Small businesses on the increase

Small Business Minister Nigel Griffiths welcomed new figures that show the highest number of business VAT registrations since records began in 1994. They also show that business services, for example consultancies and accountants, continue to be a growth sector.

New statistics from the DTI's Small Business Service outline the number of businesses which registered and de-registered for VAT in 2003.

They show an eight per cent increase in the number of firms registering, bringing the overall number of registered businesses at the start of 2004 to 1.8 million.

This means there has now been an increase in the number of registered enterprises each year for the past nine years.

'Engine room'

Nigel Griffiths said: "Today's figures are good news for the small and medium-sized business sector. SMEs are the engine room of the UK economy and it's encouraging to see that not only are more people becoming self-employed, but there are also more businesses reaching the VAT threshold which is itself the highest in Europe.

"This growth bears out the Government's commitment to the small business sector, through the Small Business Service providing a strong voice for small firms within Government to Business Links providing quality support and advice to enable firms to expand.

"The findings also complement the latest Barclays surveys of business start-ups. These show that more businesses started in 2003 than at any time since its survey began in 1988, with growth for the first half of 2004 running at 24 per cent compared to the same period the year before."

Key findings

The statistics from the DTI also show:

• All regions have seen an increase in VAT registrations between 2002 and 2003 with the North East and Yorkshire and the Humber regions seeing the biggest percentage increases in the number of registered businesses.
  
• Business services, for example consultancies and accountants, continue to be a growth sector, accounting for almost three in 10 VAT registered enterprises in the UK. The construction sector and the hotel and restaurant trade also saw large increases in registered businesses.
  
• Agriculture and manufacturing have seen the largest falls in registered businesses, a trend which has been evident for the last six years. However the decline in wholesale, retail and repairs seen in previous years has been reversed, following a large increase in new VAT registrations in this sector.

VAT figures

VAT registrations and de-registrations are claimed to be the best official guide to the pattern of business start-ups and closures. They are used as an indicator of the level of entrepreneurship and of the health of the business population.

However these figures do not give the complete picture of start-ups and closures since many very small businesses are not registered for VAT.

Enterprises are not compelled to register until their turnover reaches the threshold, and the UK has the highest threshold in Europe. At the end of 2003, the VAT threshold was an annual turnover of £56,000, and 1.8 million of the estimated four million enterprises in the UK at the start of 2003 were VAT-registered.

The full statistics can be downloaded from the Small Business Service website here