Definitions

Core UK statistical definitions

Size of business
Legal form
Self employment
Freelancer
Start-up
Entrepreneurs
Home based business
Family businesses
Registered businesses
unregistered businesses
Turnover
Employees and non-employing businesses
Total employment counts in the macroeconomy

Size of business

This can refer to the number of employees within a business or the total employment in the business. In the Business Population Estimates the following descriptions for key groups are used:

  • microbusiness: 0 – 9 employees
  • small business: 0 – 49 employees (includes micro)
  • medium business: 50 – 249 employees
  • small and medium enterprises: 0 – 249 employees
  • large business: over 250 employees

The UK Department for Business, Innovation and Skills (BIS) occasionally produces statistics on “mid-size businesses”, defined as those with turnover between £25 million and £500 million.

The Bank of England and the British Bankers Association (BBA) define Small- and Medium-Sized Enterprises (SMEs) as those businesses with less than £25 million annual turnover on the main business account. BBA breaks this definition down further to define small businesses as those that have less than £1 million or £2 million annual turnover.

Legal form

The Business Population Estimates classify businesses into three broad legal forms, any of which may have employees:

  • Sole proprietorships, run by one self-employed person; these are also occasionally called Sole Traders
  • Partnerships (ordinary partnerships with unlimited liability), run by two or more self-employed people
  • Companies; usually used to describe all incorporated businesses, which can take a range of legal forms, including Public Limited Companies, Private Limited Companies, Limited Liability Partnerships, and others such as public corporations and nationalised bodies

Self-employment

Self-employment has no formal legal definition but is usually expected to exclude those who work for their own incorporated business.

Self-employed are defined as those people who regard themselves as self-employed, that is, who in their main employment work on their own account, whether or not they have employees.

The UK self-employment statistics published by the Office for National Statistics (ONS) are based on the International Labour Organisation (ILO) definition. The ILO conceptual framework states:

Self-employment jobs are those jobs where the remuneration is directly dependent upon the profits (or the potential profits) derived from the goods or services produced (where own consumption is considered to be part of the profits). The incumbents make the operational decisions affecting the enterprises, or delegate such decision while retaining responsibility. (In this context ‘enterprise’ includes one-person operations).

Self-employment is not the same as non-employing businesses. Some self-employed people do have employees. Also, the other type of self-employed business is a partnership, where two or more self-employed people share responsibility for the business (and may employ others). This means that the number of self-employed businesses will never equal the number of self-employed people.

Freelancer

The Office for National Statistics (ONS), the UK Department for Business, Innovation and Skills (BIS) including the UK business statistics published by BIS, do not identify a specific sub-group of the self-employed as freelancers.

There is no legal or agreed working definition for this group, but one definition is that these are skilled individuals providing a service (rather than labour) and likely to be in business on their own providing personal services to a number of different clients either concurrently or during the course of a year. We are not aware of any formal measures of this definition.

Start-up

The simplest definition of a start-up is a new actively trading business that is not part of an existing enterprise. There is no direct measure of all start-ups – a number of proxies are available, each having different strengths and weaknesses, but none is fully comprehensive in coverage.

It should be noted that the number of new incorporations at Companies House is not a measure of start-ups. Many new incorporations will never become trading companies at all. Others will relate to existing firms – either where firms that have been running for a number of years decide to change legal structure, or where for some reason an existing company subdivides without changing its core activities.

Entrepreneurs

‘Entrepreneur’ is usually used in business or enterprise statistics and analysis to describe any individual who is involved in owning or controlling (running) an active or fledgling business (where the business is being formally developed but wages have not yet been paid). This can be an incorporated business or self-employment. In practice, some of the self-employed may be excluded from measures of entrepreneurship.

The key statistical source is the (non-government) Global Entrepreneurship Monitor, which contains measures of:

  • Total early stage entrepreneurial activity (TEA) – percentage of the population starting or running a business less than 3.5 years old
  • Established business ownership (EBO) – percentage of the population running a new business more than 3.5 years old
  • And a range of indicators of entrepreneurial attitudes and intentions

Home based businesses

In the Small Business Enterprise and Employment Act, a home business is defined as a business of a kind which might reasonably be carried on at home.

Usually these are defined in research as businesses that do not have separate premises from an owner’s home.

Family businesses

In research these are defined as businesses that are majority owned by members of the same family

Registered businesses

In UK official statistics a registered business may be registered for Value Added Tax (VAT) and/or for a PAYE scheme if the business has at least one employee (including employee directors).

To facilitate the production of official economic statistics the details of registered businesses are maintained by ONS on the Inter-Departmental Business Register (IDBR). The IDBR is used as a statistical register to create sampling frames, undertake business demographic analysis and coordinate and monitor sample selections.

In line with international definitions, registered businesses on the IDBR are classified into the following statistical units and the relationships between the units are identified and maintained:


    • Enterprise
      A business under autonomous and single control, usually producing a single set of accounts.
    • Local unit (or establishment)
      A single site (geographic location) where a business operates.
    • Enterprise group
      A group of enterprises under common ownership.

  • An enterprise is the smallest combination of legal units (generally based on VAT and/or PAYE records) which has decision-making autonomy (even if it is part of a wider enterprise group). A branch or office of a larger organisation is not in itself an enterprise.
  • A single person may run more than one business and each of these businesses will be counted separately in the Business Population Estimates (BPE) which is the official business/enterprise statistics for the UK.
  • There is no lower threshold (in terms of turnover or employees) for what constitutes a business – in practice, the UK business statistics counts all types of businesses including the self-employed. The self-employment data are taken from the UK Labour Force Survey.

Unregistered businesses

Unregistered businesses in the UK are those businesses run by self-employed people that are not large enough to be VAT (or have not opted to be VAT registered if below the VAT threshold) or PAYE registered and therefore do not appear on the UK Inter-Departmental Business Register (IDBR). In the UK, the VAT registration threshold is currently at £82,000 for 12 months (October 2015). Businesses with a turnover greater than the threshold are compelled by law to register for VAT.

Periodically analysis of the unregistered business population is carried out by the Office for National statistics to inform the statistical adjustments made to account for them.

Turnover

The value of sales for work done and services rendered (what is invoiced by the seller). It excludes VAT. In the BIS Business Population Estimates, turnover data for registered businesses comes from the IDBR while turnover data for unregistered businesses is estimated.

Employees and non-employing businesses

The number of employees refers to the number of people working within the business under a contract of employment in return for a wage or salary.

A business can be classed as non-employing if all the business is conducted by people classed as being working proprietors. For example, 20 partners in a partnership could all be defined as working proprietors if none of them were drawing a salary and therefore classed as an employee. In the Business Population Estimates, the most comprehensive estimates of the UK business population, companies with a single employee are classified as non-employing businesses (on the basis that in most cases this will be an employee-director).

  • Non-employing businesses are those in which the workers are all working owners – there are no employees. This should not be confused with the legal form ‘sole proprietors/sole traders’ as these may or may not have employees.
  • Employing businesses will have working owners and employees.

Total employment counts in the macroeconomy

Employment created in firms includes employees plus the number of ‘working proprietors’ who run the business.

Individuals with two jobs in different businesses, and self-employed people running two businesses will be counted against each business. Full-time and part-time employees are all counted equally.

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