Exploring business in the UK 🇬🇧

This aims to be a primer into business in the United Kingdom. It's inspired by the statistical bulletins from ONS and is an exploration of open data, content and charting libraries. It makes use of the following data sources and libraries.

Contents
1. What does it mean to be a business in the UK?
2. How many businesses are there?
3. Where are businesses in the UK?
4. What are the most popular business activities?
5. Who is investing into the UK?
6. How do businesses trade internationally?
7. What do businesses look like?
8. How do businesses feel?
9. Experimental insights
10. Summary takeaways

1. What does it mean to be a business in the UK?

In summary: A business is a legally recognised unit producing goods or services and usually paying taxes. They are categorised by a series of defined codes. Business statistics make use of a register, referenced as enterprises or they are estimated, this is because some are too small to be registered.

Being a business first invovles a type of registration or formation. There are three common ways people go about doing this in the UK:

There are lots more business structures available. People choose a structure that works best how they plan to operate, how many people are responsible and other considerations.

Due to the variety of ways a business can operate and the need for alignment to the same concepts, the core sets of UK statistics make use of two elements the Inter-Departmental Business Register (IDBR) and the Business Population Estimates (BPE) to analyse businesses as a whole.

When using data that uses the IDBR in particular and refering to a single business in the UK, we are actually refering to an enterprise unit.

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. via ONS

However businesses can be so small that the register may not include them, which is where we can make use of the Business Population Estimates (BPE):

[As] there is no single database in the UK which contains details of every active business. The [BPE] takes data on businesses on the IDBR, and then estimates the number of additional very small businesses unregistered for VAT or PAYE via BEIS

So we can use both these data sets to get a general picture of what's happening in the UK. For more on the differences this guide offers a good overview. More detail on the data used is available here.

Next, we also need to consider Standard Industrial Classifications or (SIC codes). Just like the variety of structures there are a large number of things a business can do to meet the needs of it's customers. So to capture what businesses typically do, SIC codes are used to classify economic activites.

A Standard Industrial Classification (SIC) was first introduced into the UK in 1948 for use in classifying business establishments and other statistical units by the type of economic activity in which they are engaged.via ONS

Let's explore some of these now. Press the button below to see an example SIC code and it's description.

1110,Growing of cereals (except rice), leguminous crops and oil seeds

As you can see the codes have a number and a description. The number code can be used to identify the activities of a business into an area and the descriptions can provide further context.

These activities are organised into classes or subclasses, groups, divisions, sections and broad industry groups (BIG). The chart below provides an outline of the breakdown with the number of each categorisation level and an example using 25.91 Manufacture of steel drums and similar containers.

Complex businesses can apply multiple SICs to themselves. For example, a software firm might list themselves engaging in design, software development, professional services and more. Here's another example using a popular UK super market store:

TESCO STORES LIMITED Company number 00519500

Nature of business (SIC):

    47110 - Retail sale in non-specialised stores with food, beverages or tobacco predominating
    47290 - Other retail sale of food in specialised stores
    47710 - Retail sale of clothing in specialised stores
    47750 - Retail sale of cosmetic and toilet articles in specialised stores
via Companies House

For the majority of our purposes, we'll mainly be looking at things at the Broad Industry group level which is the highest categorisation available.

The chart below shows all the Broad Industry Groups (BIG) and their breakdown composition below them. Most BIGs have one section and a number of divisions below them. As you can see Production is the most complex, with two layers structured below it.

This higlights an overall indication of how the UK business landscape is structured, at least statistically speaking. The SIC hierarchy can be explored further here.

2. How many businesses are there?

In summary: As of 2019 over 5.8 million business are estimated to be present in the UK.

The estimation is called out specifically because there are are a vast number of businesses too small to be registered using the IDBR, more detail on the data differences is available here

The chart below shows the difference between the data sets of registered enterprises versus the estimated numbers by industry groups.

The differences above are expected as each data set serves different purposes. However overall both correlate to show similar patterns that the UK has prominent numbers of businesses in industries related to construction and proffesional services.

The chart above shows the total estimated number of businesses highlighting the growth of the UK business population across a six year range.

3. Where are businesses located in the UK?

In summary: There is a concentration of businesses towards the south of the UK. The highest number in London with the lowest in Northern Ireland.

As a quick reminder the The United Kingdom of Great Britain and Northern Ireland (UK) is shaped liked the below. The UK consists of four countries: England, Scotland, Wales and Northern Ireland.

England is split into smaller 9 regions whilst Scotland, Wales and Northern Ireland are treated as individual regions, bringing up the total number of regions to be 12.

The chart below shows the number of businesses by region. It highlights the higher number of businesses towards the south of the UK with London first, followed by the South East and the East of England.

The chart below shows a time series of the numbers of businesses by their region. Click on any of legend items to hide them on the chart.

It shows how consistently those regions maintain the highest number of businesses in the UK.

