Scottish Government

Background

Scottish Annual Business Statistics (SABS) is based on data from the Annual Business Survey (ABS) (formerly Annual Business Inquiry (ABI)) conducted by the Office for National Statistics (ONS).

The statistics have been produced under partnership procedures agreed between ONS and the Scottish Government (SG). These have resulted in an improvement in the quality of the underlying data and consistency in the figures used by ONS and SG.

For more information on the methodology used to compile regional ABS statistics, please look on ONS website at: http://www.ons.gov.uk/ons/guide-method/method-quality/specific/business-and-energy/annual-business-survey/index.html

Use

The SABS results are used by the SG to inform government policies. Some of the many other users of SABS include local authorities, the enterprise networks, academics and consultants. A consultation on the use made of SABS, carried out in the Spring of 2011, showed that the results are used extensively to inform sectoral policy and regional/local economic development. For more details on the consultation, and the resulting changes made to this publication, please look at the following document:

http://www.scotland.gov.uk/Topics/Statistics/Browse/Business/scotstat/SABSFindingsReport

The quarterly GDP index is the SG's preferred source for measuring real output change over time - for broad sectors of the Scottish economy. But the strength of the SABS data is that it enables analysis at a detailed industry level and at a local level. Data for key business indicators (e.g. employment, turnover, GVA, labour costs), at basic prices, are available by industry sector, local authority area and ownership.

Coverage

The ABS estimates cover UK businesses registered for Value Added Tax (VAT) and/or Pay As you Earn (PAYE), classified to the UK Standard Industrial Classification (SIC) system. The ABS obtains details on these businesses from the ONS Inter Departmental Business Register (IDBR).

The ABS, from which the statistics are derived, covers approximately two thirds of the economy. The statistics do not cover the whole economy, omitting much of the public sector, finance and agriculture.

The industries covered are:

Agriculture (support activities), hunting, forestry and fishing Section A
Production industries Sections B-E
Construction industry Section F
Distribution industries Section G
Service industries Sections H, I, J, L, K (Part), M, N, P (excludes public sector), Q (excludes public sector and Group 86.2), R and S

The main areas excluded are agriculture (Groups 01.1, 01.2, 01.3, 01.4 and 01.5), most of Section K - Financial and insurance activities, public administration and defence.

Oil & Gas

ABS data relating to Oil & Gas ( SIC 11) is allocated to UK regions (including Scotland) according to the address at which the business is registered - onshore and offshore Oil & Gas extraction and activities are allocated in this way. Such offshore activity is excluded from Scottish National Account figures (e.g. ONS Regional Accounts, where it is assigned to an "Extra-regio" category and counted separately).

Overall/Total Results

In general, we strongly advise against quoting overall/total growth rates associated with the ABS given that significant sectors of the economy are not included and the results have not been balanced with other datasets. These statistics are therefore best suited to analyses of individual industries rather than the economy as a whole.

Major Time Series Caveats

2009

• The 2008 and 2009 data are published on a Standard Industrial Classification (SIC) 2007 basis - data pre-2008 were published on a SIC 2003 basis. Updates to the SIC are required to enable it to more accurately reflect the structure of the modern economy - SIC 2003 was replaced by SIC 2007 in January 2008. The revision was motivated by the need to adapt the classification to changes in the world economy. The revised classification reflects the growing importance of service activities in economies over the last fifteen years, mainly due to the developments in information and communications technologies. More information on SIC (2007) is available at: http://www.scotland.gov.uk/Topics/Statistics/Browse/Business/Corporate/sic2007note#top and http://www.ons.gov.uk/ons/guide-method/classifications/current-standard-classifications/standard-industrial-classification/index.html
• The 2008 and 2009 employee/employment data published in SABS 2009 are based on Business Register and Employment Survey (BRES) - previous years SABS employee data were based on the employment part of the Annual Business Inquiry (ABI/1). The BRES replaced and integrated the Business Register Survey (BRS) and the ABI/1 in 2009 (note that there was a pilot of BRES in 2008 which allowed 2008 BRES estimates to be produced). For businesses that are surveyed by BRES, the regional and local estimates of employment are more accurate (than those from the ABI/1) because, rather than producing data by a headquarter-based apportionment model, they are obtained directly from data reported at site level (shop, office, factory, etc). More information on BRES is available on the ONS website at: http://www.ons.gov.uk/ons/publications/all-releases.html?definition=tcm%3A77-230512
• Although the 2008 and 2009 ABS followed a similar sample selection criteria (see Sample Design section below) and were both sampled on a SIC 2007 basis. It is important to note that 2009 marked the full introduction of the BRES, this and the change to SIC 2007 may lead to some discontinuity with businesses moving from one SIC to another between years. It is not unusual for some businesses to change SIC code over time, but there are some particular movements between 2008 and 2009 that users should be aware of e.g. a large number of landscape business sites have moved from SIC 01 (Crop and animal production, hunting and related service activities) to SIC 81 (Services to Building and Landscape Activities) between 2008 and 2009 - this is a result of the change from SIC03 (where landscape businesses were included with the agricultural sectors) to SIC07 (where landscape businesses fall under the services sector).
• Insurance and Reinsurance (SIC 65.1 and 65.2) data is published for 2008 and 2009 - this is the first time that these data have been included in SABS. Please note that SIC 65.3 (Pension funding) is still omitted from the SABS results.

