Measuring the Impact of Business Profiling in the UK Wiesbaden Group on Business Registers Profiling (Costs and Benefits) Tallinn, Estonia, 27-30 September 2010 Andrew Sage Business Profiling Team Office for National Statistics (UK) Andrew.Sage@ons.gov.uk

The IDBR - What is it? The IDBR (Inter Departmental Business Register) Statistical business register Complies with EU standards 2.1 million enterprises (businesses) 2.5 million local units (sites) Covers 98-99% of UK economic activity

IDBR Administrative Sources HM Revenue and Customs VAT traders Intrastat traders (identified by VAT reference) PAYE employers Companies House Company registrations Dun and Bradstreet (D & B) Worldbase linkages ONS and Northern Ireland surveys Defra farms statistics system

IDBR Units Model

What is Profiling? Profiling is a method for analysing the legal, operational and accounting structure of an enterprise group at national and world level in order to establish the statistical units within that group and their relationships, and to create and maintain the most efficient structures for the collection of statistical data.

Experience of Profiling UK has many years experience of profiling: 1984 – move suggested from establishment (local unit) to legal unit reporting 1987 – review indicated that legal unit reporting was not suitable for complex businesses – profiling of private sector started 2004 – comprehensive surveying of public sector starts following review of economic statistics ONS has retained a profiling team since 1987.

Why do we need to profile in the UK? Business Profiling Why do we need to profile in the UK? Need to meet statutory requirements for data collection (Statistics of Trade Act 1947) Need to deal with businesses that are unwilling or unable to complete our forms Requirement to update business register structures on which to draw survey samples. Profiling minimises the risk of duplication or omission. Meets need for a common approach to data collection across the whole economy - ensures consistency of outputs. Produce a structure satisfying each of the employment, accounting and financial surveys

Criteria & Coverage of Business Profiling in the UK Private sector enterprise groups with 250+ persons employment with secondary activity of 125+ persons employment. Local Authorities with 3,000+ employment. Central Government with 5,000+ employment. Referrals because of survey response problems, often through mergers and takeovers. Approx 2,500 cases fall within the criteria, all profiled within a 4 year rolling programme.

Summary of Business Profiling in the UK - 2009 Business Status Business Employment No. of Profiles in Existing Criteria Monthly Profiling Target Total No. of Profiles Over a 4-Year Rolling Program Cycle Private Sector & Public Corporations (1,4,7) 250-999 1,097 29 1,392 2,000+ 953 7 336 Central Government (5) 5,000+ 104 2 96 Local Authority (6) 3,000-9,999 138 4 192 10,000+ 92 Totals 2,384

Measuring the Impact of Business Profiling in the UK – How did we measure its usefulness? Approached UK Methodology Directorate who allocated a resource to investigate the following questions:- How much does employment & turnover change month by month on the IDBR? How much does profiling change business employment & turnover? How would the IDBR look if profiling never happened? What changes on the IDBR are attributable to profiling? What is the effect of profiling at NACE 2-digit level? Is there a relationship between the size of a business and the changes in employment and turnover in the IDBR? Is there a relationship between survey response and business profiling?

Accumulative month on month change Findings of Methodology Directorate – Measuring the Impact of Business Profiling in the UK (1) - Employment Period: Jan 2008 to Jan 2009 Key IDBR IDBR - Profiling Month on month change Accumulative month on month change

Measuring the Impact of Business Profiling in the UK (2) - Turnover Period: Jan 2008 to Jan 2009 Key IDBR IDBR - Profiling Month on month change Accumulative month on month change

Measuring the Impact of Business Profiling in the UK (3)

Measuring the Impact of Business Profiling in the UK (4) Main singular reasons for greater than 2% changes in employment and turnover at NACE 2-digit level: Division Month Reason Abs. Change in Employment due to profiling (%) Abs. change in Turnover due to profiling (%) 11 Jan 2009 Reclassification of business from division 31 89.5 86.9 40 Oct2008 Change due to the movement of 16165 employment and 5364926 turnover to division 45 98.6 95.7 41 Dec 2008 Reclassification of business to division 45 with movement of 320 employment 92.7 95.2 42 Jun 2008 Gain of a reporting unit with 931 employment and 424352 turnover 100.0 60 May 2008 Restructuring. 51.1 65.1

Measuring the Impact of Business Profiling in the UK (5) Average absolute contribution to the monthly IDBR change in employment & turnover (%) over a six month period Employment Group No. of Businesses Contribution to the Monthly Change in Employment (%) Business/ Employment Ratio in Turnover (%) Turnover Ratio All 2037860.83 100 0.000049 10000+ 241.333333 6.993248634 0.028978 3.245941416 0.013450 2000-9999 1274 10.51775517 0.008256 18.67854441 0.014661 1000-1999 1131 3.713138652 0.003283 5.677393643 0.005020 500-999 2326 3.306767322 0.001422 6.173954388 0.002654 250-499 4302.16667 2.797892555 0.000650 3.071941166 0.000714 <250 2028586.33 72.67119766 0.000036 63.15222497 0.000031 Results for profiled businesses shows the same distribution. On a per business basis, those with greater than 10000+ contribute the most.

Measuring the Impact of Business Profiling in the UK (6) Response rates of the profiled businesses increased in the six months following profiling Trend also apparent when examining the change in response rates on a monthly basis

Measuring the Impact of Business Profiling in the UK (7) - Conclusions Profiling can be a significant contributor to these changes (>25% in one case) Effect of profiling (measured by changes) much more apparent at NACE 2-digit level. Without profiling a >2% divergence in employment/turnover would have occurred in a number of divisions Most large changes due to the profiling of individual businesses Program developed to analyse absolute and overall changes due to profiling – IDBR & NACE 2-digits Businesses with >10000 employment contribute the most to changes in the IDBR on an individual basis Research supports targeting strategy brought in 2009 (0.6% of businesses by employment)

Business Profiling – Comparisons with other countries Obtained copy of Netherlands (CBS) algorithm Approached UK Methodology Division to carry out comparisons Outcome – both approaches very similar however CBS alogorithm uses more variables Conclusion – continue with UK approach

Measuring the Impact of Business Profiling in the UK (9) ANY QUESTIONS Andrew Sage Business Profiling Team Office for National Statistics (UK) Andrew.Sage@ons.gov.uk