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New Zealand Business Demography Statistics: At February 2013
Embargoed until 10:45am  –  30 October 2013
Data quality

Period-specific information
Information about data that has changed since the last information release.

General information
Information about data that does not generally change between releases.

Period-specific information 

This is the latest publication of a new business demography statistics series based on the Longitudinal Business Frame (LBF). The first publication, New Zealand Business Demography Statistics (Structural): At February 2007 includes more background about the new series.

Regional data throughout this release use the 2013 area boundaries.

Employee count data for February 2013 for primary education and secondary education at ANZSIC06 class level was estimated. Some caution may therefore be required with the use of this data.

General information

Coverage

Businesses covered

The coverage of business demography statistics is limited to economically significant enterprises that are engaged in the production of goods and services in New Zealand. They must meet at least one of the following criteria:

  • annual expenses or sales subject to GST of more than $30,000
  • 12-month rolling mean employee count of greater than three
  • part of a group of enterprises
  • registered for GST and involved in agriculture or forestry
  • over $40,000 of income recorded in the IR10 annual tax return (this includes some units in residential property leasing and rental).

Enterprises recorded on Inland Revenue's client registration file are continually monitored to determine whether they meet the 'economic significance' requirements for inclusion. These enterprises maintained on the Business Frame (source of the Longitudinal Business Frame (LBF)) represent the target population from which Statistics NZ's economic surveys are selected.

All non-trading or dormant enterprises, as well as enterprises outside of New Zealand, are excluded from business demography statistics.

Provisional nature of business demography data

Data on the Business Frame (BF) is updated continually to maintain the latest information on businesses. Updates can affect the history of businesses as well. The LBF is constructed monthly from all current and historic BF data, taking into account all updates that have occurred on the BF since the last construction. This means that statistics based on the LBF can change if they are recreated from an updated version of the LBF.

From the 2007 release onwards, business demography statistics are released provisionally to allow for updates to the series to be incorporated. The largest revisions are expected to occur in the most recent reference periods, with smaller changes earlier in the time series. This is mainly due to the lags associated with the processing of administrative data, which are a key component of the BF maintenance strategy.  

How businesses are represented as statistical units

Businesses are represented in the BF and the business demography statistics as statistical units. Two types of statistical units are used:

  • The enterprise unit represents the legal business entity, for example, a limited company, a partnership, a trust, an incorporated society. Where there is a group of limited companies linked by share ownership, each individual limited company is recorded in the statistics as a separate enterprise.
  • The geographic unit represents a business location engaged in one, or predominantly one, kind of economic activity at a single physical site or base (eg a factory, a farm, a shop, an office). Geographic units are unique to enterprises and an enterprise unit can have from one to many geographic units (business locations). Typically, an enterprise unit only has a single geographic unit, unless the enterprise has paid employees permanently working at more than one location. Geographic units can be transferred between enterprises, for example, enterprise B purchases a factory (a geographic unit on the BF) as a going concern from enterprise A.

Employee count data

The employee count data published in the business demography statistics and Linked Employer-Employee Database (LEED) is sourced from the Employer's Monthly Schedule (EMS) tax form. There are a number of conceptual differences between the business demography employee count size measures and the published LEED employment statistics. Major differences include:

  • Business demography includes employees of all ages (LEED statistics exclude employees aged under 15 years).
  • Business demography counts employees employed at any time during the February month (LEED statistics only count employees employed on the 15th of the reference month).
  • Business demography uses the EMS data before all the returns are finalised. At the time of the business demography publication, the EMS data is considered robust enough to provide an accurate indicator for business size.

Business demography does not provide official statistics on employment levels. The employee count data in business demography is primarily used to support business size measure statistics.

