REPORT FROM THE COMMISSION TO THE COUNCIL Implementation of Council Regulation (EEC) Nº2186/93 of 22 July 1993 on Community co-ordination in drawing up business registers for statistical purposes

TABLE OF CONTENTS

SUMMARY

1. INTRODUCTION

1.1. Aim and structure of the report

1.2. Background of the Regulation

1.2.1 The need for good national business registers

1.2.2 The need for harmonisation of business registers

2. THE IMPLEMENTATION OF THE REGULATION: 1993-1998

2.1. Derogations

2.1.1 The German derogation

2.1.2 The requests of Belgium and the United Kingdom

2.2. Measures facilitating the implementation

2.2.1 Financial support to the Member States of the European Union

2.2.2 Methodological recommendations

2.2.3 Training

2.3. Measurement of the implementation of the Regulation

2.3.1 Surveys on business registers

2.3.2 Coverage of business registers

2.3.3 Units recorded

2.3.4 Variables recorded

2.4. The uses of business registers

2.4.1 Results of the 1996 survey

2.4.2 Intended uses

2.5. Business registers outside the European Union

2.5.1 The countries of the European Economic Area

2.5.2 Central European Countries

2.5.3 Co-ordination with the UN Economic Commission for Europe

2.6. Conclusions: achievements and work still to be done

3. THE IMPLEMENTATION OF THE REGULATION:

FUTURE QUALITY IMPROVEMENT

3.1. The need for and principles of a quality policy

3.2. Quality requirements

3.2.1 Coverage of the business register

3.2.2 Delineation of statistical units

3.2.3 Variables recorded for the units

3.3. Implementation of the quality policy

3.4. Other elements of the quality policy and the need for methodological support

4. BEYOND THE REGULATION:

THE FUTURE OF BUSINESS REGISTERS

4.1. The place of business registers in the European system of business statistics

4.1.1 Present situation

4.1.2 Issues to be solved

4.1.3 Future development

4.2. The use of administrative sources

4.2.1 Administrative sources for business registers

4.2.2 Satellite registers

4.3. Enterprise groups and globalisation

4.4. The manual of recommendations

4.5. Conclusion: a work plan for the future

5. CONCLUSION

ABBREVIATIONS

REFERENCES

ANNEX 1

Summary data per country

Table 1: Units registered by type of statistical unit

Table 2: Coverage by section of NACE Rev.1 and by type of statistical

Table 3: Variables registered by statistical unit

Table 4: Sources for business registers by type of statistical unit

ANNEX 2

Overview of financial support to Member States, 1993-1997

REPORT FROM THE COMMISSION TO THE COUNCIL

Implementation of Council Regulation (EEC) Nº2186/93 of 22 July 1993 on Community co-ordination in drawing up business registers for statistical purposes

SUMMARY

The Regulation on business registers (BRs) [1] for statistical purposes was adopted in 1993. According to the Regulation, Member States are obliged to set up business registers of enterprises carrying out economic activities contributing to the gross domestic product, the legal units responsible for them and their local units (with few exceptions mentioned in the Regulation). The Regulation also lists compulsory and optional characteristics for the three types of units, gives specifications for updating of the BR, access to information by the Commission and the procedures.

[1] For an overview of abbreviations see page 34.

The report includes information on the role of BRs in the European system of business statistics and reasons for the Regulation, it describes the implementation of the Regulation and it shows the progress made. But it also shows that the implementation is not yet completed. The future of BRs in the European system of business statistics is discussed. The role of BRs in the production of statistics on highly topical issues such as globalisation is taken into account.

The experiences from the implementation of the BR Regulation have in general been positive, the convergence and improvements of the totally different BRs from the time before the Regulation has been enormous. The coverage is greatly improved and more than half of the MS already include also the non-compulsory NACE Rev.1 sections. The cost-benefit ratio for BRs can be very good considering the possible benefits through the efficient use of high-quality BRs. BRs can now be considered as an efficient tool to lower the response burden on businesses, especially for SMEs.

Even if the results are fairly good, there remain two main issues where a great deal of work is still needed. These are the harmonisation of statistical units and the quality of BRs. Even though the improvements concerning these issues have also been extensive, the different enterprise delineations used in the MS have huge consequences on the comparability of enterprise statistics. Although the coverage has been highly improved and can be considered generally good, there are some NACE Rev.1 sections, especially in services, which are not covered well enough, e.g. concerning small enterprises, non-profit institutions and government units.

It is a great challenge for the future to develop BRs as a tool for globalisation statistics. This means to include the name and address non-resident legal unit, which controls the legal unit into the BRs, as well as including information on enterprise groups. Studies and extensive development of methodology is needed and will be carried out in the near future.

No changes in the text of the BR Regulation are sought in short or medium term, neither on compulsory nor on optional parts. In the long term, the initiatives started on, especially on enterprise groups and globalisation, may lead to a need for changes in the Regulation. In that connection the role of optional variables must be reconsidered. To be able to prepare for the second phase of the development of BRs, the implementation phase of the BR Regulation must be completed rapidly. Some compulsory information is not yet recorded in the BRs of some MS and these MS will be requested to submit a detailed plan and timetable for their inclusion.

1. INTRODUCTION

1.1. Aim and structure of the report

On 22 July 1993 the Council Regulation (EEC) No. 2186/93 on Community co-ordination in drawing up business registers for statistical purposes was adopted. According to the Regulation, Member States are obliged to set up for statistical purposes one or more harmonised registers of all enterprises carrying out economic activities contributing to the gross domestic product at market prices, the legal units responsible for them and the local units dependent on them. An exception is made for some activities as defined in the statistical classification of economic activities in the European Community, NACE Rev.1, namely sections A, B and L of that classification (broadly agriculture, fishery and public administration), of which inclusion is optional, and, under certain conditions, households. It was stipulated that the enterprises had to be entered in the business registers before 1 January 1996, and the legal units and local units before 1 January 1997.The Regulation also lists a number of characteristics that have to be registered for each of the three types of units and some of them are optional. Furthermore, the Regulation gives specifications for updating the BR, access to information by the Commission, access to administrative or legal registers by the National Statistical Institutes (NSIs), and procedures, among others for derogations. For the definition of the terms "enterprise", "legal unit" and "local unit", the Regulation refers to Council Regulation (EEC) No. 696/93 of 15 March 1993 on the statistical units for the observation and analysis of the production system in the Community.

