have closed.  Only 1.8 million out of an estimated 4.3 million enterprises in the UK at the start of 2005 were registered for VAT.  Our estimates of survival rates therefore exclude a large proportion of the very smallest businesses.

8.     In this analysis, enterprises that de-register for VAT are not counted as de-registered if they still have an active PAYE record, as this indicates that the business is still trading despite having fallen below the VAT threshold.  This is no different from the methodology used in the VAT Registrations publication.

Adjustments

9.     As time goes on, the number of VAT registrations recorded for a particular year tends to increase as late registrations come in.  However, although late de-registrations are also picked up, in time the overall number of VAT de-registrations tends to decrease due to dormant records that were previously classed as de-registered becoming active again.

10.  Data have been adjusted to take into account lags in the reporting of VAT registrations and de-registrations.  The eventual number of registrations and de-registrations in each year of the series has been predicted by looking at how the numbers recorded in previous extracts have changed with time.  More information on the adjustment factors used can be found in the guidance note accompanying Business Start-ups and Closures: VAT Registrations and De-registrations at www.sbs.gov.uk/vat.

Survival rates estimates

11.  An extract was taken from the IDBR listing the number of new VAT registrations in each year from 1995 to 2004 for each Local Authority, region, industry, etc..  The number of these enterprises that de-registered within each three-monthly interval after registration was also listed.

12.  These data were lag adjusted using the method described in paragraph 10, above.  Enterprises that de-registered within 6 months of registration were assumed to have de-registered in the registration year, while those that de-registered after six months but within 18 months of registration were assumed to have de-registered in the subsequent year, those de-registering after 18 to 30 months the year after that, and so on.

13.  The number of new registrations remaining at three-monthly intervals after registration was calculated.

14.  Survival rates were calculated by dividing the number remaining at each three-monthly interval by the original number of registrations.

Changes to the series

15.  This year survival rates have been shown for each English and Welsh Local Authority, Scottish Council Area and Northern Ireland District Council Area.  This is a change on last year’s publication, which presented survival rates by Business Link area in England, Training and Enterprise Council (TEC) in Wales and Local Enterprise Company (LEC) in Scotland.  A list of Local Authorities by Business Link area/TEC is given in Annex A, along with a worked example of how to estimate survival rates for composite areas.

16.  The lag adjustment factors have been updated since the last publication in February 2006, affecting all of the UK, although the impact on individual Local Authorities is small.  The estimated number of VAT de-registrations in 2004 has been revised downwards by almost nine per cent, leading to a noticeable upwards revision of the one-year survival rates for 2003 and the three-year survival rates for 2001.

17.  There has been a minor change in the way de-registration years have been assigned.  In last year’s publication enterprises de-registering three to six months after registration were assumed to de-register in the following year.  In this year’s publication these enterprises are assumed to have de-registered in the same year as registration.  This change in assumptions improves slightly the accuracy of the figures, with a magnitude of around 0.1 of a percentage point.

Rural Urban Definition and Index of Multiple Deprivation

18.  This year, survival rates figures have been shown broken down by the Rural and Urban Area Classification and Index of Multiple Deprivation (IMD) quintile, for each region.

19.  The Rural and Urban Area Classification was introduced in 2004.  Areas are assigned to one of four different types based on the size of settlement that the area lies within.  In order of decreasing settlement size these are: urban; rural – town and fringe; rural – village; and rural – hamlet and isolated dwelling.  Each of these area types can then be subdivided into “sparse” and “less sparse” based on the underlying population density of the broader area, giving an eightfold classification of the type of area that an enterprise is located in.  As Scotland and Northern Ireland use their own versions of the Rural Urban Classification[3], figures are presented only for England and Wales.

More information on the Rural and Urban Area Classification can be found at http://www.statistics.gov.uk/geography/nrudp.asp or at http://www.defra.gov.uk/rural/ruralstats/rural-definition.htm.

20.  The Index of Multiple Deprivation 2004 (IMD 2004) combines seven different Domains of deprivation: income deprivation; employment deprivation; health deprivation and disability; education, skills and training deprivation; barriers to housing and services; living environment deprivation; and crime, to arrive at an overall ranking of deprivation at the Super Output Area (SOA) level.  This ranking can then be used in each region individually or for England as a whole to determine the deprivation quintile of the area in which an enterprise is based.  As other UK countries define their own multiple deprivation indices, figures presented are for England only.