  • Business demography revisions each year can include updates to the employee count (EC) data for previous years.
  • Interpreting time series data and Data limitations in this section apply to the EC statistics as well as to the counts of statistical units.
  • The timing of seasonal business activity (eg horticultural crop harvesting) can influence the time series for some industries and regions.
  • The EC statistics include all employees that were paid during the month, irrespective of the number of hours worked or the number of days employed. If an individual had multiple jobs during a month with different employers, all jobs are counted.
  • The EC statistics at the geographic unit level for multi geographic unit (many business locations) enterprises are calculated by a process that includes some estimation. Enterprise unit EC data is proportioned out to the constituent geographic units by using survey data and administrative records on employee locations. 
  • Generally the employee count for a geographic unit is all paid employees working at that business location. However, for industries with employees who do not work at a fixed location, the employees are counted at the geographic unit that represents the base, administrative, or head office of their employer. Examples include the building and construction industry, transport industry, contract labour industry, health care and assistance, gardening, agriculture contracting, cleaning, etc.
  • Caution and an understanding of the factors influencing EC statistics are required in interpreting changes over time.

The employee count data does not include working owners unless they are paid a salary or wage by the enterprise that is subject to PAYE. So enterprises in the zero employee count size category may have:

  • working owners
  • labour provided by other businesses or contractors
  • business activity that requires no labour (eg passive investment).

Business births and deaths

Identification of business births and deaths

To observe business dynamics such as births and deaths over time from administrative data sources, it is crucial to be able to link continuing businesses if their identifiers change in the source data. A business may undergo several changes in its lifetime, in addition to birth and death. For example, legal or administrative entities may close down or emerge due to breakups, mergers, split-offs, takeovers, or restructuring. Any of these events can result in the business obtaining a new unique identifier (an IRD number) in the tax reporting system and subsequently on the BF. A business would then appear as a death and subsequent birth in these systems. However, neither administrative changes nor the events mentioned above necessarily indicate the occurrence of a birth or death of the underlying business activity in the real world.

The methods used to identify business births and deaths and continuing businesses in the business demography dataset are in line with recommendations from the Organisation for Economic Co-operation and Development (OECD) and Eurostat. The theoretical criteria used to define business births and deaths and continuing businesses are based on a combination of factors of production (land, labour, capital). A birth is an assembly of new factors of production. A death is a disassembly of factors of production.

In practice, the information used as proxies for these factors of production to identify continuing businesses are:

  • whether a business holds a majority of its original geographic units (business locations)
  • if a business keeps the same trading name
  • if a business is in the same industry
  • if a business continues to operate from the same location
  • whether a business continues to employ most of its former employees.

In contrast, indicators for a new business (birth) are whether a business formed new geographic units, has a new trading name, and mostly recruits new employees.

The processes used to identify continuing businesses on the LBF (longitudinal links) are described in the Business Demographic Statistics Review Report.

Reference period for births and deaths

Births and deaths are presented on an annual basis, as at February. For a birth or death to be counted in a reference period, it must have occurred at some stage during the year (start of March to the end of February), and not have a changed status by the February reference point. For example, an enterprise that ceased operation at some stage during the year, and then recommenced operation before February, will not be counted as a death.

According to the recommendations of Eurostat for enterprise births and deaths, a reactivation (an existing enterprise which has been dormant for a period of time and come back into the business demography population) after less than two years of inactivity is not counted as a death and subsequent birth. To identify births at time (T), it is therefore necessary to check movements in the enterprise population over more than one period (a year) – that is, at least back to time T-2 years. Looking back in time further than just one period to determine the status of an enterprise also helps to filter out temporary movements in and out of scope (as determined by the economic significance of an enterprise, which may change from one period to the next). The number of periods we can look back for births, or forward for deaths, is limited by the start and end points of the available data (the LBF holds data from April 1999 to the current month). For enterprise births in 2001, the snapshots of April 1999 and February 2000 were used as reference points. For all other birth and death reference periods, only snapshots for February were used as reference points.

Identification of enterprise births in business demography

Total entries of period T are all enterprises whose identifiers exist at time T but not at time T-1 year. Of these, real births are all enterprises whose geographic units existed at neither time T-1 year nor time T-2 years. 