The objective of this report is to comply with one specific article of the Regulation: article 10, which reads:

Within four years of the date of adoption of this Regulation, the Commission shall submit a report to the Council on the implementation of the Regulation which may be accompanied by suitable proposals taking into account the experience gained.

The structure of this report is as follows. In the rest of this chapter some background information on the history of the Regulation, the role of BRs in the European system of business statistics and the main reasons for having such a regulation is given. (When reference is made to BRs this means business registers for statistical purposes, unless stated otherwise.) The next chapter describes in detail the implementation of the Regulation up till now in the EEA, and includes information on developments in Central European Countries (CEC). Chapter two shows that progress has been made in implementing BRs in the MS, but it also shows that the quality and harmonisation of the BRs need to be improved in the future. The way to do this is discussed in chapter three. In chapter four the scope is widened by looking at the future of BRs in the European system of business statistics, the construction of which has not yet been completed. The role of BRs in the production of statistics on highly topical issues such as globalisation is taken into account as well. The report ends with a concluding chapter.

1.2. Background of the Regulation

1.2.1 The need for good national business registers

BRs contain lists of businesses including business identification information such as addresses and variables such as size class and main economic activity. They play an essential role in any advanced national system of business statistics:

- The businesses recorded are used in business surveys, whether or not sample-based;

- BRs make it possible to ensure that business surveys are co-ordinated and do not have undue overlaps or gaps;

- Co-ordination makes it possible to have efficient survey designs;

- BRs make it more easy to link results of different business surveys;

- They make it possible to monitor and reduce the total response burden at the level of the individual business;

- BRs can possibly be linked to registers of other administrations, thereby allowing the efficient use of information registered with other administrations;

- They can be used as a direct source of information on the total population of businesses in a country, its characteristics and its evolution over time.

As a consequence of these features, BRs are considered very cost-efficient framework tools for business statistics.

1.2.2 The need for harmonisation of business registers

Given the importance of BRs for national statistical systems, and the need to build a European statistical system of good quality with harmonised data on the MS based on common concepts, definitions and classifications, the question arose in the 1980s whether the BRs of the MS needed to be harmonised. It was decided to make an inventory of the BRs of the NSIs before answering that question. This inventory was carried out in 1988/1989.

The inventory clearly established two facts:

- The quality and coverage of the BRs in a number of MS was not a sufficient basis for the European business statistics envisaged; and

- The BRs of the MS were far too heterogeneous in definitions applied to form the basis for comparable business statistics. In particular, the recorded statistical units varied between countries.

Also the inventory led to two conclusions:

- There was a need to establish a common set of definitions of statistical units by means of a regulation; and

- There was a need to help MS build the necessary infrastructure for recording the most important of those units with a sufficient coverage and with a number of standardised variables; again the means chosen was a regulation.

As a consequence, the Regulation on statistical units and the BR Regulation were drafted and adopted. An additional consideration for the Regulations was that a new statistical collection system was being set up covering trade in goods and services between MS (Intrastat), and this system could benefit from improved, harmonised BRs. Furthermore, it was acknowledged that the use of such BRs would have a positive effect on the response burden on businesses, as regards statistics surveys.

In view of the fact that BRs were at a different stage of development in the MS, it was neither considered feasible nor desirable to oblige MS in the short run to administer BRs that cover all statistical units used or planned to be used in the European system of business statistics. On the contrary, it was decided to develop comprehensive, harmonised BRs in two stages, the first of which was dealt with in the present Regulation.

As a consequence, the Regulation refers to only two statistical units (the enterprise and the local unit), and one unit to which the statistical units are related (the legal unit) [2]. Other statistical units of the European statistical system such as the kind-of-activity unit, the local kind-of-activity unit and the institutional unit are not covered by the Regulation. The precise contents and timetable of the second stage of the development of business registers will be based on the present evaluation; plans for the future are outlined in chapter four.

[2] The legal unit was not itself considered a statistical unit, because this unit is not comparable between countries. Moreover, it sometimes carries out economic activities in combination with other dependant legal units, in which case it is better to combine the legal units into the enterprise for statistical purposes in order to avoid distortion of statistical outcomes.

2. THE IMPLEMENTATION OF THE REGULATION: 1993-1998

2.1. Derogations

The Regulation mentions the possibility of derogations from the implementation of the Regulation in Article 8 and defines the procedure to be followed in Article 9. Derogation has been granted to the Federal Republic of Germany [3]. Two other countries, Belgium and the United Kingdom, submitted a derogation request or sought advice on whether they should apply for derogation; in both cases derogation was not deemed necessary. No other countries requested derogations.

[3] In October 1993 the Federal Republic of Germany also lodged an appeal at the Court of Justice of the European Communities requesting the annulment of the Regulation (case C-426/93); this appeal was rejected by the Court in its decision of 9 November 1995.

2.1.1 The German derogation

The German request for derogation [4] concerned the deadlines for implementation: an extension of the deadlines to 31 December 1999 was sought. The reasons for the request can be summarised as follows:

[4] The Statistisches Bundesamt submitted the request on 17 August 1994.

- A change of law was needed to get access to legal and administrative files, which would require time;

- The creation of a BR of about 3 million units would mean a great deal of work for the Statistisches Bundesamt (the German NSI) and for the statistical offices of the Länder; an immense effort would be needed in terms of technology and manpower;

- Carrying out the large number of branch-based surveys necessary and compiling the corresponding databases could best be done by a sequential approach;

- The non-market sector was almost entirely not included in the periodic surveys; the establishment of a register for this sector would require a considerable development time.

Together with the request, Germany submitted a timetable for the implementation of the Regulation within the boundaries set by the requested derogation. After a positive advice of the Working Group on Business Registers, the Statistical Programme Committee (SPC) accepted the timetable and granted the German request [5].

[5] An analysis of the derogation request and the timetable applicable to Germany can be found in SPC document 95/16/1.

2.1.2 The requests of Belgium and the United Kingdom

Belgium requested [6] derogation for a number of issues concerning coverage, units and variables to be recorded, updating requirements and the timetable for implementation. The most important points were differences in the definition of the local unit due to administrative data availability and switching the order of implementation of the legal unit and the enterprise. The differences in the local unit definition would be temporary. This would be solved by 1 January 1998, and in the meantime an approximation for the local unit would be available.

[6] The request was submitted by the Belgian NSI on 6 February 1995.

Switching the order of implementation of the legal unit and the enterprise implied that only during the year 1996 the legal unit would have to be used as an approximation for the enterprise.