More information on the Index of Multiple Deprivation can be found at http://www.communities.gov.uk/index.asp?id=1128440.

For further information on the publication and the methodology, please contact:

Rosie Telford

DTI Small Business Service Statistics Team

Tel: 0114 279 4344

E-mail: [email protected]


Annex A – Composite Areas

Previous years’ publications have broken down the survival rates figures by Business Link area in England, Training and Enterprise Council (TEC) in Wales and Local Enterprise Company (LEC) in Scotland.

In this year’s publication survival rates have instead been presented in more detail, broken down by English and Welsh Local Authority, Scottish Council Area and Northern Irish District Council Area.

Tables 2 and 3 on the following pages show which Local Authorities make up the English Business Link areas and Welsh TECs used in former years.  The remainder of this Annex shows a worked example of how to estimate survival rates for composite areas.

Worked example: calculation of survival rates for composite areas

1.     This section gives a worked example of how to estimate survival rates for Business Link areas or TECs from this year’s Local Authority figures.  We will use Bedfordshire as the example Business Link area.  This method requires the use of VAT registration figures in Table 1a of the DTI publication Business Start-ups and Closures: VAT Registrations and De-registrations, which can be found at www.sbs.gov.uk/vat.

2.     Table 1 shows that Bedfordshire is made up of four Local Authorities: Bedford, Luton, Mid Bedfordshire and South Bedfordshire.  The one-year survival rates for each of these areas for businesses registering in 2004 are shown in Table 1 below, alongside the number of VAT registrations:

Table 1  Survival rates and number of VAT registrations for Bedfordshire Local Authorities, businesses registering in 2004

 

Percent surviving

VAT registrations in 2004

Survivors x registrations

Bedford

88

470

41,360

Luton

91

435

39,585

Mid Bedfordshire

95

515

48,925

South Bedfordshire

93

420

39,060

Total registrations

1,840

 

3.     As we want the Local Authorities with a higher number of VAT registrations to have a bigger effect on the average, we need to multiply the survival rate in each Local Authority (first column of numbers) by the number of VAT registrations in this authority (second column).  The results of this can be seen in the last column of Table 1.

4.     We then add the four numbers in the last column of Table 1 together:

41,360 + 39,585 + 48,925 + 39,060 = 168,930

5.     We can then calculate the average survival rate for the Business Link area by dividing the total above by the total number of registrations, given on the bottom line of Table 1:

Average survival rate for Bedfordshire = 168,930 ¸ 1,840

                                                         = 91.809782

                                                            = 92 percent

6.     This method can be used to calculate average survival rates for any group of Local Authorities.


England

The boundaries of English Local Authorities map directly on to the boundaries of Business Link areas.  Table 2 shows the composition of the Business Link areas used previously.

Table 2  List of English Local Authorities that comprise Business Link areas

Business Link area

Local Authority

 

 

Bedfordshire

Bedford

Devon & Cornwall

Caradon

 

Luton

 

Carrick

 

Mid Bedfordshire

 

East Devon

 

South Bedfordshire

 

Exeter

Berkshire

Bracknell Forest

 

Isles of Scilly

 

Reading

 

Kerrier

 

Slough

 

Mid Devon

 

West Berkshire

 

North Cornwall

 

Windsor and Maidenhead

 

North Devon

 

Wokingham

 

Penwith

Birmingham and Solihull

Birmingham

 

Plymouth

 

Solihull

 

Restormel

Black Country

Dudley

 

South Hams

 

Sandwell

 

Teignbridge

 

Walsall

 

Torbay

 

Wolverhampton

 

Torridge

Cambridgeshire

Cambridge

 

West Devon

 

East Cambridgeshire

Dorset

Bournemouth

 

Fenland

 

Christchurch

 

Huntingdonshire

 

East Dorset

 

Peterborough

 

North Dorset

 

South Cambridgeshire

 

Poole

Cheshire & Warrington

Chester

 

Purbeck

 

Congleton

 

West Dorset

 

Crewe and Nantwich

 

Weymouth and Portland

 