2008

• ONS improved the sample design for the 2008 survey which means that the latest results for 2008 cannot be compared with historical trends. Although this temporary loss of comparability over time is a downside - it means that the results for 2008 are more accurate, and comparisons can still be made between sectors across the UK. More details are provided below on the change in sample design due to SIC 2007 and the complete re-allocation of the sample in 2008.
• Notwithstanding, the change in sampling, the high energy prices in 2008 have had a significant impact on the "Remaining Sectors" results for Scotland in 2008.

2006

• For 1998-2005 data, Scottish Government analysts merged ABI/1 (employment survey) and ABI/2 (financial survey) results in order to produce consistent "per employee" totals (e.g. GVA per employee). During this process, employee data was retained only if a company was part of smaller financial survey. However, for 2006 data onwards, there has been a change in the sampling arrangements for the two parts of the ABI. In previous years, ABI/2 was a sub-sample of ABI/1 but they are now sampled separately in different months. This leads to non-matching between the two sets of results - this affects around 3-4% of total ABI/2 units. For these units, employee totals have been set to their values from the Inter-Departmental Business Register (IDBR).
• Further, for 2006 data onwards, ABI/1 survey reference date has been moved from December to September each year. This step change should be taken into consideration when analysing time series data.

2001

• From 2001 coverage of Section A was further extended to include Groups 01.4 (Agricultural and animal husbandry service activities, except veterinary activities; landscape gardening) and 01.5 (Hunting, trapping and game propagation including related service activities). Within Groups 01.4 and 01.5 employee data is volatile between years due to small sample size - time series should therefore be treated with caution.

2000

• From 2000 ABI coverage was extended to include Division 02 of Section A (Forestry, Logging and Related Service Activities) and Division 05 in Section B (Fishing).

1999

• From 1999 improvements to the questionnaires for Sections M (Education - excludes some public sector) and N (Health and social work - excludes some public sector), have led to a movement of data from 'total turnover' to 'value of grants/donations received'. This has caused the approximate Gross Value Added at basic prices to fall between 1998 and 1999. Data from 1999 onwards has been collected and processed on a consistent basis.

Sample Design

The ABS sample is designed as a stratified random sample of around 70,000 businesses from the IDBR. The inquiry population or universe is stratified by Standard Industrial Classification, employment, and country using the information from the IDBR. The sampling scheme is designed to give best estimates of the population totals for a given sample size and involves selecting all the largest businesses with a progressively reducing fraction of smaller businesses. This method ensures the sample size is kept to a minimum.

The inquiry results are grossed up to the register population, so that they relate to all active UK businesses on the IDBR for the sectors covered.

Scottish sample

Since 1998, the Scottish Government has funded an enhanced ABS sample in Scotland, to improve the quality of Scottish figures. In 2009, around 2,600 extra firms in Scotland were sampled as a result of this "boost", giving a total sample size in Scotland of around 8,100 firms.

Changes to sample in 2008

In 2008 and 2009, the sampling stratification and resultant estimation was carried out on a SIC 2007 basis.

Please note that, for the 2008 sample, ONS undertook a complete sample re-allocation (using the Neyman methodology) to ensure that sufficient account of the variability within the micro businesses was reflected in the sample.

Due to the complexity of the ABS sample structure ONS had erred away from regularly re-allocating the sample. Hence, for a number of years ONS were left in the position of having the basis of the original sample produced in 1998 but with a number of manual tweaks. The earlier sample design did not adequately take account of the greater variability of smaller businesses, which should have led to a larger proportion of smaller businesses than was actually selected over that period. Consequently, the share of smaller businesses in 2007 and earlier was smaller than it should have been.

One feature of the 2008 and 2009 selections is the change in the proportion of businesses of employment size 0 -9 in the sample. The table at link below shows a significant increase in businesses sampled in employment size 0-9 for Scotland - 43% in the 2007 sample to 58% in 2008 and 2009.

Sampling framework Table for 2007-2009

The change in the sample design, due to the SIC 2007 and the sample re-allocation, from 2008 onwards means that the results for 2008 onwards are not strictly comparable with earlier years data.

Inter Departmental Business Register

The sampling frame used for the ABS is the Inter Departmental Business Register (IDBR), which consists of companies, partnerships, sole proprietorships, public authorities, central government departments, local authorities and non-profit making bodies. The main administrative sources of the IDBR are HM Revenue and Customs (HMRC) for VAT and PAYE details.

Each legal unit is classified to a single activity, whether it is wholly or mainly engaged in that activity. The nature of a business can change with time, possibly because another business has been absorbed in a take-over. Some businesses have a very significant secondary activity, perhaps completely different from their main activity, and a small change of direction can lead to a new main activity and to the reclassification of the business. Other changes may arise from improvements to classification data held on the IDBR as a result of new information received about individual businesses. The reclassification of businesses for reasons such as these contributes to the year on year changes in the figures published.

Further information on the IDBR can be found at http://www.ons.gov.uk/ons/about-ons/who-we-are/services/idbr/index.html

Response

Details of UK-wide ABS response rates are made available by ONS at:
http://www.ons.gov.uk/ons/rel/abs/annual-business-survey/2009-revised-results/abs-2009r---quality-measures--june-2011-.xls

Confidentiality

The Statistics of Trade Act 1947 prohibits the disclosure of any information relating to an individual undertaking without the consent of the person carrying on that undertaking. Rigorous checks have been made to ensure that information relating to individual businesses has not been disclosed, either directly or by deduction, in any of the figures released. Similar precautions will be taken in safeguarding the confidentiality of returns in the preparation of any ad-hoc analyses.

Estimation

Factors were produced to enable estimates for all businesses classified to each SIC(92)/ SIC(2003)/ SIC(2007) to be compiled from data provided by responding businesses. These factors were calculated for each employment size-band within each SIC(92)/ SIC(2003)/ SIC(2007) and are equivalent to the ratio of responding businesses to the total number of businesses. Northern Ireland and Scotland are sampled and estimated for separately, England and Wales are sampled separately but are combined for the estimation procedure.

Returns for the few large non-responders were estimated for individually. This estimation was normally based on summary data received from the business, or on the business's return to the inquiry in the previous year adjusted to take account of the likely change in the value of trading over the period.

Regional Estimation

Important Information about Regional Data - The total regional estimate for a variable summed across all regions within any industry will not necessarily equal the UK industry estimate of the variable. This is due to the method of calculating estimated regional data. The regional estimates are constrained to the UK data at the all-industry level.

The ABS regional methodology apportions returned data to the local units (individual sites) of the reporting unit (main site from which data is collected) before the estimation process. The estimation process is then performed at local unit level. For the UK industry level data the estimation process is performed at the reporting unit level.

The local unit estimation process calculates an estimation factor for non-response from the apportioned local unit data. The estimation factor is then applied to the apportioned local unit values to give a total estimate for the local unit population. The estimation factor is calculated using the IDBR employment, classification and region of the local unit. This estimation factor will cause the regional data to differ from the estimated national data and so the data is constrained to the UK all industry level.

The reporting unit estimation process calculates the estimation factor for non-response from the returned reporting unit data. The estimation factor is then applied to the returned reporting unit data to give a total estimate for the reporting unit population. The estimation factor is calculated using the IDBR employment, registered turnover and classification of the reporting unit.

The local unit industrial classification may differ from the industrial classification of the reporting unit and the apportioned value for the local unit will be added to the industry of the local unit, not the industry of the reporting unit as would be the case for UK data.

The sub-national estimates are constrained to the UK data at the all-industry level and so the total regional estimate, for a variable summed across all regions, and all industries, will equal the UK estimate of the variable at the A-S level in the national results.

ABS figures are based on an annual survey of companies. In the context of overall Scottish figures, year-on-year differences are sometimes less obvious as they can be compensated for by other changes. However, at a more disaggregate level, such as sectoral or local authority, changes in a small number of large companies can have a have a very marked effect on figures from one year to the next.

