Business demography, quarterly experimental statistics, UK: January to March 2022

• The number of businesses removed from the Inter-Departmental Business Register (business closures) in the UK in Quarter 1 (Jan to Mar) 2022 was 23% higher than in Quarter 1 2021.

• There was an increase in closures in 15 out of 16 main industrial groups in Quarter 1 2022 compared with Quarter 1 2021, with the most significant increase coming from the transport and storage industry.

• The number of businesses added to the Inter-Departmental Business Register (business creations) in the UK in Quarter 1 2022 was at the same level as the number added in Quarter 1 2021.

• Construction saw the most significant increase in creations in Quarter 1 2022 compared with Quarter 1 2021, while retail saw the most significant decrease.

• Data in this release are Experimental Statistics and produced rapidly to support understanding of the impact of the coronavirus (COVID-19) pandemic on the economy; our annual Business Demography, UK bulletins remain the best source of information on business demography.

Business closures are those removed from the Inter-Departmental Business Register (IDBR). A business is removed from the IDBR if its turnover and employment are zero for several periods, or if the Office for National Statistics (ONS) is notified that the business has ceased trading through an administrative or survey source.

The number of business closures in the UK in Quarter 1 (Jan to Mar) 2022 was 137,210. This is 23% higher than in Quarter 1 2021, with all industrial groups except for agriculture, forestry, and fishing showing an increase in closures. A significant increase in closures came in the transport and storage industry (up 75%). Freight transport by road and courier activities (unlicensed carriers) are the two main industries contributing to the increase in closures within transport and storage. These closures follow significant increases in creations throughout 2020 and 2021 in those industries.

The number of closures in Quarter 1 2022 is the highest Quarter 1 figure since the start of the series in 2017. It is also the fourth quarter in a row where there have been more closures than creations.

Businesses closing in Quarter 1 2022 were smaller than those that closed in the first quarters of 2017 to 2021. The average size of business that closed in Quarter 1 2022 by employment was 2.0 employees. This was around 21% smaller than the average size of businesses that closed in the first quarter over the period 2017 to 2021, but only 6% smaller than the average size of businesses that closed in Quarter 1 2021. This shows that the size of businesses that have closed since the coronavirus (COVID-19) pandemic began is smaller than those that closed before it.

Business creations are new enterprise entries onto the Inter-Departmental Business Register (IDBR). These are referred to as business births in our annual Business Demography, UK bulletins and other data. For more information, see the Measuring the data and Glossary sections of this bulletin.

The number of IDBR business creations in the UK in Quarter 1 (Jan to Mar) 2022 was 136,390. This figure is at the same level as Quarter 1 2021. There was a decrease in the number of births in 7 of the 16 industry groups when compared with the same quarter a year ago, with the most significant fall being in retail (down 34%). The most significant increase in creations on the same quarter a year ago is in construction (up 14%).

Although the number of creations in Quarter 1 2022 is at the same level as Quarter 1 2021, the number of business creations in Quarter 1 2022 was 15% higher than the average number of business creations in each Quarter 1 between 2017 and 2021.

Between 2017 and 2021, the average new business created in Quarter 1 had around 2.7 employees. The average number of employees in Quarter 1 2022 was 19% lower at 2.2 employees. Businesses that have been created since the coronavirus (COVID-19) pandemic began tend to be smaller in terms of employment than those created before the coronavirus pandemic.

Business

For this release, the term "business" is used to represent an enterprise. An enterprise can be defined as the smallest combination of legal units that is an organisational unit producing goods or services, which benefits from a certain degree of autonomy in decision-making, especially for the allocation of its current resources. An enterprise carries out one or more activities at one or more locations. An enterprise may also be a sole legal unit.

Business creations

Often referred to as business births, we refer to enterprises added to the Inter-Departmental Business Register (IDBR) as business creations in this release. Enterprises are added to the IDBR when a new business is identified from administrative sources (usually the VAT or PAYE systems).

