Understanding Business Statistics

Business demographics

Every year Statistics New Zealand issues the NZ Business Demography Statistics report. The raw data is six months old on publishing day but the trends over the years can be seen. The data is at February 2010.

I thought I would review this year’s report at this time of year because now is the time of year when I get asked to predict what will happen next year. For my Big Hairy Audacious Prediction see the end of this article.

Back to Business demography.

In the year to Feb 2010 New Zealand lost a net 8220 enterprises - 1.7% of businesses.

These are not just any old businesses but ones that Statistics NZ considers are “economically significant.” Economically significant broadly means they turn over at least $30 000 of sales. It includes any enterprise operating in New Zealand and can be a company, partnership, trust, estate, incorporated society, producer board, local or central government organisation, voluntary organisation or self employed individual. Any enterprise that produces goods or services in New Zealand to the value of at least $30 000.

We lost more than 8000 of these -is that a problem?

The 470 350 remaining enterprises employed almost 1.9 million people between them. Most of them, however, (97%) had fewer than 20 employees and accounted for only 31% of all employees. In fact almost 70% of enterprises did not employ anyone at all.

One explanation for this large group is that over 95 000 enterprises were rental companies: typically the family home in an LAQC.

An easy prediction for next year is that many of these will disappear in 2011 as the new tax regime takes effect and LAQCs are eliminated.

However that still leaves many businesses that are one man bands: consultants, lawn mowers, farmers, building contractors and small retailers featuring in this category. Working owners are not counted as employees.

For all the scaremongering of those of a certain political persuasion there is not a lot of “Big Business” in New Zealand. Less than 1% of all enterprises in New Zealand employ more than 100 staff. Every time there is a new regulation or requirement for a business to fill out a form remember that it is the 99% of small businesses who have to find the resources to do this.

To really rub salt into the wound, the larger enterprises include all those city and district councils and government organisations that charge you and me for the time that they spend dealing with those new regulations.

Those few organisations employ almost half of all employees. Big Government –not Big Business.

In terms of industry coverage the number of enterprises declined in just about every major industry sector. Manufacturing was down by 2% (dropping employees by 5%), forestry by 2.2% (6% in terms of employees), construction plummeted by 5.3% (but 10% employees). Retail lost 4 900 (2.4%) employees.

Health care and social assistance did increase but compared to the average annual increase of 3-5% this years increase was a paltry 0.5%.

The good news is that a small increase in enterprises resulted in close to 3000 extra jobs in hospitals and aged care residential services.

The bad news is that this reflects an aging society. This year taxpayers paid $8.3 billion to the Superannuation benefit. This is forecast to balloon to $20.5 billion by the time I am ready to retire in 2025.

Prediction: Fewer businesses, lower employment, 250% increase in Superannuation payments can’t happen – therefore it will not happen. A Government will bite the bullet and change Superannuation, get kicked out of office at the next election and the next government will not revert to the current unsustainable rules. I will have to pay for my own retirement –as will anyone in their 40s today.

Just a final note. The Business Demography Statistics (BDS) use different definitions of employment than the unemployment data in the Household Labour Force Survey. In that survey Statistics NZ said that there were roughly 2.1 million in employment in February 2010. This report states there are 1.9 million employees. For example the BDS doesn’t take into account seasonal factors, business owners not taking a salary and people holding multiple jobs. For that reason one can’t make comparisons between the data.

Big Prediction for 2011.
In March 2011 (possibly April) the DOW will plummet in value. I’m predicting 20%.

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