Furthermore, estimates derived from samples invariably produce results which differ from those that would have been obtained from a complete survey. If a number of different samples were selected then each would produce a different result. Sampling errors measure the extent to which these estimates can be expected to differ from the 'true' value.

However, in addition to sampling errors there is the potential for non-statistical errors which cannot be easily quantified. Examples where these errors may occur are deficiencies in the inquiry register and errors made by respondents in completing the inquiry forms.

Data Reliability

The Annual Business Survey (ABS) is a stratified random sample, using SIC(2007), employment and country as stratifying variables. As in all samples the estimates from the survey are subject to various sources of error.

Details of UK-wide sampling errors for the main variables are made available by ONS at: http://www.ons.gov.uk/ons/rel/abs/annual-business-survey/2009-revised-results/abs-2009r---quality-measures--june-2011-.xls

It is not possible to produce sampling errors for the regional or local estimates given the estimation involved. Therefore, to give users an indication of data quality and reliability, the SABS publication now includes information on the percentage of selected data (business units, turnover, GVA, labour costs) that is from actual survey returns as opposed to estimated data. For example, if a Local Authority area has an estimate of £X m Turnover in the Manufacturing sector, from the associated quality measure table, users will be able to see that Y% of the Turnover figure is produced from actual returns and by deduction Z% from estimated data. Data quality measures for SABS data can be found here.

The actual survey returns proportions also include constructed returns; this is where returns for the few large non-responders are estimated for individually. This estimation is normally based on summary data received from the business, or on the business's return to the inquiry in the previous year adjusted to take account of the likely change in the value of trading over the period.

Note that SABS data quality measures have not been provided for the employment or employee variables. The employment and employee estimates are largely based on Business Register and Employment Survey (BRES) data, and sampling errors for 2008 and 2009 BRES estimates are provided at a regional and local level, by ONS, at: http://www.ons.gov.uk/ons/publications/all-releases.html?definition=tcm%3A77-230512

Regional Capital Expenditure

It has been established that the estimation of regional capital expenditure is unreliable therefore Net Capital Expenditure figures are not now available on Scottish Annual Business Statistics website.

Office for National Statistics (ONS) has provided the following information:

Figures on regional capital expenditure are no longer made available on the ABS website pages. Accurate estimation of regional capital expenditure is dependent on there being a strong correlation between the variable on which any estimation is based, in this case local employment, and the variable for which we are attempting to produce estimates, here regional capital expenditure. It has been established that the relationship between regional employment and regional capital expenditure is, in fact, unreliable.

It will still be possible to obtain regional capital expenditure figures by requesting either standard extracts, for which there is no charge, or special analyses, for which a charge will be made. ONS does not recommend the use of these regional capital expenditure figures but recognises that some users will, nevertheless, wish to have them.

For more information about either of these services, please either email abi2@ons.gov.uk or telephone +44(0) 1633 456592 for standard extracts or +44(0) 1633 456601 for special analyses.

Further information on the regional methodology is contained in an article published in the November 2000 edition of Economic Trends: http://www.ons.gov.uk/ons/rel/elmr/economic-trends--discontinued-/no--564--november-2000/the-development-of-the-annual-business-inquiry.pdf. Refinements to the methodology have taken place since this article was written; methodological information given on these pages supersedes the Economic Trends article.

If you require Scottish Capital Expenditure figures only, you can alternatively contact the Scottish Government.

Total Employees/Employment and Per Employee variables

For 2008-2009 data, Scottish Government analysts merged BRES (employment survey) and ABS (financial survey) results in order to produce consistent "per employee" totals (e.g. GVA per employee). However, the BRES and ABS are sampled at different times of the year so where a BRES employee/employment estimate cannot be found for a business within the ABS, employee/employment totals are set to their values from the Inter-Departmental Business Register (IDBR).

Please note that Total Employees/Employment is a head count and not a Full Time Equivalent (FTE) measure. This distinction is particularly important for sectors with high levels of part time employment (e.g. Retail and Accommodation & Food Service activities) especially when comparing Per Employee figures.

Revisions Policy

In general, SABS follows the Revisions Policy for the ONS ABS results i.e. the latest results are provisional until the following year when they may be revised as a result of late returns or information received in the course of the following year's inquiry. So, for example, within SABS 2009 the latest results for 2009 are provisional and will be made final when they are re-published within SABS 2010 - at which point they may be revised due to late returns. Likewise the results for 2008 within SABS 2009, have been revised since SABS 2008 and, are now final.

