Business Start-ups and Closures: VAT Registrations and De-Registrations - The Herefordshire Partnership

Business Start-ups and Closures: VAT Registrations and De-Registrations

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VAT statistics provide a guide to business formation and closures at a national, regional and local level. Businesses with a turnover below the VAT threshold (£67,000 annually¹) are excluded, so a considerable number of small businesses and particularly sole traders are missing from these figures. Herefordshire contains a high proportion of sole trader and micro businesses, so levels of VAT based businesses and VAT registrations and de-registrations can only give an indication of the trend in business activity in Herefordshire. Businesses de-registering from VAT do so as a result of closure or (in a small number of cases) because turnover has fallen below the registration threshold. Closure does not necessarily involve bankruptcy or insolvency proceedings, these make up only around one in four closures.

National Indicator #171 Definition: The proportion of business registrations per 10,000 resident population aged 16 and above. 2001 2002 2003 2004 2005 2006 Herefordshire, County of UA 38.3 41.3 44.8 40.7 43.2 40.1 This is also an indicator in the Herefordshire Community Strategy (HCS). Indicator number HCS 2. Information on National Performance Indicators

In Herefordshire the number of registrations decreased by 6.4% whilst de-registrations increased by 7%, for the period 2005 to 2006 (Table 1). This resulted in business stocks over this period showing an increase from 8,830 to 8,870, an increase of 0.4%. This increase was small relative to the increases seen in the West Midlands Region (1.8%) and England as a whole (2.1%). This increase of 0.4% is also low compared to growth from previous years with only the period 2000 to 2001 showing no change (chart 1).


Table 1: VAT registrations, de-registrations and stock, Herefordshire 2000-2006

Source: ONS - Crown copyright

Compared to the West Midlands region and England, Herefordshire experienced a lower rate of growth over the reporting period, with percentage change being 5.7% compared with 11.0% for the West Midlands and 11.1% for England for the period 2000 to 2006.

Chart 1: Percentage change in end of year stocks from previous year, Herefordshire, West Midlands and England 2001-2006

Source: ONS - Crown copyright

When comparing Herefordshire with neighbouring local authorities, the picture appears slightly worse again. Only Herefordshire has seen a decline in growth compared with other areas, with Shropshire and Powys showing a steep increase. Also in 2006, Herefordshire had one of the lowest growth rates at 0.4% compared to England (2.1%) and the West Midlands (1.8%). This resulted in Herefordshire having the second lowest business stock by VAT registrations, 8,870 compared to Gloucestershire, which had 23,130. In previous years only Powys has shown consistently lower growth rates.

Chart 2: Percentage change in end of year stocks from previous year, Herefordshire and other neighbouring local authorities 2001-2006

Source: ONS - Crown copyright

¹ As of June 2008 (Source; HM Revenue & Customs)