Ellesmere Port and Neston

E. Lancashire

Blackburn with Darwen

 

Macclesfield

 

Burnley

 

Vale Royal

 

Hyndburn

 

Warrington

 

Pendle

County Durham

Chester-le-Street

 

Ribble Valley

 

Derwentside

 

Rossendale

 

Durham

Essex

Basildon

 

Easington

 

Braintree

 

Sedgefield

 

Brentwood

 

Teesdale

 

Castle Point

 

Wear Valley

 

Chelmsford

Coventry & Warwickshire

Coventry

 

Colchester

 

North Warwickshire

 

Epping Forest

 

Nuneaton and Bedworth

 

Harlow

 

Rugby

 

Maldon

 

Stratford-on-Avon

 

Rochford

 

Warwick

 

Southend-on-Sea

Cumbria

Allerdale

 

Tendring

 

Barrow-in-Furness

 

Thurrock

 

Carlisle

 

Uttlesford

 

Copeland

Gloucestershire

Cheltenham

 

Eden

 

Cotswold

 

South Lakeland

 

Forest of Dean

Derbyshire

Amber Valley

 

Gloucester

 

Bolsover

 

Stroud

 

Chesterfield

 

Tewkesbury

 

Derby

 

 

 

Derbyshire Dales

 

 

 

Erewash

 

 

 

High Peak

 

 

 

North East Derbyshire

 

 

 

South Derbyshire

 

 


 

Hampshire and I.O.W.

Basingstoke and Deane

London

Barking and Dagenham

 

East Hampshire

 

Barnet

 

Eastleigh

 

Bexley

 

Fareham

 

Brent

 

Gosport

 

Bromley

 

Hart

 

Camden

 

Havant

 

City of London

 

Isle of Wight

 

Croydon

 

New Forest

 

Ealing

 

Portsmouth

 

Enfield

 

Rushmoor

 

Greenwich

 

Southampton

 

Hackney

 

Test Valley

 

Hammersmith and Fulham

 

Winchester

 

Haringey


Hereford & Worcs.

Bromsgrove

 

Harrow

 

Herefordshire, County of

 

Havering

 

Malvern Hills

 

Hillingdon

 

Redditch

 

Hounslow

 

Worcester

 

Islington

 

Wychavon

 

Kensington and Chelsea

 

Wyre Forest

 

Kingston upon Thames

Hertfordshire

Broxbourne

 

Lambeth

 

Dacorum

 

Lewisham

 

East Hertfordshire

 

Merton

 

Hertsmere

 

Newham

 

North Hertfordshire

 

Redbridge

 

St. Albans

 

Richmond upon Thames

 

Stevenage

 

Southwark

 

Three Rivers

 

Sutton

 

Watford

 

Tower Hamlets

 

Welwyn Hatfield

 

Waltham Forest

The Humber

East Riding of Yorkshire

 

Wandsworth

 

Kingston upon Hull

 

Westminster, City of

 

North East Lincolnshire

M. Keynes, Oxon & Bucks.

Aylesbury Vale

 

North Lincolnshire

 

Cherwell

Kent

Ashford

 

Chiltern

 

Canterbury

 

Milton Keynes

 

Dartford

 

Oxford

 

Dover

 

South Bucks

 

Gravesham

 

South Oxfordshire

 

Maidstone

 

Vale of White Horse

 

Medway Towns

 

West Oxfordshire

 

Sevenoaks

 

Wycombe

 

Shepway

Manchester 

Manchester

 

Swale

 

Salford

 

Thanet

 

Stockport

 

Tonbridge and Malling

 

Tameside

 

Tunbridge Wells

 

Trafford

Leicestershire

Blaby

Greater Merseyside

Halton

 

Charnwood

 

Knowsley

 

Harborough

 

Liverpool

 

Hinckley and Bosworth

 

Sefton

 

Leicester

 

St. Helens

 

Melton

 

Wirral

 

N.W. Leicestershire

N&W Lancashire

Blackpool

 

Oadby and Wigston

 

Chorley

Lincolnshire & Rutland

Boston

 

Fylde

 

East Lindsey

 

Lancaster

 

Lincoln

 

Preston

 

North Kesteven

 

South Ribble

 

Rutland

 

West Lancashire

 

South Holland

 