Although the general rule is to only revise back one year, if revisions have a significant impact on estimates for Scotland, then we may revise back the entire time series. Significant revisions of this sort, and their treatment within SABS, will be highlighted at the time of the release.

Major Historical Revisions

SABS 2009

• Within industry 20.14 (Manufacture of other organic basic chemicals), a significant downwards revision has been made to the 2008 data, which has an impact on turnover and GVA for this group. This revision was required as it became apparent that previous data submitted was incorrect as it included turnover generated in other European countries. This error has been corrected for the 2008 data onwards.
• Within industry 46.3 (Wholesale of food, beverages and tobacco), there is a significant under-reporting of data within the Scottish results for 2008 and 2009. This under-reporting is a result some business data being inadvertently excluded from the Scottish results in both years. This data is included in the overall UK results but not the Scottish results. This error in the Scottish results cannot be amended until the 2010 data and revised 2009 data are published in summer 2012.

SABS 2007

• Within industry 92.20 (Radio and television activities) a significant revision was made to 2006 Turnover and GVA. The revision is identified due to changes in the nature of the reporting within the Industry for 2006 onwards. Note that the entire time series for Creative Industries was redefined in from SABS 2007 onwards to incorporate this change.

SABS 2006

• Within industry 23.20 (Manufacture of refined petroleum products) and 24.14 (Manufacture of other basic organic chemicals) there have been significant revisions to Turnover, Purchases and GVA for both 2005 and 2006. This is due to a large reclassification of a business from Class 23.20 to Class 24.14 that came to light during the processing of the 2006 ABI inquiry. Further, for both 2005 and 2006, there has been an additional upward revision to Class 24.14 to correct underestimation.
• Within industry 92.20 (Radio and television activities) a significant revision has been made to 2005 Turnover and GVA data after some overestimation was identified. The overestimation has also been identified for earlier years but in conjunction with current Annual Business Inquiry (ABI) revision policy there will be no revision to published data for years prior to 2005. However, note that the entire time series for Creative Industries was revised back to adjust for this over estimation.

Rounding of Figures

Where necessary, figures have been rounded to the nearest final digit shown. Consequently, there may be slight discrepancies within a table between totals and the sums of constituent items.

Symbols and Abbreviations

The following symbols and abbreviations are used within the ABS data:

.. not available

- nil

* Information suppressed to avoid disclosure

Comparable Data

Statistics for the UK, English Government Office Regions, Scotland, Wales and Northern Ireland are available at:
http://www.ons.gov.uk/ons/publications/re-reference-tables.html?edition=tcm%3A77-249334
 

Comparisons with other GVA estimates

The Annual Business Survey (ABS) is a valuable source dataset which is used alongside a number of other important datasets in the production of macro-economic statistics in Scotland and the UK as a whole. However, we strongly advise against quoting overall growth rates associated with the ABS given that significant sectors of the economy are not included and the results have not been balanced with other datasets.

The quarterly GDP index is the Scottish Government's preferred source for measuring real GVA change over time - for broad sectors of the Scottish economy. But the strength of the SABS data is that it enables analysis of nominal GVA and other financial variables at a detailed industry level, at a local level and in terms of ownership.

Nominal GVA at a regional and broad sector level is also published via the ONS Regional Accounts Data. The main reasons why differences arise between the ONS regional accounts GVA estimates and the ABS GVA estimates are:

• ABS data are not used in the compilation of regional GVA for non-manufacturing industries - instead ONS use the income approach, which is based on earnings and employment from, the Annual Survey of Hours and Earnings (ASHE) survey and the Business Register and Employment Survey (BRES) respectively.
• Also, regional accounts data are revised all the way back whenever the national accounts are revised, unlike ABS.
• And the regional accounts data cover the whole economy - whereas are the ABS omits some sectors, which will affect some regions and industries more than others.

More information on ONS Regional Accounts is available at:

http://www.ons.gov.uk/ons/taxonomy/index.html?nscl=Regional+Accounts

Code of Practice

This is a National Statistics publication. It has been produced to the high professional standards set out in the Code of Practice for Official Statistics and the Pre-release Access to Official Statistics (Scotland) Order 2008.

Code of Practice for Official Statistics:

http://www.statisticsauthority.gov.uk/assessment/code-of-practice/code-of-practice-for-official-statistics.pdf

Pre-release Access to Official Statistics (Scotland) Order 2008:

http://www.opsi.gov.uk/legislation/scotland/ssi2008/pdf/ssi_20080399_en.pdf