UK business; activity, size and location: 2016

There were 2.55 million businesses registered for VAT and/or Pay As You Earn (PAYE) in the UK in March 2016 compared with 2.45 million in March 2015, a rise of around 105,000 (4.3%).

The number of companies and public corporations has continued to rise and represents 68.8% of total businesses. The number of sole proprietors and partnerships has continued to decline and now represents 27.4% of total businesses.

The largest industry group this year remains professional, scientific and technical, with 18.0% of all registered businesses in the UK compared with 17.8% in 2015.

London has the largest number of VAT and/or PAYE-based businesses, with 18.7% of the UK total and has also experienced the largest growth of 7.2% between 2015 and 2016.

UK Business: Activity, Size and Location, 2016 is produced from an extract taken from the Inter-Departmental Business Register (IDBR) recording the position of units as at 11 March 2016.

This publication represents the businesses registered with HM Revenue and Customs (HMRC) for VAT and/or Pay As You Earn (PAYE). The Department for Business, Energy and Industrial Strategy (BEIS) produces Business Population Estimates which seek to provide full coverage of all types of businesses in the UK including an estimate of the unregistered business population.

For the purpose of this release the term “business” is used to represent an enterprise. An enterprise can be defined as the smallest combination of legal units (generally based on VAT and/or PAYE records) 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 be a sole legal unit.

Please note that all data are rounded to protect confidentiality. The figures in the tables are rounded individually therefore the sum of component items may be slightly different to the totals shown.

The upwards trend in the number of VAT and/or Pay As You Earn (PAYE) businesses (Figure 1) is reflective of the UK economy’s recent performance. In the 12 months to Quarter 1 (Jan to Mar) from 2014 to 2016, GDP rose by 2.6%, 2.9% and 2.0% respectively. CPI inflation was 1.6%, 0% and 0.5% in the years to March 2014, March 2015 and March 2016 respectively. This strong growth and low inflation may have provided a good environment for businesses to set up. Furthermore, through 2015 and 2016, the oil price has remained historically low which may have put downwards pressure on businesses’ operating costs.

During the period from March 2011 to March 2016, the Bank of England base rate was 0.5%. This historically low rate may have encouraged more businesses to set up over the period. The base rate may be linked to commercial loan rates to businesses which are often required to start up and invest in fixed capital.

The employment rate rose from 70.5% in the 3 months to March 2011 to 74.2% in the 3 months to March 2016. The amount of people employed in the public sector from March 2011 to March 2016 fell when excluding reclassifications. The data suggest that the new employment growth from the 2011 to 2016 period was in the private sector. This is consistent with the continuing increase in the number of businesses which were set up between 2011 and 2016.

From the January to March period in 2011 to the same period in 2016, the redundancy rate fell from 4.9 to 4.1 per 1,000 employees (LFS ILO time series). This rate is based on the amount of people who were made redundant out of all workers employed. A lower rate may indicate a stronger job market and is consistent with the increase in the number of VAT/ PAYE businesses.

Between March 2015 and March 2016, there was an increase of 7.4% in corporate businesses, while there was a reduction of 3.1% in the number of sole proprietors and partnerships.

Corporate businesses (companies and public corporations) represented 68.8% of total businesses, up 2.0 percentage points from 66.8% in 2015; of the corporate business figure, 46.5% is made up of single employee limited companies, which have increased by 92,000 between 2015 and 2016.

Sole proprietors represented 18.7% of total businesses, down 1.3 percentage points from 20% in 2015. Partnerships represented 8.8% of total businesses, down 0.7 percentage points from 9.5% in 2015.

General government and non-profit making bodies represented 3.8% of total businesses, compared with 3.7% in 2015.

In 2016, the professional, scientific and technical sector accounted for the largest number of businesses, with 18.0% of all registered businesses in the UK. Wholesale, retail and repair of motor vehicles was the second largest sector, with 14.5% of all businesses registered, although it experienced a decrease in percentage share of UK businesses, from 15.0% in 2015. The third largest sector was construction, with 11.8% in 2016.

The professional, scientific and technical sector had the largest growth between 2015 and 2016, an increase of 23,000 businesses. This was followed by construction which also increased by 17,000.

Between 2015 and 2016, all regions saw an increase in the number of businesses, with London experiencing the greatest increase of nearly 32,000 businesses representing a growth of 7.2%.

London accounted for the largest number of businesses in March 2016, with 18.7% of the UK total. The growth of businesses in London accounts for 30.5% of total growth in the UK.

The region with the next largest share of businesses was the South East, at 15.3%.

Between 2014 and 2016, the number of VAT and/or PAYE businesses in London as a proportion of all regions increased by 1.1 percentage points, from 17.6% in 2014 to 18.7% in 2016.

Table 2 provides the number of businesses in every region and the percentage contribution of each region to the UK total.

Local units are sites that belong to a business. In March 2016, there were 3.01 million local units belonging to VAT and/or PAYE-based businesses, compared with 2.91 million in March 2015, a rise of nearly 103,000 (3.5%). Out of the 2.55 million VAT and/or PAYE businesses, only 58,000 (2.3%) operate from more than one site. These operated a total of 514,000 local units.

The UK business: activity, size and location Quality and Methodology Information document contains important information on:

• the strengths and limitations of the data and how it compares with related data

• users and uses of the data

• how the output was created

• the quality of the output including the accuracy of the data