Wyre

 

South Kesteven

 

 

 

West Lindsey

 

 


 

N. Yorkshire

Craven

South Yorkshire

Barnsley

 

Hambleton

 

Doncaster

 

Harrogate

 

Rotherham

 

Richmondshire

 

Sheffield

 

Ryedale

Shropshire

Bridgnorth

 

Scarborough

 

North Shropshire

 

Selby

 

Oswestry

 

York

 

Shrewsbury and Atcham

Norfolk

Breckland

 

South Shropshire

 

Broadland

 

Telford and The Wrekin

 

Great Yarmouth

Somerset

Mendip

 

King`s Lynn and W. Norfolk

 

Sedgemoor

 

North Norfolk

 

South Somerset

 

Norwich

 

Taunton Deane

 

South Norfolk

 

West Somerset

North Manchester

Bolton

Staffordshire

Cannock Chase

 

Bury

 

East Staffordshire

 

Oldham

 

Lichfield

 

Rochdale

 

Newcastle-under-Lyme

 

Wigan

 

South Staffordshire

Northamptonshire

Corby

 

Stafford

 

Daventry

 

Staffordshire Moorlands

 

East Northamptonshire

 

Stoke-on-Trent

 

Kettering

 

Tamworth

 

Northampton

Suffolk

Babergh

 

South Northamptonshire

 

Forest Heath

 

Wellingborough

 

Ipswich

Northumberland

Alnwick

 

Mid Suffolk

 

Berwick-upon-Tweed

 

St. Edmundsbury

 

Blyth Valley

 

Suffolk Coastal

 

Castle Morpeth

 

Waveney

 

Tynedale

Surrey

Elmbridge

 

Wansbeck

 

Epsom and Ewell

Nottinghamshire

Ashfield

 

Guildford

 

Bassetlaw

 

Mole Valley

 

Broxtowe

 

Reigate and Banstead

 

Gedling

 

Runnymede

 

Mansfield

 

Spelthorne

 

Newark and Sherwood

 

Surrey Heath

 

Nottingham

 

 

 

Rushcliffe

 

 

 


Wales

The boundaries of Welsh Local Authorities map directly on to the boundaries of the Training and Enterprise Councils in Wales, with the exception of Gwynedd, which is split between Celtec and Mid Wales.  A map of TECs including those in Wales can be found at

http://www.statistics.gov.uk/geography/teclec.asp.

Table 3  List of Welsh Local Authorities that comprise TECs

TEC

Local Authority

Celtec

Conwy

 

Denbighshire

 

Flintshire

 

Isle of Anglesey

 

Wrexham

 

part of Gwynedd

Mid Wales

Ceredigion

 

Powys

 

part of Gwynedd

South East Wales

Blanau Gwent

 

Bridgend

 

Caerphilly

 

Cardiff

 

Merthyr Tydfil

 

Monmouthshire

 

Newport

 

Rhondda, Cynon,Taff

 

Torfaen

 

Vale of Glamorgan

West Wales

Carmarthenshire

 

Neath Port Talbot

 

Pembrokeshire

 

Swansea

Scotland

The boundaries of Scottish Council Areas do not map neatly on to those of Local Enterprise Companies.  More information on the areas covered by Local Enterprise Companies in Scotland can be found at http://www.scottish-enterprise.com/sedotcom_home/about_se/local_enterprise_companies.htm

and at http://www.hie.co.uk/Local-Enterprise-Companies.htm for the Highlands and Islands.

Northern Ireland

Our previous publication did not provide a breakdown of survival rates by Northern Irish geographies.



[1] More information on the Rural and Urban Area Classification can be found at http://www.statistics.gov.uk/geography/nrudp.asp

or http://www.defra.gov.uk/rural/ruralstats/rural-definition.htm.

 

[2] More information on the Index of Multiple Deprivation 2004 can be found at http://www.communities.gov.uk/index.asp?id=1128440.

[3] Information on the rural and urban classification for Scotland is available from the Scottish Executive at http://www.scotland.gov.uk/Publications/2004/06/19498/38784 

and that for Northern Ireland from the Northern Ireland Statistics and Research Agency at http://www.nisra.gov.uk/statistics/financeandpersonnel/DMB/urban_rural.html.