4. What are the most popular business activities?

In summary: The UK's highest buisness activities are typically those related to construction or proffesional activites. In order at the SIC Division level they are:

  • 43 Specialised construction activities
  • 41 Construction of buildings
  • 85 Education
  • 47 Retail trade, except of motor vehicles and motorcycles
  • 81 Services to buildings and landscape activities
  • The chart below tries to show the regional differences in the concentraion of enterprises. It's using 2019 ONS data on activity and size.

    Couple of interesting points above:

    The chart below shows a treemap of the number of estimated businesses by their broad industry group and their SIC industry division, allowing us to see a little more detail into the most popular business activites.

    5. Who is investing into the UK?

    In summary: Historically the largest amount of investment into the UK has come from Europe followed by the Americas, however in recent years the overall net flow of investment has decreased from Europe with the Americas taking the lead.

    Businesses can take on debt or investment or alternative financial approaches to meet their needs. Here we're looking at Foreign Direct Investment (FDI) as a whole.

    The chart below shows the net flow of FDI by continent. These are net values showing investments minus disinvestments. It shows a shift from Europe to the Americas between 2016-2018.

    Considering overall positions, which we mean to be the value of a stock of investment held at a point in time, the UK continues to see an increase overall. The chart below shows the World Total of International investment positions in the UK by industrial activity.

    Click on any of the items in the legend to hide them from view.

    Financial services continues to be the highest, food and drink along with mining activites have seen the largest changes in international investment positions.

    6. How are UK business trading internationally?

    In summary: An estimated total of 2,424,700 enterprises carried out exporting or importing activity, with a slightly larger number importing. For most it's either exporting or importing rather than doing both activities.

    The largest number of enterprises trading internationally was seen in Wholesale and Retail Trade; Repair of Motor Vehicles and Motorcycles.

    The chart below shows estimated total counts of export and import enterprises in the UK. The number of importers are slightly higher than exporters with the most significant being in goods.

    The chart below shows whether the enterprises are doing both exporting and importing or only one of those actions. Overall what the data shows are that far more enterprises are only doing one of the activity rather than both activites.

    The chart below shows the estimated counts of internationally trading enterprises by high level SIC sections. It illustrates the high activity in Motor vehicles, manufacturing and professional services.

    7. What do these business look like?

    In summary: The majority are small, turning over less than £250,000 a year and if they have been around for >5 years they are hardy survivors.

    Overall, this is a more complex question to analyse and we can break this into factors like number of employees, turnover and their survival rates.

    The chart below shows the numbers of businesses by their Employment Size Band, as you can see the vast majority of businesses employ between 1-9 employees, larger businesses are much lower in number.

    The chart below shows the numbers of enterprises by their turnover band using IDBR data, here there is a slightly more centered distribution. enterprises earning £100-249k are the most frequent.

    Businesses are competing all the time so survival rates are also an interesting factor on businesses.

    A business is deemed to have survived if having been a birth in year t or having survived to year t; it is active in terms of employment and/or turnover in any part of t+1 via ONS

    By that we mean a buisness would have been born in 2013, is still present at 2013 and or has active turnover or employment in 2014 for example.

    The chart below shows the overall survival rates of businesses "born" in 2013.

    The chart demonstrates significant drops in business numbers year to year highlighting the difficulty businesses must face.

    8. How do businesses in the UK feel?

    In summary: Most businesses feel quite positive about their business, outlook and job satisfaction overall.

    This section makes use of data before the COVID pandemic, so perhaps could be considered as a general insight into overall UK businesses sentiment.

    Of course, businesses aren't people, usually they are groups of individuals working together. However we can utilise data from the OECD and Facebook in their survey of businesses (2019). preview.

    This chart below asks the respondents about how they feel about the current evaluation of their business. The majority are positive towards this.

    This chart below asks the respondents about how they feel about their Next 6 month outlook for their business, again the majority are positive.

    This chart below asks the respondents about how they feel about their Job satisfaction levels, again the majority are positive.

    9. Experimental Insights

    This secton takes a few different data sets to see if there are any interesting patterns that emerge, mainly making use of the survival rate.

    The chart below plots the 5 year survival rate (2013 onwards) with the regional population numbers and the numbers of businesses by tens of thousands for that region. Click on any of the legend items to hide them from view.

    On the whole the visual trend appears to be that survival rates could be linked to the density of both people and other businesses. London is interesting to compare to the other regions as it has the highest buisness count and population. Whilst we can see that the business numbers are large it has a lower survival rate in comparison to other regions. Perhaps a cumulation of density, population numbers and rent costs of the region could be attributed.

    In the chart below we are repeating the main points but swapping the regional population with the median gross annual earnings of full time employees for that region.

    Here again London appears as an outlier with the highest gross earnings, the visual trend appears to be that survival rates could be linked to the overall earnings and density of other businesses.

    In the chart below we are repeating the points and now plotting the productivity of the regions. Productivity here is an estimate of the volume of goods and services produced by an industry within a geographic area, and in aggregate across industries for a geographic area,source.

    Considering all the trends perhaps there maybe an ideal balance between productivity, salary and population size that has an impact on the survival of a business.

    10. What are some key takeaways?

    That's it, thanks for reading. Feel free to explore the data sources and libraries here. If you have any feedback, requests for future articles or thoughts please do get in touch.

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