Entry to and Exit from Business Demographic Statistics
SMEs account for the majority of all entries and exits.
Entry and exit statistics relate to the movement of firms into and out of the Statistics New Zealand business demography dataset. Exit figures should not be interpreted as solely representing the number of New Zealand firms that fail or go bankrupt, though they include failed firms among the other exits.
The analysis of business demography is limited to economically significant enterprises - those that meet at least one of the following criteria:
- greater than $30,000 annual GST expenses or sales
- rolling mean employee count of greater than three
- in a GST-exempt industry (except for residential property leasing and rental)
- part of a group of enterprises
- registered for GST and involved in agriculture or forestry.
Data on the entry and exit of firms include administrative changes such as restructuring and changes of ownership, as well as genuine business start-ups and closures. When businesses register for GST and are added to the dataset, they are given a new reference number. Company restructuring and changes of ownership can result in a new GST registration being filed for an existing business. The proportion of entries and exits can be established in business demography statistics by matching the GST registration reference numbers for one year with those of the previous year.
It should be noted that administrative changes will not always result in an exit from the business demography dataset. Statistics New Zealand has procedures in place to monitor changes of ownership, geographic transfers, and temporary closures of enterprises. It should be assumed, however, that firms that experience genuine business failure are only likely to represent a proportion of those reported as exiting the dataset, as the administrative changes can not always be identified. Indeed research suggests that New Zealand SMEs have lower failure rates than generally has been assumed.11
Statistics New Zealand, in collaboration with Inland Revenue and the Department of Labour, has been developing the Linked Employer-Employee Data (LEED) project since 2002. The LEED project is aimed at integrating existing employer and employee information to provide insights into the operation of the labour market and its relationship to business performance. LEED draws on existing administrative data sourced from the taxation system, and business data from the BF. The longitudinal employer series (or longitudinal BF) attempts to identify births and deaths of enterprises due to administrative churn (such as company restructuring and changes of ownership), so that genuine business start-ups and closures/failures can be counted. Statistics New Zealand is about to begin a project looking into the feasibility of producing new business population statistics from the longitudinal Business Frame. An experimental series is anticipated in 2006.
Firms with 5 or fewer employees dominated entries and exits.
Enterprise entries and exits are dominated by firms employing 5 or fewer employees, accounting for more than 93 percent of entries and exits at February 2004, as they have in previous years.
Figure 13: Enterprise Entries, as at February 2004
→ Long Description of Figure 13: Enterprise Entries, as at February 2004
Figure 14: Enterprise Exits, as at February 2004
→ Long Description of Figure 14: Enterprise Exits, as at February 2004
Enterprise entries outnumbered exits.
Entries outnumbered exits on the Business Frame as at February 2004.
Figure 15: Enterprise Entries and Exits, February 1998-2004
→ Long Description of Figure 15: Enterprise Entries and Exits, February 1998-2004
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