How many businesses are there in the North East?
Thomas Athey, Economic Analyst at the North East Local Enterprise Partnership (North East LEP), explains the different ways of measuring the number of businesses in our region, and the range of data available.
At the North East LEP we are committed to evidence-led decision-making, using data and insight to deliver regional economic growth. The findings from this data and insight are often nuanced, and we recognise apparently simple questions are sometimes difficult to answer.
A good example is a question of central importance to the regional economy, how many businesses are there in the North East? A range of data has been released on the local business population in the last few months. Yet to analyse how the business population is changing we need to understand what insights are available from different sources.
For our headline measures at the North East LEP we use the Office for National Statistics UK business counts. This is one of the most detailed business datasets in the UK and covers all PAYE or VAT registered businesses. In 2022 there were 55,030 businesses in the North East LEP area according to this data, 25,000 fewer than there would be if the North East had the same number per person as England excluding London.
Not all businesses are registered for VAT and PAYE however and estimates of the unregistered business population from the Department of Business, Energy and Industrial Strategy suggest only 45% of businesses in the wider North East region are registered for VAT or PAYE. Registered business account for 87% of all employment, but we need to be aware that the more detailed ONS business counts don’t cover the entire business population.
You can also use registrations with Companies House to count local businesses. 77% of registered businesses are legally companies, which means they must register with Companies House, but this does not necessarily mean the company is registered for VAT or PAYE. Multiple registrations and dormant companies also mean these registrations do not align perfectly with active businesses. There were 83,000 companies registered in the North East LEP in December 2022.
This data becomes even more complicated once you consider what it means for a business to be ‘in’ the North East. If a business is headquartered in a different region, but has a branch in the North East, is it counted as in the North East or not? The Data City, a data platform that links the locations on businesses’ websites to their Companies House registrations, shows the scale of the branch economy in the North East LEP area: the number of companies registered in the region increases from 83,000 to 102,000 when website locations are included.
The UK business counts data does not have this problem because the underlying data is segmented into local units, but even here there are unanswered questions. New business models with large numbers of remote workers for instance, such as those that are increasingly common in the tech sector, complicate what it means for a business to be ‘in’ the North East.
Ultimately these data sources all provide different perspectives and must be used together, along with insight from direct engagement with businesses, to provide a broad understanding of the North East business population. This is also why at the North East LEP we are open to exploring new and innovative datasets that provide additional perspectives.
See the latest data on the number of businesses in the North East compared with the rest of England here. You can also email the Strategic Economic Planning team to find out more about the data at evidence@nelep.co.uk.
