Archive:Korea-EU - business demography

Data from September 2013. Most recent data: Further Eurostat information, Main tables and Database.

This article presents statistics for Korea and for some of the largest member states of the European Union (EU) on the number of active enterprises, the creation of new enterprises, the survival of such new enterprises and the closure (‘deaths’) of enterprises. This is generally called business demography statistics. The economic sectors covered are the business economy, more specifically industry, construction and services. In technical terms, this corresponds to sections B to N of NACE Rev.2 and the Korean activity classification KSIC, excluding activities of holding companies (K64.2).

In 2010, the EU economy was made up of around 24 million active enterprises (based on data from 26 member states). The largest active enterprise population in the EU was registered in Italy with 4.0 million, followed by Spain, France, Germany and the United Kingdom. In Korea, the population of active enterprises was 5.1 million in 2010. In the EU as a whole and in the five largest European economies, the service sector made up around three quarters of the active enterprises. In Korea, the service sector was even more dominant, making up 86 % of the total population of active enterprises.

In the European economies, the birth and death rates of enterprises tend to be around 10 % of the number of active enterprises. In Korea, these birth and death rates tend to be around 15%. In 2010, there were more enterprise births than deaths in Korea, Germany and France, while there were more deaths than births in Italy, Spain and the United Kingdom. For the EU as a whole, the one-year survival rate for enterprises created in 2009 was 81 %; the five-year survival rate of enterprises born in 2005 and still active in 2010 was 46 %. Amongst the five major European economies, the one-year survival rate was highest in the United Kingdom and Italy, while the five-year survival rate was highest in France and Italy. In comparison, these survival rates were significantly lower in Korea.

Figure 1: Structure of active enterprises by sector, business economy, 2010 (%)
(EL not available - see country codes)
Source: Eurostat (bd_9b_sz_cl_r2)

Main statistical findings

Active enterprises in the business economy

This section provides a general overview of the business enterprise population. It is based on aggregated data for industry (Sections B to E), construction (Section F) and services (Sections G to N, excluding activities of holding companies – K64.2), according to NACE Rev. 2. The data presented for the EU aggregate were created from the 26 Member States for which data for 2010 were available (data are not currently available for Greece). In the EU, three quarters (74.5 %) of all active business economy enterprises (NACE Rev. 2 Sections B to N, excluding K64.2) were within the services sector in 2010, providing work for 65.0 % of the total number of persons employed (see Figures 1 and 2). Services accounted for between 64.7 % of the number of all enterprises in the business economy in Slovakia and 85.1 % of the total in Luxembourg. In terms of its contribution to employment, the services sector accounted for 52.3 % of the workforce in Slovenia while the United Kingdom had the highest shares - 76.7 %.

By contrast, only 10.0 % of active enterprises in the EU were found in industry, even though these enterprises provided work for 24.6 % of the total number of persons employed. The difference between these shares provides evidence that the average size of industrial enterprises (as measured in terms of the number of persons employed) was considerably higher than for services. Indeed, industrial enterprises employed 14 persons on average across the 26 Member States that compile the EU aggregate, compared to an average of five persons for services. The average number of persons employed in construction was similar to that in services, at four persons per enterprise.

Birth rate

The birth of new enterprises is often seen as one of the key determinants of job creation and economic growth. Enterprise births are thought to increase the competitiveness of a country's enterprise population, by obliging them to become more efficient in view of newly emerging competition. As such, they stimulate innovation and facilitate the adoption of new technologies, while helping to increase overall productivity within an economy.

Looking at birth rates in the EU (based on the data available for 26 Member States), the number of newly born enterprises as a proportion of the total number of active enterprises slightly decreased by 2.4% in 2010 compared with 2009. The birth rates range from 3.9% in Cyprus to 21.1 % in Lithuania. The Netherlands and Luxembourg were close to the EU average for 2010, as were Estonia and Denmark in 2009. The birth rate was lowest in Cyprus and Belgium for both years. At the other end of the scale, the highest birth rates in 2010 were recorded in Lithuania and Latvia, and in 2009 in Bulgaria and Latvia.

The comparison of the two years reveals a steep decrease of 35.4% in Bulgaria, while Lithuania posted the opposite trend, recording the biggest increase of all countries, at 43.2 %.( Figure 3) While the study of enterprise birth rates provides useful information on the dynamism in the economy, the effect on the labour market is an important aspect, too.

Figure 4 shows the share of newly born enterprises in total employment of active enterprises, in terms of number of persons employed. In the total business economy in 2010, the employment share ranges from 0.7 % to 5.0 %. The EU average employment births rate remained similar between the two years in question. The highest share in 2009 and 2010 was around 5 % in Bulgaria and Slovakia, whereas the lowest share was below 1%for both years in Finland and Ireland.

Considering the similarity between the birth rates of enterprises and their employment share, those countries with relatively low/high birth rates also tended to report relatively low/high employment share. In contrast, the birth rate of new enterprises in Finland was considerably close to the EU average, whereas the employment share was significantly below the average.

Death rate

From a theoretical point of view, enterprise birth is related to the expectation of making a profit. If the main objective of newly born enterprises is to make a profit, enterprise births are most likely to occur where profits are consistently high, whereas among loss-making activities, enterprise deaths will be relatively more frequent.