The Working Group on Business Registers agreed with Eurostat that in this case derogation would not be needed; the SPC agreed with this view and the derogation procedure was cancelled. Most points raised were actually a question of clarification of the Regulation. Moreover, the local unit issue and the switch between the implementation of the legal unit and the enterprise were considered of little consequence, since the solutions proposed were adequate.

The United Kingdom informed Eurostat that they were seeking to restrict coverage of the BR to traders registered for VAT or for PAYE (employers). In this way the smallest businesses would not be registered, and the United Kingdom requested an opinion from Eurostat on this.

The Working Group on Business Registers observed that agreement existed on the convention that an enterprise must employ at least one person half time [7]. An analysis by Eurostat showed that the threshold for VAT in the United Kingdom was such that conversion to hours worked implied the inclusion of all half-time businesses. Therefore it was agreed that with the present threshold there was no reason for the United Kingdom to seek derogation.

[7] See section 6.3 of the publication: Business registers for statistical purposes: methodological recommendations, volume 1, Office for official publications of the European Community.

2.2. Measures facilitating the implementation

2.2.1 Financial support to the Member States of the European Union

In view of the different stages of development of BRs in the MS when the Regulation was adopted and the costs to implement the Regulation, the Commission made funds available to support the MS with the implementation. In the years 1993 to 1997 the total financial support amounted to 2.81 million ECU (see Annex 2). During the first four years the support was given by means of contracts, in which the NSIs agreed to carry out certain specified activities. In 1997 the support took the form of subsidies to activities carried out by the NSIs; these activities were agreed on as well. Most of the projects concerned setting up or redesigning BRs, or improving the coverage of BRs.

The available budget was allocated on the basis of project proposals from the MS. Not all MS made proposals when the opportunity was given, which is natural considering the different state of the BR of the MS and the different needs. The budget was not enough to fund or subsidise all eligible proposed projects. For the allocation of the available budget the following criteria were applied [8]:

[8] Of course some formal conditions had to be met as well, for instance the requirement that the costs could be clearly assigned to the project.

- The needs in terms of the discrepancy between the actual situation of the BR and the situation as required by the Regulation;

- The efforts that the MS itself was undertaking to address the needs;

- The degree to which the project proposal addressed the needs in terms of:

- coverage of the mandatory scope of the Regulation,

- registration of the three types of unit (enterprise, local unit and legal unit),

- registration of the characteristics which are mandatory according to the Regulation, and

- quality improvements

- Cost efficiency of the proposed project;

- Country proportionality in terms of relative wealth and size of the business population of the country.

2.2.2 Methodological recommendations

From the beginning it was clear that the implementation of the Regulation was not an easy affair in respect of statistical methodology, for two reasons. In the first place, the BR Regulation and, even more importantly, the Regulation on statistical units to which it refers for the definition of the units to be registered, cannot be applied without an interpretation of the concepts, definitions and rules of those regulations, and the expert discussions that preceded the drafting of both regulations showed that such interpretation would require a large effort. In the second place, due to the different stage of development of BRs in the MS, some countries with no or little experience in the field of BRs would need methodological guidelines in order to set up and develop their BRs.

These two reasons were sufficient to start the development of methodological recommendations, but there was an even more compelling reason: It became increasingly clear that international comparability of business statistics was not feasible if the definitions of statistical units, particularly the enterprise, were applied differently in the BRs of the MS. (See also paragraph 3.2. on quality requirements.)

Therefore the derivation of enterprises from legal units is one of the main subjects of the methodological recommendations that have been developed so far. Other subjects covered are:

- Objectives of BRs;

- Principles of maintenance;

- Operational rules for the local unit;

- Definition of a number of characteristics;

- Some principles of register access;

- Some quality guidelines.

These methodological recommendations were published in 1996. Further methodological recommendations are being developed. At present draft recommendations exist on the treatment of changes in BRs and on special operational rules for the treatment of large and complex enterprises.

The methodological recommendations have been one of the main factors that have made it possible to implement the Regulation to the extent described in the next section. It that senses the achievements are considerable. However, there is still need for further and more detailed recommendations. This is one of the obstacles to finalise the implementation of the Regulation. The plans for future additions to the recommendations are described in paragraph 4.4.

2.2.3 Training

It was clear from the outset that there was a need to provide training in the field of BR. Therefore courses were organised by the institute TES (Training of European Statisticians), an institute associated with Eurostat and the NSIs of the MS. The courses were given by staff from the Norwegian and Danish NSIs and closely co-ordinated with Eurostat.

In parallel with the courses, software has been developed by Statistics Norway on behalf of Eurostat to demonstrate the management of BRs. The software shows how legal units, which are the input to the BR from administrative sources such as VAT registers and registers administered by social security institutions, are processed in order to produce BR output in the form of statistical units, i.e., enterprises and local units. This software is now being used in TES courses, and further applications are being considered.

The theory of statistical units can best be demonstrated by practical cases. Therefore Eurostat, showing how enterprises and local units relate to legal units has developed a set of cases. These cases are used for training purposes - the training software can handle the cases - but they are also important as a complement to the methodological recommendations, since they give the much needed ultimate interpretation of the definitions of statistical units.

2.3. Measurement of the implementation of the Regulation

2.3.1 Surveys on business registers

After the adoption of the Regulation, Eurostat decided in agreement with the Working Group on Business Registers, to hold annual surveys on the state of implementation of the Regulation in the MS and Norway. So far four surveys have been held, the first survey referring to the situation on 1 January 1995, the second to 1 January 1996, the third to 1 January 1997 and the latest to 1 January 1998. For this purpose a questionnaire was developed for the first survey, and modified for the second, third and fourth survey, in order to take into account experiences with the previous survey(s) and to drop or add questions that need not be asked every year. The third and fourth questionnaires were electronic ones. All questionnaires covered:

- The state of national legislation concerning BRs and access to administrative sources in the MS;

- The sources used to update the business registers;

- The types of units registered, in particular the legal unit, enterprise and local unit;

- Numbers of units registered;

- The coverage in terms of NACE Rev.1;

- The registration of characteristics;

- Planned changes.

Questions that were asked only in one or two years concerned:

- Undercoverage of the BR (estimation of missing units);

- Overcoverage of the BR (estimation of inactive units incorrectly registered as active and units erroneously registered more than once);

- The use made of the BR;

- The resources used (including the resources used for the implementation of NACE Rev.1).

