VAT-Registered Business Stock by Local Authority
1994-2007

Introduction

Each year the BERR Enterprise Directorate Analytical Unit publishes detailed estimates of the number of business start-ups and closures in the UK based on VAT registrations and de-registrations. To coincide with the latest VAT stock estimates for 2007, revised figures of registrations and de-registrations have been produced for the years 1994 to 2006. Long time lags can occur in a small number of cases in the notification of such registrations and de-registrations which results in a periodic need to revise earlier figures.

A full analysis of the trends in the VAT Business Stock and in business formation and survival rates across the wider Lancashire NUTS-2 region based on these revised figures can be found in an associated research monitor VAT Business Registrations and De-registrations. Associated data sets can be found in the Data Download Centre. Overall, between start-1994 and start-2007 the stock of VAT-registered businesses in this area increased by an estimated 3,945 or by 10.6%. Despite a steadily improving out-turn over the past few years, this compared unfavourably with a net increase of 14.7% in the North West and to an even greater extent with the net gain of 20.7% in the UK at large. Lancashire's performance in terms of its net VAT stock increase over this 13-year period was one of the poorest in the UK and was part of a persistent pattern stretching back to at least 1980 when the VAT data series first became available.

Lancashire District Authorities

Within the Lancashire region there have also been some striking contrasts in net business stock changes between different areas as demonstrated in Figure 1 and Table 1.

Figure 1 Percentage Change in VAT Business Stock, 1994-2007, Local Authority Districts

Source BERR Enterprise Directorate Analytical Unit - VAT Registrations and De-registrations, 1994-2006

Some of the best out-turns over the period occurred in Central Lancashire with overall net stock growth 1994-2007 of 1,950 or 16.4% and where both Chorley and South Ribble districts comfortably exceeded the UK average stock growth rate. Growth in Preston and West Lancashire was rather more subdued, though in the former case still exceeded the sub-regional average. Business formation rates in the area (except for West Lancashire) have generally been at or slightly below the national average, and where especially buoyant over the first half of the period. The area (and particularly Chorley) has also seen a small improvement in its rate of business survival).

Across much of East Lancashire business stock growth has been rather more modest, showing a net increase over the full period of about 11% or half that of the UK. The main exception was recorded stock growth of over 22% in Ribble Valley, the third highest rate in Lancashire. Business growth rates were particularly sluggish in Hyndburn and Pendle. Not withstanding recent above-par performance in both Blackburn and Burnley, business formation rates in East Lancashire over the period have been below the UK average as also have survival rates. Much of this can be explained in terms of local structural factors such as the continuing strong presence of slowing growing sectors and a corresponding under-representation of fast growth sectors like business services. However, in East Lancashire's favour it might be noted that the area has begun to move into more positive territory over recent years. Business formation rates over the past five years have moved above the UK average with an especially strong improvement in Blackburn, Burnley and Hyndburn. This trend has also been accompanied by some improvement in the business survival rate.

By far the poorest performance in business stock growth has been exhibited in North Lancashire with a small increase over the period 1994-2007 of just 4.4%. A large part of this out-turn was attributable to Blackpool with a 6% decrease in the stock count (the largest of any English unitary authority) but the characteristic of sluggish growth was apparent across many parts of the area. Business formation rates across all four districts have largely remained below the national average for much of the period, though did improve slightly post-2001 as elsewhere across Lancashire, with the improvement especially marked in Blackpool. Business survival rates too have shown some upturn over recent years, moving ahead of the Lancashire and national averages. Survival rates in Lancaster and Wyre are especially high and may to a degree reflect structural factors such as the higher representation of agricultural businesses. Blackpool too has moved forward in terms of business survival but still has the lowest rate in Lancashire partly due to the role of seasonal tourism businesses.

An alternative way of examining these local business stock trends is via the "population rate" – measuring the number of registrations, de-registrations or stock of registered enterprises per 10,000 resident adults (Table 4). Using population to calculate such rates aids comparison between locations of different sizes, though such comparisons can be less robust in areas where there is a high level of labour market or business activity across boundaries. In 2004, the Lancashire NUTS-2 are had a registration rate per 10,000 adult population of 31 compared with a somewhat higher average figure of 37 in the UK. However, partly offsetting this, the de-registration rate of 27 enterprises per 10,000 population was rather lower than the UK average of 32.

Amongst local districts a general pattern taken over several years has been one in which above-average rates of new registrations have often been matched by higher de-registration rates. Equally, in areas where rates of new business formation per 10,000 adult residents have been relatively low de-registrations or closure rates have also been well below average. It is not possible to draw any firm conclusions from this pattern as all these measures are closely related. For example, an area with a high registration rate will also tend to have a high de-registration rate reflecting the short lifespan of most small businesses. Crudely, a high turnover rate or turbulence of businesses can be interpreted as a favourable characteristic, reflecting a health competitive economy or a process of adjustment reflecting a shift from declining to growing industries (e.g. locally, a major closure can often lead to a spurt of new businesses as ex-employees are spurred into self-employment). Conversely, low levels of turbulence can be viewed as a sign of undesirable economic stagnation. Beyond a certain point, however, very high levels of turbulence can be seen as a sign of unhealthy instability. However, the position is greatly complicated by other factors such as the characteristics of the local industrial structure. Thus, a location with a high proportion of enterprises in the hotels and restaurants sector might, other things being equal, expect to have a high churning of enterprises because registrations and de-registrations are high in this sector. In tourism areas many such businesses may be established just for the season. Conversely areas with a large agricultural business stock, in which turnover is low, tend to show a higher degree of stability.

It is of note also that many areas in Lancashire with relatively high formation rates are also districts that have above-average business stock density (i.e. stock per 10,000 population), presumably implying higher proportions of smaller businesses, and are additionally often associated with population and affluent commuter dormitory areas.