Business closures

Business closures are removals from the IDBR. A business is removed from the IDBR if its turnover and employment are zero for several periods, or the Office for National Statistics (ONS) is notified that the business has ceased trading through an administrative source. These are referred to as business deaths in our annual Business Demography, UK bulletins and other data.

This should not be confused with temporary business closures because of the coronavirus (COVID-19) pandemic, whereby a business pauses trading but is still an active business.

The Inter-Departmental Business Register (IDBR)

A database of all businesses in the UK registered for VAT and/or the PAYE income tax system. There are approximately 2.8 million businesses on the IDBR. The IDBR is the register of UK businesses used as a sampling frame for ONS business surveys.

Turnover and employment data

The turnover data on the IDBR is mostly derived from VAT or ONS business survey records. Employment data on the IDBR is derived from PAYE or ONS business survey records. In some cases, values are imputed from administrative data. The turnover data are updated annually, every September, from available data. Employment data are updated more frequently for some businesses but at least annually for all businesses.

The turnover and employment data for business closures are the stored values at the last update while the business was active on the IDBR, often the last annual update. These figures are not adjusted for inflation, so the average turnover would be expected to rise slowly over time in line with inflation.

For business creations, the value for turnover is usually that estimated by the business upon registration with HM Revenue and Customs (HMRC) for VAT. The employment value is the number of actually registered employees on their PAYE scheme if they have one, and it is imputed if they do not. This value is revised on the IDBR when more up-to-date data are received, but it is not revised in these statistics.

Data on turnover and employment on the IDBR should not be used to measure economic growth or the growth of the labour market; other ONS sources should be used for this. Data points are generally current for larger businesses, but less current for smaller businesses.

Experimental Statistics

The statistics presented are Experimental Statistics, so care needs to be taken when interpreting them.

Additional geographical breakdowns

From the Quarter 4 (Oct to Dec) 2021 release, additional geographical breakdowns of business creations and closures have been made available to meet user needs. An unspecified geography category has also been introduced to deal with the distorting effect of multiple registrations at the same site. These apply where there are over 250 creations or closures at the same postcode. Any creations or closures that happen at one of these postcodes are taken out of their geography and placed into the unspecified category. These cases still count towards the UK totals. The figures are provided in the data workbook published as part of this statistical release.

Time of recording

Business creations and closures in these data are based on the date on which the action occurs on the Inter-Departmental Business Register (IDBR). Data for this release are extracted from the IDBR quarterly.

The date a business is added to the IDBR is generally on the same day, or within a few days, of the legal creation of the business as a company with Companies House. However, this can be several weeks after the effective birth of the business.

For business closures, the registration process can take a little longer because the death of a business may be long and complex. The effective death of a business may occur several months before its actual death from a legal perspective. A business is removed from the IDBR if information from HM Revenue and Customs (HMRC), Office for National Statistics (ONS) business surveys, or Companies House indicates it is no longer active. The ONS proves deaths by contacting businesses if necessary.

Frequency of data

The IDBR is updated from four main sources:

• Value Added Tax (VAT)

• Pay As You Earn (PAYE)

• ONS business surveys

• Companies House

The updates occur in various frequencies from daily to annual. A shorter time period analysis of business creations and closures would be very volatile because the PAYE update is quarterly. As such, this source is best suited to quarterly publications.

Timeliness

In line with international guidance from Eurostat and the Organisation for Economic Co-operation and Development (OECD), our annual Business Demography, UK bulletins are published a year after the reference period to allow for reactivations before deaths figures are calculated. We have published these quarterly data to provide a timelier indicator of business creations and closures to support understanding of the impact of the coronavirus (COVID-19) pandemic on the UK economy. However, these data will not be entirely consistent with our annual bulletin, and that remains the superior measure of business demography.

More detail about the IDBR and our annual official statistics on business demography is available in our Business demography QMI (Quality and methodology information) article.