Figure 5 shows that in 2009 there were slightly more enterprise deaths than births looking at the EU average, and also in half of the Member States for which final data were available. The average enterprise death rate for the business economy in 2009 was 10.5 % (0.6 percentage points higher than the birth rate). This situation was reverse in Bulgaria and France, where the death rates were about 50 % lower than the birth rates in 2009. The most dramatic negative change was reported in Portugal, where death rates were 95 higher than birth rates, followed by Romania and Lithuania, at 90 % and 67 %, respectively.

Looking at the trend of peliminary death rates in 2010 compared to the final data in 2009, (although in many countries only provisional, due to an impossible check of reactivation at the time of reporting the data), an average decrease of 9 % was to be expected (Figure 6). Enterprise death rate was likely to decline in a majority of the Member States; this fall was most significant in Estonia, the United Kingdom and Romania. Although the situation was set to remain fairly stable in Bulgaria, Denmark, Sweden and Hungary, the enterprise death rate was expected to increase in Latvia, Finland, Ireland, Slovenia , Slovakia and Luxembourg, with the biggest rise in Lithuania and Cyprus.

Enterprise survival rate

The focus is to present information about the life cycle of newly born enterprises and their ability to survive up to five years after their creation. The collection of data for the 2009 reference year had, for the first time, enabled the tracking of newly born enterprises over a five-year period, tracing how many of them have survived during that period. Figure 7 shows the one- to five-year survival rates of enterprises for those Member States for which the information was available.

Looking at the one-year survival rate for enterprises it appears that, for the business economy, roughly 81% of the enterprises born in 2009 survived in 2010. Subsequently, year-on-year survival rates posted a gradual fall in the majority of the countries. Actually, the five-year survival rate of enterprises born in 2005 and still active in 2010 shows that less than half (46.4 %) of them survive for 5 years.

The highest one-year survival rates were recorded for the Swedish business economy – 96.5 % and were also above 90 % for the United Kingdom. It would appear that newly born enterprises in Latvia, France and Denmark generally are less likely to survive one year than newly born enterprises in other countries, and the lowest rate was reported in Lithuania at 59.1 %.

Enterprises born in 2005 in Sweden, Slovenia and Austria were most likely to survive up to the fifth year after their birth, while Lithuania ran the greatest risk of non-survival. Note: Non-survivals may be due to actual deaths, but also to mergers and take-overs.

Given that the survival rates logically decrease over 5 years in all countries for which data were available, it is still interesting to look at the changes in employment in a five-year time frame. For each country in Figure 8, the second bar shows the change in employment. In 7 countries employment in those enterprises that survived for 5 years increased, from 2 % in Estonia to 75.3 % in Finland. The largest decrease, by almost 50 %, was noted in the Netherlands, followed by Spain and Germany, with a decrease of around one third.

Data sources and availability

Business demography data has been collected on a voluntary basis since 2002. Currently 29 countries participate in the data collection exercise.

After the recently adopted amendment of the SBS Regulation, the business demography data collection has become part of the regular annual collection of structural business statistics.

Annex IX of the recast structural business statistics Regulation provides for a detailed module for the collection of statistics on business demography. It requires the national statistical institutes (NSIs) to produce statistics on enterprise births, deaths and survival, using common definitions and methodology, which should ensure greater comparability in this field of statistics from the reference year 2008 onwards. Note that up to 2007, the statistics presented for this subject have been produced and provided by most of the NSIs on the basis of informal, gentlemen’s agreements.

Some 15 countries participated in the factors of business success development project, when enterprises that were born in 2002 and survived to 2005 were surveyed to obtain more information on the factors supporting or hampering the successful start-up of an enterprise.

Context

Business demography is an important subject for policymaker's discussion about increasing the level of employment, since it is one of the main priorities of the EU growth strategy.

Enterprise demography reflects, to some degree, the dynamism of the EU economy through the adaptation of economic structures to changing market conditions. The potential contribution that enterprise creation can make to employment is also one of the most important aspects drawing the attention of policy makers to the subject of enterprise demography. In this context, enterprise creation can be seen as an indicator of competitiveness, as a factor of economic growth and as a vital means of creating jobs.

Business demography provides information for births, deaths and survival rates of enterprises, as well as information on related employment data. The demography of the business population is represented by data on:

the active population of enterprises;
their birth;
their survival (followed up to five years after birth);
their death.

Particular attention is paid to the impact that these demographic events have on employment levels. Business demography data can be used to analyse the dynamics and innovation of different markets, such as:

in terms of the propensity to start a new business;

entrepreneurship in terms of the propensity to start a new business, such as analysed in the joint OECD/Eurostat indicators Entrepreneurship Indicators Programme;
how newly-born enterprises can contribute to the creation of jobs.

Further Eurostat information

Publications

Business Demography: employment and survival - Statistics in focus 70/2009
Business demography in Europe: employers and job creation - Statistics in focus 100/2008
Business demography: the impact on employment - Statistics in focus 49/2007
Business demography: growth in the population of enterprises - Statistics in focus 48/2007
Business demography in Europe - results from 1997 to 2002 - Statistics in focus 36/2005
Business demography (1997-2001) - Detailed Tables - 09/2004

Main tables

Structural business statistics (t_sbs) (New SBS presentation), see:

Business demography statistics - all activities (t_bd)

Business demography (tsier150)

Database

Structural business statistics (sbs) (New activity classification (NACE Rev 2)), see: