Defining the business world

The business universe

The legal world of businesses is translated into a statistical world. The UNECE Guidelines on Statistical Registers shows how the business universe can be sub-divided into a legal universe governed by national laws and administrative rules and a statistical universe governed by statistical concepts and definitions.

Relationship between statistical and administrative universes

defining-biz-world-diagram

International definitions

In the European Union statistical concepts and definitions are laid down in regulations and internationally recommended by Organisation for Economic Co-operation and Development (OECD) and/or United Nations (UN) guidance.

The European Business Register Regulation No 177/2008 establishes a common framework for business registers for statistical purposes. One of the roles of the business register is to map the relationships between legal units, enterprises and local units. A benefit of harmonised European and International definitions is comparability.

In the UK, ONS business demography estimates are based on the concept of active businesses in a reference year. These are defined as businesses that had either turnover or employment at any time during the reference period.

Institutional units

In National Accounts – which produce key economic aggregates such as Gross Domestic Product – the basic statistical building block is an institutional unit. An institutional unit is defined in the European System of Accounts as:

“an economic entity characterised by decision-making autonomy in the exercise of its principal functions. A resident unit is regarded as constituting an institutional unit in the economic territory where is has its centre of predominant economic interest if it has decision-making autonomy and either keeps a complete set of accounts, or is able to compile a complete set of accounts” (ESA, 2010: para 2.12).

Legal units

Legal units are defined according to national legislation. In the UK the Companies Act 2006 establishes the rules for the operation of companies. Companies formed and registered, by one or more persons, under this Act are:

  • A limited company if the liability of its members is limited by its constitution. It maybe limited by shares or limited by guarantee.
  • A private company is any company that is not a public company.
  • A public company is a company limited by shared or limited by guarantee and having a share capital.

On the registration of a company, the registrar of companies issues a certificate that the company is incorporated.

Businesses

The defining of businesses by National Statistical Institutes – such as the Office for National Statistics – is informed by a number of factors:

  • typically businesses are defined according to their activity within national boundaries
  • the rules that govern what statistical offices do largely reflect institutional and administrative arrangements that exist in their country
  • legal units are usually the building blocks used in defining business. However legal units are not themselves comparable across countries since they reflect national administrative and legal requirements that will differ across countries

Eurostat/OECD (2007), Eurostat – OECD Manual on Business Demography Statistics, Office for Official Publications of the European Communities, p. 10.

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