  • If an enterprise consists of more than one geographic unit, it is only considered a real birth if none of its units existed in the previous two years.
  • Entries other than real births are enterprises that experience administrative changes or movements in and out of scope.

Once real births have been identified on the LBF using the methods above, they can be analysed further by splitting real births of period T into:

  • pure births (birth dates of all geographic units and the enterprise are more recent than the February snapshot of time T-2 years)
  • other births (birth dates are not recent, and are therefore likely to be reactivations)
  • surviving births (survive at least one period until time T+1 year)
  • short-lived births (disappear by time T+1 year, either due to death or dormancy).
Identification of enterprise deaths in business demography

Total exits of period T are all enterprises whose identifiers exist at time T-1 year but not at time T. Of these, real deaths are all enterprises whose geographic units exist at neither time T nor time T+1 year.

  • If an enterprise consists of more than one geographic unit, it is only considered a death if all of its units disappear in the following two years.
  • Exits other than real deaths are enterprises that experience administrative changes or movements in and out of scope.
  • If data for time T+1 year are not available, the number of real deaths will be preliminary until it can be revised after the next snapshot is available. Therefore, deaths for the more recent reference periods should be treated with caution.
Identification of geographic unit births and deaths in business demography

These statistics are available by regional council and territorial local authority. The rules for identifying geographic unit births and deaths mirror those of enterprise units, as described above, except that the enterprise unit to geographic unit linkages are irrelevant. Existing geographic units moving between regions are not considered to be births or deaths. 

Survival of enterprise births

The longitudinal nature of the LBF allows enterprise births in any reference period to be tracked over subsequent years. Survival rate statistics can be used to analyse the rate of survival of new births, by both industry and business size. Survival rates are calculated as the percentage of births in each reference period that survive into future reference periods in the business demography population (surviving births divided by total births for a particular reference period). To be considered a survivor, the enterprise must have existed at every reference period between its birth year and the given reference period.

International comparability

The OECD study on international comparability of business start-up rates found that although enterprise birth rates are considered key economic indicators, their availability and definition varies considerably from country to country. Therefore, comparisons of birth or start-up rates between countries should be treated with caution. Eurostat and the OECD are currently working on standard models for business populations and standardised definitions for key indicators. The definitions and methods used in New Zealand business demography statistics align well with the best practice models presented in the OECD study. Further detail is available in the Business Demographic Statistics Review Report.

Interpreting time-series data

The published time series of business demography data has several significant changes caused by improved Statistics NZ processes. Due to data constraints, no attempt has been made in the series to remove the influence of these changes, but they are described here so that users can understand the time series:

  • Agriculture units (ANZSIC 2006 subdivision A01) – for a period of time before 2002 the agricultural units on the BF were maintained to a lower quality level than other units on the BF as there was no agricultural production statistics programme in place. Following the reintroduction of a programme of annual agricultural production statistics in 2002, there were consequential improvements in the BF quality, with business demography data for the agriculture industry considered more robust from 2004. However, feedback on the BF from the agriculture programme cycle can still result in some volatility in the agriculture series. Some of the changes in business demography statistics for agriculture therefore reflect quality improvements in the BF, rather than actual changes.
  • The business demography series shows a small drop in the total number of enterprises from 2000 to 2001. This was influenced by a change in June 2000 to the methodology used to add new units to the BF. Under the new methodology, units were only added to the BF after administrative data sources reported that they displayed sufficient activity to meet the BF economic significance conditions. Previously, non-employing units had been added to the frame before they met the economic significance conditions. The change only affected non-employing businesses.
  • The business demography series shows a significant increase in the number of enterprises in 2004, particularly in ANZSIC 2006 divisions K (financial and insurance services) and L (rental, hiring, and real estate services). This was largely a consequence of improved use of administrative data to maintain the BF. Most of the enterprises added were non-employing businesses.