The response to the questionnaires was high: all countries but two responded in 1995, and all responded in 1996, 1997 and 1998. However, there was significant partial non-response, especially concerning quantitative data and information concerning the quality of the recorded data. The results of the surveys are the main source of information on which the following paragraphs are based; unless indicated otherwise, the results of the last survey have been taken to describe the present situation. The main survey results themselves are summarised in Annex 1.

2.3.2 Coverage of business registers

The coverage required according to the Regulation, in term of NACE Rev.1, include all sections except agriculture, hunting and forestry; fishing; public administration and defence; and compulsory social security.

The present situation in respect of coverage is the following [9]. The BRs of all MS include the areas traditionally covered by business statistics: mining and quarrying; manufacturing; electricity, gas and water supply; construction; wholesale and retail trade; and hotels and restaurants. In respect of the services sections of NACE Rev.1, the situation is somewhat less complete. Almost all countries cover: transport, storage and communication; financial intermediation; and real estate, renting and other business activities. Almost all countries also cover the activities: education; health and social work; and other community, social and personal service activities. However, it is quite common that although countries may cover all these sections, they do not include all the classes of which the sections consist. Finally, poorly covered are the sections: private households with employed persons; and extra-territorial organisations and bodies due to lack of methodological guidelines and good sources.

[9] The coverage examined is the coverage of the enterprise.

The good coverage of the areas of traditional business statistics and the somewhat less coverage of services in general and activities of non-profit organisations in particular is related to two factors. First, obviously the priority in the development of BRs has been those areas for which statistics exist. The development of BR is closely related to their use. Whereas at the European level business statistics on industry and trade have an established history, services statistics have only received due attention relatively recently. In this respect the recently adopted Regulation on structural business statistics is very important. The coverage of the BRs in the services sections will certainly improve along with the implementation of this regulation.

The second factor causing delay in BR coverage of some services sections of NACE Rev.1 is the need for methodological guidelines. The definition and delineation of the enterprise for non-profit institutions is problematic; most NSIs do not have much experience in the field, at least not related to BRs. For Eurostat the development of methodological recommendations in this area has a high priority (see also paragraph 4.2.); so far the development of methodological recommendations were primarily and necessarily aimed at areas already covered by European statistics.

The poor coverage of private households with employed persons and extra-territorial organisations and bodies may also have a methodological cause. Some countries have no enterprises in these sections of NACE Rev.1 because of the definition of the enterprise: they consider the non-existence of enterprises in these sections an implication of the enterprise definition. This issue needs to be clarified in the future.

Finally it should be noted that the coverage of small units is insufficient in some countries. This is to some extent linked to the availability and use of administrative files for statistical purposes. Although Article 7 of the Regulation requires access to administrative and legal registers, their use could be improved. This is discussed further in paragraph 4.2. Improvement of the coverage of small units is an important aspect of the quality policy discussed in chapter three.

2.3.3 Units recorded

By far most MS report that they register the required units, as is shown in the first table of Annex 1. All countries record the enterprise and/or the legal unit. The local unit is recorded by all countries except one and this is planned to be added to the BR shortly (see also paragraph 3.3.). The conclusion seems justified that there has been significant convergence in the registration of statistical units since the Regulation was drafted. The 1989 inventory showed much more heterogeneity among the twelve MS of the time.

However, despite the progress made, the units as registered in the BRs are still far from harmonised. There are seven countries that report registering both the enterprise and the legal unit without in practice making any distinction between the two types of units other than in their characteristics. That is, whereas the enterprise is defined in the Regulation on statistical units as consisting of one or more legal units these countries do not have any enterprise in their BR consisting of more than one legal unit. And those countries that do make a distinction between the enterprise and the legal unit in their BRs tend to apply the enterprise definition in different ways in practice.

The importance of the lack of harmonisation of units should not be underestimated. The question whether in a particular case legal units are combined into one enterprise or are treated as separate enterprises has an impact on:

- the number of enterprises measured;

- the size of the enterprises, which also influences their selection for surveys;

- the classification of enterprises to their main activity, also with an effect on their selection for surveys;

- the measurement of variables (consolidation effects);

- the allocation of variables to categories of NACE Rev.1;

- economic ratios involving the above data, such as turnover per employee; and

- the evolution of the above data over time.

Recently a study was carried out to measure the impact of differences in the application of the enterprise definition in BRs. This study [10], in which three MS were involved, has shown that the effects on statistical variables such as turnover and employment are very important indeed.

[10] The impact of diverging interpretations of the enterprise concept on statistical data, a comparison of enterprise profiling practices in Denmark, the Netherlands and the United Kingdom. Study carried out by Statistics Netherlands on behalf of Eurostat, May 1998.

Although more extensive studies would be needed to give a more precise quantification of the effects of diverging practices, it is clear that international comparability of business statistics is severely impaired.

The differences between the countries concerning the units registered have several causes. They reflect different statistical traditions, which cannot be harmonised rapidly. Where countries were not used to making a distinction between the legal unit and the enterprise, the methodology to do so needs to be developed. The manual of recommendations on BRs and other available methodological documents are helpful but do not provide the operational rules NSIs need because such rules are necessarily country-specific if only because the available administrative sources differ widely. And in some areas there is a need for further European guidelines.

Finally it is interesting to note that some countries register more types of units than needed to comply with the BR Regulation; they also register other statistical units defined in the Regulation on statistical units. The enterprise group is kept in the BRs of about half of MS and the local kind-of-activity unit by three MS. No country reported to register the kind-of-activity unit itself.

2.3.4 Variables recorded

Annex II of the BR Regulation lists the variables to be recorded for the legal unit, the enterprise, and the local unit. Some of the variables are optional. The situation in respect of the main variables will be discussed for each of the three units; this is of course restricted to those countries that do indeed record the unit concerned.

The legal unit

The legal unit is an input unit for BR, not a statistical unit. Statistics refer to enterprises or other statistical units rather than legal units as such. Therefore the characteristics recorded for the legal unit are of an administrative nature and do not include economic activity and size-class [11].

[11] Most enterprises equal legal units, in which case the NSI may choose to keep the data for the two units on the same record in the BR.

The legal form and the date of incorporation of legal persons are quite well recorded; for the legal form countries use their own classification. The date on which the legal unit ceases to be legally responsible for the enterprise is missing in most BRs. Whether a legal person has the character of a "public undertaking" is recorded only for about half of the MS. However, this is a variable, which is needed for compulsory EU statistics (structural business statistics) and the situation should be very rapidly improved. The link with the register of so-called Intra-Community operators (Intrastat) is also recorded only by a small majority of the MS.

