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Printable version
Key Statistics - article, January/February 2003, p. 9-12
This article presents information on two broad topics. The first topic examines the picture of businesses in New Zealand between 1987 and 2002, asking questions such as "where have the significant changes occurred"? The second topic examines business starts, closures, survival rates and changes in employment in the period 1998-2002.
Business demography: a wealth of data on New Zealand businesses1
What are business demography statistics?
Business demography statistics are sourced from the Statistics New Zealand Business Frame. This is a register of businesses in New Zealand that is primarily used to select businesses to be included in the various business surveys carried out by Statistics New Zealand.
The Business Frame records details such as names and addresses, the predominant type of industrial activity undertaken, employment levels, and the degree of overseas ownership.
This information can be used to produce statistics on changes in the number, type and location of businesses, ie their ‘demography’. Analyses can be undertaken using a range of variables including geographic area, industry, institutional sector, business type, overseas ownership, and business size (employment level).
Enterprises (businesses) and geographic units (business locations) that are engaged in farming activities (Australian New Zealand Standard Industrial Classification (ANZSIC) subdivision A01, Agriculture) are excluded from these statistics.
For pragmatic reasons, the business demography statistics are limited to those enterprises whose data is maintained on Statistics New Zealand’s Business Frame, which generally includes all employing units, and those with a GST turnover greater than $30,000 per year.
This article presents information on two broad topics. The first topic examines the picture of businesses in New Zealand between 1987 and 2002, asking questions such as “where have the significant changes occurred”? The second topic examines business starts, closures, survival rates and changes in employment in the period 1998–2002.
What has happened to New Zealand businesses between 1987–2002?
Figure 1 shows the large growth in the number of businesses in New Zealand since 1987. Between 1987 and 2002, the number of businesses in New Zealand has nearly doubled. However, this growth has been largely confined to the service industries.
The number of businesses in the service industries has grown by 115 percent between 1987 and 2002. Within the service industries, the property and business services industry grew by approximately 70,000 businesses over this period. Statistics New Zealand’s business demography data suggests that the number of businesses engaged in primary and secondary industries has remained static. It must be noted that the number of enterprises engaged in primary industries excludes enterprises engaged in farming. (In 1998, there were approximately 71,000 enterprises in the farming category.)
Most of the growth in the number of businesses between 1987 and 2002 came from businesses that engaged five or fewer full-time equivalent (FTE2) persons. There were approximately 150,000 more ‘micro businesses’ in New Zealand in 2002 than there were in 1987.
Business demography data also shows a slight northward drift in the number of business locations. The percentage of business locations north of Hamilton has increased from 40 percent in 1987 to 44 percent in 2002 (see figure 4).
Business dynamics and survival 1998–2002
Business demography data can also be used to answer questions such as:
- How many businesses have started operating each year?
- How many businesses have ceased operating?
- How many businesses have increased the number of persons they engage by more than 10 percent?
This data allows Statistics New Zealand to explain changes in the numbers of businesses, and also look at how the ‘average’ business grows.
In the following analysis, a business is a ‘birth’ if the unit appears on the business demographic database for year X but not for the previous year (X-1). A business is a ‘death’ in year X if the unit appears on the business demographic database for the year (X-1) but not for following year (X).
Over the period between 1998 and 2002, there were approximately 273,000 births and 220,000 business deaths.
A large proportion, 86 percent as at February 2002, of New Zealand businesses are micro businesses (businesses that engage five or fewer full-time equivalent employees). Micro businesses also contribute a large proportion of the births and deaths. Between 1998 and 2002, over 90 percent of total births and deaths were micro businesses.
By tracking the businesses that started operating in 1998, and establishing whether they were still in business in subsequent years, business demography data can estimate survival rates. In 1998, there were approximately 58,200 births and, of these, a total of 25,100 businesses (43 percent) were still operating in 2002. Figure 7 illustrates the number of new businesses that have survived over the 1998–2002 period.
Using business demography data, we can also observe the way that businesses change size over time. This enables analysis on what happens to surviving businesses. Table 1. shows how many businesses increased or decreased their employment between 1998 and 2002. Most businesses in the two categories of ‘all business’ and ‘new micro businesses’ have tended to remain about the same size over the four-year period, with ‘no change’ in size being reported by 56 percent and 64 percent, respectively.
Limitations
There are a number of time series breaks in the business demography data. In 1994, Statistics New Zealand changed from using ‘compulsory GST registrations’ to using a size indicator when deciding if businesses should be on the Business Frame. In 1997, the coverage of the business demography dataset was defined by the Australian New Zealand Standard Industrial Classification (ANZSIC) rather than the New Zealand Standard industrial Classification (NZSIC). To create the long time series used in this article, the series were adjusted to preserve the period-on-period percentage movements, and the current levels of the series.
The numbers of business births and deaths include businesses that have been sold and bought, and are not solely brand new business starts or business failures.
References
Holwell A (1998). “Business demographic trends 1994–1997”, Business Activity 1997, Statistics New Zealand, Wellington, 27–34.
Ministry of Economic Development, SMEs in New Zealand: Structure and Dynamics (2002), Ministry of Economic Development, Wellington, http://www.med.govt.nz/irdev/ind_dev/smes2002/index.html [10 January 2003].
Treadgold N (1999). “Job creation and firm growth 1995–1997”, Business Activity 1998, Statistics New Zealand, Wellington, 21–28.
Footnotes
BusDemo.pdf (428Kb)
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Business Demographics
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