Other factors related to the representation of businesses on the BF can also influence time series data:

  • Business demography time series statistics can be influenced by structural changes in businesses, such as business mergers, one business taking over another business, or a business selling part of its activities. This can cause a significant movement in an industry (ANZSIC) time series of employee count data. For example, in a business takeover where one enterprise is absorbed into another enterprise, the employees of the smaller enterprise will typically become classified to the ANZSIC of the larger enterprise.
  • Regional business demography time series statistics can be influenced by changes in how an enterprise with many business locations is represented on the BF as geographic unit(s). For example a move to a less granular or more detailed geographic unit structure on the BF, due to changes in a way a business reports regional information, can influence regional time series.
  • Many enterprises undertake a range of business activities simultaneously. For example, they manufacture and wholesale goods and their activities can be over a range of commodities that cross ANZSIC boundaries. Enterprises are classified to ANZSIC on the BF according to its predominant activity. Movements in time series of ANZSIC data can be caused by the predominant activity of enterprises changing. This can cause what appears to be a significant change in an industry time series. These changes need to be interpreted with caution, because the business activity may be largely continuing under a different predominant industry classification.

Data limitations

There are a number of limitations associated with business demography data. These limitations include: 

  • Non-coverage of 'small' enterprises that fall below the economic significance criteria.
  • Partial coverage of enterprises in the gap between the BF economic significance condition of $30,000 of sales subject to GST and the compulsory GST registration threshold of $60,000 (applied from 1 April 2009). The level of this partial coverage cannot be quantified, but some businesses do register for GST when their activity is below the compulsory GST registration threshold.
  • The residential property operators industry (ANZSIC 2006 class L6711) contains only partial coverage, so must be analysed with caution.
  • Lags in recording enterprise births and deaths.
  • The published time series is subject to revision each year as the latest data from the LBF is incorporated for relevant years. Revisions of any significance will typically be confined to the last end points of the series.
  • The business demography statistics on the number of business births and deaths and surviving businesses rely on a variety of data sources to identify a continuing business (which for example undergoes a change of legal ownership and restructuring) as well as genuine business start-ups and closures. These data sources are not comprehensive and are of lower quality for small non-employing businesses. When businesses register for GST and are added (or 'birthed') onto the BF, they are given a new reference number. Company restructuring or changes of ownership can result in a new GST registration being filed, even though it relates to an existing business. Both the BF and the LBF have procedures in place to identify links between new and existing businesses, but there is no guarantee that all links will be identified. There will also be some false positive links identified. So some caution is required in the interpretation and use of these statistics.
  • Non-availability of overseas ownership information for some of the units on the BF.
  • Information on enterprise ownership links (needed for identifying BF enterprise groups) being limited to administrative data sources with only large businesses being covered by direct surveys.
  • Difficulties in maintaining industrial and geographic classifications for medium and smaller enterprises (that are primarily maintained on the BF using administrative data).
  • Fine-level regional and industry business demography data needs to be used with caution. The BF, which is the main source of data for the business demography series, is designed to support quality national-level and aggregate industry-level statistics. It is not designed to provide quality fine-level regional or industry statistics. Particularly for small and medium-sized enterprises, the BF update sources can have timing lags and less robust information. These quality weaknesses can be highlighted in fine-level business demography statistics.
  • Some caution is required with the use of back-cast ANZSIC 2006 statistics as some of the classification data has been imputed (estimated).

Rounding

Enterprise and geographic unit counts in the tables in this release are unrounded. Employee count data has been randomly rounded. Due to rounding, individual employment figures may not always sum to the stated total(s). Derived figures (eg percentage changes) have been calculated using unrounded data.

Liability

While all care and diligence has been used in processing, analysing, and extracting data and information in this publication, Statistics NZ gives no warranty it is error-free and will not be liable for any loss or damage suffered by the use directly, or indirectly, of the information in this publication.

Timing

Our information releases are delivered electronically by third parties. Delivery may be delayed by circumstances outside our control. Statistics NZ does not accept responsibility for any such delay.

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