Two optional characteristics concerning the control over a legal unit are registered by only a few countries: the name and address of any non-resident legal unit, which controls the legal unit; and the identity number of the legal unit in the BR, which controls the legal unit. In the future these variables may become important; this is further discussed in paragraph 4.4.

The enterprise

The two main BR variables recorded by all MS, for the enterprise are the economic activity code and the size or size-class in terms of persons occupied. For both characteristics harmonised classifications are used: NACE Rev.1 (four-digit level) for the economic activity, and a size classification specified in the Regulation for the other variable. However, there are some MS that measure the size-class in terms of employees instead of persons occupied, because they do not have adequate administrative sources for this variable. Under certain conditions secondary activities have to be registered as well; this concerns only enterprises which are the subject of surveys. Most countries do this.

The date of commencement of the enterprise is recorded by almost all countries and the date of cessation by a great majority. The net turnover from sales of goods and services (if it exceeds 2 million ECU) is recorded by almost all countries. Only two MS record the optional variable of net assets.

The local unit

The economic activity code of the local unit is recorded by all MS, and the size-class by all countries except two. Most countries measure the size-class in terms of persons occupied as specified in the Regulation, but there are countries that fail to do so because they lack adequate administrative sources for this variable. The same classifications as mentioned at the enterprise variables are applied. The registration of secondary activities is optional for the local unit, but it is still done in six countries. The date of commencement of the local unit is recorded by almost all countries, but the date of cessation by only about half of the MS, fewer than the case was for the enterprise. All countries record the geographical location code. Finally the variable indicating whether or not the activity carried out is an ancillary activity of the enterprise on which the local unit depends, is recorded by a majority of the countries.

2.4. The uses of business registers

2.4.1 Results of the 1996 survey

In 1996 the survey on the implementation of the Regulation included one question on the uses of business registers. The aim of the question was to find out to what extend the BRs were used for business-demographic statistics [12], for other economic statistics and for achieving co-ordination among surveys.

[12] Business demography comprises statistics on the number of enterprises and other units, and their distribution over size classes, sections of NACE Rev.1, etc. It also includes information on changes in those numbers, such as the number of births of enterprises and their characteristics.

Seven of the sixteen countries surveyed reported used BRs to produce business demographic statistics for the enterprise and three for the local unit. Other units were used as well for this purpose: three made such statistics for the legal unit and two for the local kind-of-activity unit. All countries except two used the BR for other economic statistics such as on employment, turnover, capital expenditure, value added, operating surplus, assets and liabilities, and profits and losses. The enterprise was used by ten countries and the local unit by five countries for any of those variables.

Other units were used as well: again three compiled statistics for the legal unit and two for the local kind-of-activity unit. Ten of the sixteen countries used the BR for the co-ordination of surveys and sampling frames.

These results have to be interpreted with care. Some countries did not have the enterprise or the local unit at the time, so they could not use them. In some cases they used the legal unit or the local kind-of-activity unit instead. Nevertheless it is remarkable that about half of the countries did not make use of the local unit or a similar unit.

2.4.2 Intended uses

To interpret the results of the 1996, one has to consider what uses of the BRs were and are required. In fact, strictly speaking there are no requirements. The BR regulation itself does not specify the statistics for which the BRs are to be used. Other regulations such as the Regulation on structural business statistics which require specific business statistics to be compiled do not stipulate that the BRs have to be used. In other words, the BR Regulation requires MS to have a tool for business statistics, but the actual use of this tool is left to the MS [13].

[13] This is also the main reason why the question on the uses is not repeated every year.

In practice, of course, the BRs are extensively used in most countries where they are available and of sufficient quality. In fact, the implementation of the SBS Regulation, which is currently taking place, would not have been possible without the availability of BRs in the MS. There is broad consensus that even if there is no formal obligation to use the BRs, their benefit clearly outweighs their costs. And the reduction of the response burden on enterprises which follows when BRs are used as a core tool in the production of business statistics is an important incentive to use them widely.

The fact that the use of BRs is left to the MS is broadly in line with the principle of subsidiarity. Countries are in the best position to decide where the BR fits in their national statistical data collection system, how to link data from administrative sources to their statistical system and how to reduce the response burden on enterprises. However, harmonising the use that is made of BRs could be beneficial to the European system of business statistics. If countries use their BRs for all business statistics and use it as a tool for co-ordination of surveys and sampling frames, the data quality and comparability increase.

Finally it should be pointed out that the use that is made of BRs depends on how well they are tuned to the requirements of statistics such as specified in the SBS Regulation. The European system of business statistics is currently being constructed; a number of important statistical regulations have been adopted in recent years. However, the statistical units of the statistics with which these regulations are concerned are not always those that are available in the BRs. This limits the present use of BRs. This issue will be dealt with in chapter 4.

2.5. Business registers outside the European Union

2.5.1 The countries of the European Economic Area

The BR Regulation also concerns the other EEA countries, Norway, Iceland and Liechtenstein. In Norway the situation is very similar to EU and Norway is also surveyed in the annual inquiry. The results on Norway are annexed to this report along with the results on the EU countries.

In Liechtenstein a new BR was constructed and Iceland has adapted its BR to the EU requirements.

2.5.2 Central European Countries

Twelve Central European and Baltic countries, Albania, Bulgaria, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Former Yugoslav Republic of Macedonia, Poland, Romania, Slovakia and Slovenia are participating in PHARE programme that helps them to develop their BRs and business statistics. This has been done mainly through two CEC pilot projects: enterprise panels in 1995-1998 and its continuation, demography of SMEs, starting in 1998. The results of the surveys have been published, e.g. the characteristics of enterprises, the creation and survival of new enterprises.

The situation of the BRs in these twelve countries is also surveyed in a largely similar way as for the EU countries. The CEC countries have done and are still doing great efforts to build their BRs, sometimes totally revising their previous registers. The situation varies: In some countries the BRs are already approaching the requirements of the BR Regulation, while some others still have plenty of work to do, especially with local units.

2.5.3 Co-ordination with the UN Economic Commission for Europe

The division of work between Eurostat and UN/ECE on BRs has been agreed upon and Eurostat is mainly responsible for developing the methodology on BRs and monitoring the situation in EU, EEA and PHARE countries. UN/ECE monitors the situation in other European countries, in TACIS countries (former Soviet Union and Mongolia) and non-European countries participating in the UN/ECE work on BRs (USA, Canada, Japan, etc.). According to the TACIS programme, EU can also help the TACIS countries. UN/ECE and Eurostat have joint meetings on BRs annually or every second year.

