Section 4: Business Development

12. Business Registrations and Survival Rates

This measure reflects entrepreneurial activity in the formation rate of new firms and their ability to survive their first three years of trading.

VAT Registrations as a Proportion of the Stock of Business

An indicator of business formations is the number of new Value Added Tax (VAT) registrations each year as a percentage of enterprises registered for VAT at the start of that year.

The figures in Table 12(a) detail VAT registrations for manufacturing, services and the rest of the economy, while Chart 12(a) illustrates total VAT registrations as a proportion of business stock.

Table 12(a) indicates that registration rates in service industries during 2001 were lower in all regions of the UK during 2001 than in 1998. The impact of this change on the overall UK rate has led to a drop from 13.4 per cent of business stock in 1998 to 12.0 per cent in 2001. Over the same period registration rates in manufacturing have also fallen in most regions, although the declines have, in general, not been of the same magnitude. Between 1998 and 2001 manufacturing registrations in the UK fell from 7.9 to 7.2 per cent.

London had the highest business formation rates in all the years shown for manufacturing, services, and for other industries. The relative positions of the other regions and countries did not change markedly between 1998 and 2001, but it is evident that the gap between London and the rest of the UK has narrowed in recent years as registrations in London have declined more quickly than in other regions.

VAT Registrations as a Percentage of the Adult Population

Table 12(b)i details business VAT registration per 10,000 adults resident in each region while Table 12(b)ii presents this information in the form of a UK = 100 index. Chart 12(b) compares the indices for 1999 through to 2001.

London had the highest rate of VAT registrations per 10,000 adults between 1998 and 2001 at more than 160 per cent of the average for the UK as a whole. For all years between 1998 and 2001 registrations per head were lowest in the North East (around 20 registrations per 10,000 adults), just over half of the rate for the UK as a whole.

The greatest decline during this period occurred in London, with a fall of just over 11 percentage points relative to the UK. Registrations per head in most other regions were reasonably steady or increased between 1998 and 2001.

The very high registrations/population rate for London is likely be, at least in part, a result of the high concentration of business in Central London and in - commuting of workers from other regions.

Business Survival

Business survival rates detail the proportion of businesses remaining registered for VAT three years after their initial registration, the year shown in Table 12(c) + 3.

Survival rates for the UK have been rising steadily since 1994. Three-year survival rates were nearly 60 per cent for firms first registered during 1994, and increased during all years to a high of just over 65 per cent for businesses registered during 1997. Chart 12(c) indicates that this overall pattern has been repeated in most of the English regions, as well as in Wales and Scotland.

Chart 12(a)

13. Research & Development and Employment in High and Medium High Technology Industries

This indicates the value of the Research & Development (R&D) activity carried out by manufacturing and service sector firms and the number of employee jobs in high technology industries.

Expenditure on R&D measures the extent to which businesses are developing and exploiting new technology, software and ideas. R&D activity can be a stimulant to the competitiveness of firms within a region.

Chart 13(a) represents the value of R&D carried out by the combined manufacturing and service sectors as a proportion of regional GVA for 1997 to 1999. The R&D data used in this Chart and in Table 13(a) are taken from the Survey of Business Enterprise Research and Development and the regional economic accounts, both produced by the ONS (see Definitions Section).

It is evident that R&D as a proportion of GVA was significantly higher in the East of England than any other region, with proportions relatively low in the North East, Yorkshire and the Humber, London and in Wales, Scotland and Northern Ireland. Across regions, expenditure on R&D was in general, higher in the manufacturing sector than in the services sector.

Chart 13(b) and Table 13(b) detail the proportion of employee jobs in high and medium - high technology manufacturing industries. As can be observed from these, 5.3 per cent of all employee jobs in the UK were classified as high or medium - high technology industries during 2001, a fall of just under 1 percentage point on 1998. This fall is due to two factors: a decrease of around 10 per cent in the number of UK high and medium - high tech. jobs as well as some growth in other sectors of the economy over the 1998 to 2001 period. During 2001, the West Midlands had the highest proportion of this type of job (at just under 8 per cent of all employee jobs), with the lowest in London (at 1.7 per cent).

The fall in the level of high and medium � high technology jobs between 1998 and 2001 occurred in every region and country within Great Britain. The North East, East Midlands and West Midlands have been particularly affected, with decreases in the level of these jobs of 14, 15 and 16 per cent respectively.