An important international forum for discussions and exchange of information are the annual international Roundtable meetings on Business Survey Frames. Roundtable meetings are mainly attended by OECD countries. The subjects vary from reporting the progress achieved to BR technology, globalisation, business demography, BR standards, etc.

2.6. Conclusions: achievements and work still to be done

The overview of the first four years of implementation of the Regulation shows a mixed picture. Much has been achieved: the MS all operate BRs with the most important economic units and variables and a good overall coverage.

Terminology has been harmonised. Methodological guidelines have been developed and training provided. However, much remains to be done. There is a number of cases where MS have gaps in the coverage of their BRs, do not record all types of units required, or do not have certain variables. In other cases the quality of parts of the BR is insufficient. Moreover, countries still have much work to do in harmonising the delineation of the statistical units recorded. This has considerable effect on the comparability of the business statistics of the MS.

It is clear that, despite the progress made, the implementation of the Regulation is not finished. There are two aspects to this:

- Some countries have not applied elements of the Regulation concerning coverage, units recorded and variables; and

- Where the Regulation has been applied to create BRs with the required contents, the quality of the BRs may not be sufficient to provide a tool for good and comparable European business statistics.

The first point has to be corrected to the extent that the requirements of the Regulations are clear. This means concretely the following:

- Any four-digit group of NACE Rev.1 within the scope of the Regulation that is not covered by the BR of a MS should be added to the BR immediately. If this is not possible, the MS will be requested to submit a detailed plan and timetable for their inclusion. An exception is made for private households with employed persons and extra-territorial organisations and bodies, because some issues have to be resolved first at the EU level.

- If the BR of a MS presently does not record which large enterprises consist of more than one legal unit, this should be changed immediately, starting with the simplest cases. If this is not possible, the MS will be requested to submit a detailed plan and timetable for the delineation of large enterprises.

- Any non-optional variable listed in annex II of the Regulation that is not recorded by the BR of a MS should be added to the BR immediately. If this is not possible, the MS will be requested to submit a detailed plan and timetable for their inclusion. Similarly, if the size-class variable is not based on persons occupied, this should be changed immediately or, in case this is not possible, the MS will be requested to submit a detailed plan and timetable how this can be achieved.

As for the second point, a quality policy is being developed which is outlined in the next chapter. This policy is based on the assumption that all required types of information are actually recorded, although possibly not to a sufficient extent and with sufficient quality.

3. THE IMPLEMENTATION OF THE REGULATION: FUTURE QUALITY IMPROVEMENT

3.1. The need for and principles of a quality policy

The first three years after adoption of the Regulation, the efforts of the NSIs of the MS were aimed at the creation of BRs or the adaptation of BRs to the requirements of the Regulation. At the same time Eurostat tried to facilitate this by several measures as described in paragraph 2.2, and paid especially attention to methodological issues, since this was recognised as a potential bottleneck for the implementation of the Regulation. At the beginning the main aim was that the required types of units and variables were recorded, and that the relevant economic activities were covered. Given the starting position, ensuring that certain types of unit and certain economic activities were covered was bound to precede considerations of quality.

With this pragmatic approach much has been achieved. Paragraph 2.3. showed that generally speaking the implementation of the Regulation has been a success: the MS (at least the fourteen to which no derogations apply) all have a BR with the most important economic units and variables and a good overall coverage. Terminology has been harmonised. However, it has also become clear that the quality of the BRs is less than perfect in a number of cases and countries are far from harmonised in the delineation of the statistical units recorded.

After the initial years of implementation, the time has come to focus on improving the quality of BRs; in fact, a number of MS have already plans for improvements. Eurostat initiated the discussion with the MS on a quality policy in June 1997.

The Regulation does not specify quality requirements. Although the requested registration of units, the variables and coverage are formulated in absolute terms, a 100% quality is clearly not the objective of the Regulation. Not only is it obvious that such quality would be extremely cost-inefficient and would cause a huge response burden on businesses, but also Article 5 of the Regulation gives some very general rules for register updating which imply a less than perfect quality. According to this article, "As a general rule, information obtained from administrative files or annual surveys shall be updated annually, other information being updated every four years". A procedure for implementing rules is established by the Articles 8 and 9.

It is the intention of Eurostat to reach an agreement with the MS on certain quality requirements and on the way to implement them. In accordance with the subsidiarity principle, the MS will remain responsible for designing their own updating strategy taking into account considerations of cost efficiency, data availability, national needs and business response burden, provided that the quality requirements are met. Those requirements would guarantee a sufficient level of quality and data comparability as needed for the European system of business statistics. This implies that quality requirements would pertain to the output of BRs rather than to updating procedures; as a consequence, they would focus on statistical units (enterprises and local units) rather than on BR input units (legal units).

The quality requirements would have to respect the following principles:

- Subsidiarity as just explained;

- All quality requirements must be measurable;

- The quality requirements must be based on the needs of the European system of business statistics, in particular data comparability between countries and compar-ability between different types of business statistics;

- The quality requirements will be restricted to the units and variables whose registration is compulsory according to the Regulation, and to their coverage; there will be no requirements for optional data.

3.2. Quality requirements

Quality requirements are presently being developed; only a general idea of what they will look like can be given for the time being. A distinction is made between requirements concerning the coverage of the BR, the delineation of statistical units, and the variables recorded.

3.2.1 Coverage of the business register

The quality requirements concerning the coverage of BR must differentiate between units of different size, and will depend on the economic activity carried out. Obviously the coverage of large enterprises has to be more complete than for smaller enterprises, not only because of their economic significance, but also for reasons to lighten the administrative burden on SMEs. But for those services industries where small enterprises dominate, the norms have to take this feature into account as well. The requirements would typically specify a minimum percentage of coverage for each stratum. This percentage could be expressed in terms of value added.

The requirements about coverage can not be limited to the areas about which business statistics are compiled traditionally. The Regulation on structural business statistics has a much wider scope already (see paragraph 2.3.2.), and the BR Regulation itself stipulates a wide coverage, which was chosen with an eye on the future. Moreover, BRs are also important for other statistics than structural business statistics, such as business demography, employment statistics and, indirectly, national accounts. For similar reasons the coverage requirements also have to include small units; BRs are a crucial tool for SME statistics.

Although the level of coverage of units is easy to define, it is very difficult to measure, because this supposes knowledge about the extent to which units are not registered. For this other data sources are needed, and they may not be readily available.

3.2.2 Delineation of statistical units

The need for quality norms concerning the delineation of statistical units, in the first place the enterprise, comes from its impact on statistical measurements.

Paragraph 2.3.3. also showed the need for quality norms in this area.

As was the case with coverage, and largely for the same reasons, the quality requirements will have to differentiate between enterprises of different size, and will depend on the economic activity of the enterprise; they are meant to specify a minimum degree of correct delineation for each stratum. Unfortunately, developing quality standards for unit delineation is very complicated. It is very difficult to define what is a correct delineation and to measure it, considering the fact that BR updating procedures vary widely among countries and depend on the use of national data sources. There are also a number of technical problems when this aspect of quality is to be monitored statistically. And it is clear that in order to formulate quality standards for the delineation of units in some services industries, methodological recommendations are a prerequisite. It has been proposed to start specific methodological recommendations with the treatment of holding companies and complex businesses with staff agencies. This kind of work must be done in co-operation with persons working on classifications.

3.2.3 Variables recorded for the units

Quality requirements for variables can of course only refer to variables whose registration is compulsory. The most important requirements will concern the economic activity (NACE Rev.1 code at four-digit level) and the size-class in terms of persons occupied, for the enterprise and the local unit.

Quality standards for the economic activity code can be formulated with relative ease, although their measurement is not as easy. Quality requirements for economic activity can be differentiated according to size-class. They would have to apply to the entire BR for the same reasons as given at the coverage requirements [14].

[14] Another reason is the fact that classification errors in one area by definition affect other areas.

Requirements concerning the correctness of the size-class have to take into account the specific factors that determine the quality of this variable, in particular the availability of administrative files. In some countries it is very difficult to obtain data on the number of persons occupied as distinguished from the number of employees; in some MS data from social security registers can only be obtained with a long delay. Such factors are bound to influence the quality requirements; and for reasons of business response burden they should.

3.3. Implementation of the quality policy

Several steps can be distinguished in implementing the quality policy. The first step is, as discussed above, to formulate and agree on the quality requirements. These requirements have to be realistic; the level of ambition must be a feasible aim within a period of five to ten years for a large majority of the MS. The ambitions cannot take into account only the need for good quality BRs, but must also be based on the present state of the BRs as described in chapter 2 and improvements that have already been planned. Some of the planned improvements are:

- Concrete plans to include additional NACE Rev.1 sections to their BRs;

- The last missing statistical unit (in one MS) will be added;

- Plans to add one or more new variables;

- To improve the quality by the use of additional administrative sources.

The second step is monitoring the quality of the BRs; if quality standards are agreed on, their implementation has to be checked. Ideally the quality of BRs is systematically measured, for instance by means of a regular quality survey [15], but unfortunately this tends to be very costly.

[15] A quality survey can be defined as a representative sample survey of the BR or a part thereof with the aim of establishing the degree of correctness of the contents of the BR or the part investigated.

In a number of cases the quality will have to be assessed by indirect methods, such as comparison with data from other sources or analysis of the way administrative files are updated. Although measuring the quality of BRs is often problematic, it is important to agree not only on quality standards, but also on ways to assess the actual quality of BRs.

The next step is to agree on a procedure of reporting about the quality of the BRs to Eurostat. The contents and frequency of such reports need to be established; they need to be standardised. This, again, may be a complicated and time-consuming affair, as experience with the Regulation on structural business statistics has shown. Nevertheless, a reporting arrangement is an essential part of any quality policy.

If there is agreement on quality requirements, the measurement of quality and the reporting procedure, this should be formalised in accordance with the provisions of the Regulation. Article 8 of the Regulation stipulates that implementation rules shall be adopted in accordance with Article 9, which describes the procedure to be followed. As part of this procedure the SPC will give its opinion before the implementation rules are finally adopted. The implementation rules, consisting of quality requirements, the quality measurement and the reporting arrangements, will be subjected to this procedure.

In addition to the formal implementation of the quality policy as described above, there is more that can be done. Eurostat tries to stimulate the spread of good practices; there are many things that MS can learn from each other in the field of BR quality improvement, in particular in making optimal use of administrative files and keeping the administrative burden on businesses as low as possible. Some current initiatives are described in paragraph 4.2.

3.4. Other elements of the quality policy and the need for methodological support

In a study on the implementation of enterprises in the business registers in three MS (see also paragraph 2.3.3), the effects on some key statistical variables were investigated. The study did not include the most simple cases but there are more complicated cases than those studied. The study showed that for all 21 enterprise groups investigated, the delineation was done differently in the three countries according to their profiling rules, resulting in inconsistent statistics.

The differences in the delineation have a very serious impact on data comparability, and it urgently calls for standardised application of concepts and definitions in order to reach harmonised and comparable business statistics.

Between Eurostat and all Member States there is a coherent view on the need for quality aspects in the Business Registers, but many Member States have also expressed requests for further guidelines and harmonised definitions.

The first steps have been taken towards collecting documentation on the profiling rules in the Member States and to develop a "case law" in order to establish methodological support for a more harmonised European statistics. Other suggested work includes comparing BRs with exogenous data, for example the labour force survey estimates on employment or other administrative systems. The need for application of quality standards is recognised and supported by the Member States.

4. BEYOND THE REGULATION: THE FUTURE OF BUSINESS REGISTERS

4.1. The place of business registers in the European system of business statistics

4.1.1 Present situation

In recent years much progress has been made in building the European system of business statistics. The system is rapidly developing. A number of regulations have been adopted that are relevant to BRs in one way or another, the most important ones being:

- the Regulation on the statistical classification of economic activities (NACE Rev.1,1990, amended in 1993)

- the Regulation on the statistics relating to the trading of goods between MS (Intrastat, 1991, amended in 1999)

- the Regulation on structural statistics on earnings and on labour costs (1999)

- the Regulation on the European System of national and regional Accounts (1996)

- the Regulation concerning structural business statistics (1996, amended in 1998)

- the Regulation concerning short-term statistics (1998)

The NACE Regulation is relevant because it is directly applied in BRs, for classifying both enterprises and local units. This includes classifying secondary activities. There is one other regulation providing standards to be applied in BRs, namely the Regulation on statistical units, as seen earlier. Both regulations preceded the BR Regulation.

Apart from regulations providing standards, there are also regulations concerning business statistics to be compiled. MS would need BRs to provide the sampling frames for the statistical surveys. Probably the most important regulation is the SBS regulation, especially because it is comprehensive both in coverage and variables. The new STS regulation (the one on short-term statistics) is also important, for the same reason. Although the statistics compiled on the basis of the Intrastat Regulation are not "business statistics" as such, this regulation, which preceded the BR Regulation, is relevant because it requires MS to maintain lists of Intra-Community operators (article 10), and the BR Regulation itself requires the registration of the Intrastat number for legal units (variable k).

The ESA Regulation (the one on the European System of Accounts) is only indirectly relevant. The economic accounts are based largely on business statistics, especially data collected in the context of the SBS Regulation.

4.1.2 Issues to be solved

There are some problems concerning the place of BRs in the European system of business statistics in its present stage of development. Some regulations do not match in the statistical units to which they refer. In many cases there may be good reasons for this, but consistency should be guaranteed and care should be taken that the BRs can provide the frames needed for European business statistics.

The core of the problem is the choice of statistical units in the SBS, STS and ESA Regulations compared with the statistical units registered in the BRs according to the BR Regulation. The main statistical unit of the SBS Regulation is the enterprise, which can be provided by the BRs. But the SBS Regulation also requires data collection on kind-of-activity units for five variables [16] in industry and construction, and this unit is not recorded in any of the BRs of the MS according to the annual questionnaire. The kind-of-activity unit is even more important in the STS Regulation, where it is the observation unit for all variables collected on industry and construction [17]. The unit used for short-term statistics on other activities is the enterprise.

[16] Turnover, production value, wages and salaries gross investment in tangible goods and number of persons employed.

[17] Under certain conditions other types of units may be used.

The BRs do register secondary activities, but there is no information on whether or not a secondary activity corresponds with a kind-of-activity unit. This will often not be the case, among other things because of the strict data availability requirements for the kind-of-activity unit. Moreover, as the experience with harmonising the enterprise unit among MS has shown (see paragraph 2.3.3), it may be assumed that the kind-of-activity unit will not get the same contents in MS without methodological guidelines and tuning of register practice. For data on kind-of-activity units it may be feared that they will not at all be comparable, and that countries may have severe problems in data collection and may incur high costs when they try to establish the population of kind-of-activity units. There is also high risk of negative effects on the response burden on enterprises.

The SBS Regulation requires regional data to be compiled as well and in the implementation local unit is specified as the statistical unit on which these data are to be based. MS can use the local unit as available in the BRs or some other locally or regionally defined unit, but some MS may perhaps also choose to use the enterprise for data collection, asking the enterprise to provide a regional breakdown of the variables. It can be concluded that there are no matching problems with the BR Regulation for regional SBS data. The STS Regulation does not require regional data to be compiled.

The statistical units used in national accounts are the institutional unit and the local kind-of-activity unit. These units are defined in the Regulation on statistical units [18]. The institutional unit has a close correspondence with the enterprise, and enterprise statistics are therefore a good information source for national accounts. The use of the local kind-of-activity unit is more problematic. There are currently no European statistics that yield data on that unit, so business statistical data have to be recompiled analytically, for instance by applying output indicators, in order to produce the accounts concerned. Since most BRs do not have the local kind-of-activity unit (with the exception of three MS), the BRs can offer no help.

[18] More precisely, they have been redefined and specified in the ESA Regulation.

Apart from the practical problems of data collection, accuracy and comparability between MS, the coherence of the business statistics is also a concern. A number of variables of the SBS, STS and ESA Regulations are similar, but their values are compiled for different statistical units. Moreover, this depends on the economic sector concerned.

As far as Intrastat is concerned, the issue is different. The Intrastat Regulation preceded the BR Regulation. Therefore it could not refer to existing BRs. As a consequence, the Intrastat Regulation has its own requirement of maintaining a list of units, although the BR Regulation provides a link via a variable of the legal unit.

The issues described above are a natural side effect of the rapid development of the European system of business statistics. The need to rethink the choice of the statistical units of the various regulations leads to several possibilities to approach the problems. To mention a few:

- Leave things as they are and accept the consequences.

- Reduce the need for data on kind-of-activity units by changing the regulations concerned accordingly; as a compensation information on secondary activities could be added.

- Integrate the register aspects of the Intrastat Regulation with the BR Regulation, and base the list of Intra-Community traders on enterprises rather than legal units.

- Change the national accounts requirements such that they are better tuned to available sources such as statistics produced in the framework of the SBS and STS Regulations.

- Register secondary activities in BRs if and only if they correspond with operational units for which data are available.

- Register kind-of-activity units as separate units in BRs.

4.1.3 Future development

All the options mentioned have advantages and disadvantages, in terms of quality of statistics, data comparability, coherence, consistency with wider international guidelines such as those on national accounts, response burden on businesses, costs, etc. The different options have to be investigated. The question of statistical units in the different regulations has to be answered in an integral manner in the long-term.

To require a registration of KAUs or local KAUs in the BRs does not seem justified at the moment. The KAU is used as data collection unit only very rarely (possibly in 1-2 MS), others use different methods of estimation. KAUs can be built up in an analytical way. They can be approximated by using local units, or aggregated from local KAUs in those MS, where these are in the BR. To register local KAUs in the BRs would be very important for national and regional accounts, but this requires plenty of resources.

The European system of business statistics is under construction and it is important to approach the issues in an open and flexible way. When we have more experience of the implementation of the SBS and STS Regulations, the effects of the inconsistencies can be studied and the inconsistencies can be revised where necessary.

To continue the harmonisation and delineation of statistical units is a first priority. Having different profiling rules from country to country has a very serious impact on data comparability, and it calls urgently for standardised application of concepts and definitions in order to reach harmonised and comparable business statistics. The documentation within the MS must be improved, in many cases the national procedures are not well documented. MS will document their profiling rules where this has not yet been done and keep Eurostat informed about them. A special group to be set up will deal with statistical unit cases and such a group would try to develop "case law". Cases should be based on real examples from the MS. Eurostat will organise the "case law" group and its procedures.

Enterprise profiling concerns large and complex enterprises. Small units can be left as they are. Although large enterprises form only a small part (5 % may be a rough estimate) of all enterprises, they involve large part of the economy. The existing operational rules may need to be changed, where they are not clear and applicable. An example is the treatment of ancillary legal units. According to the statistical unit Regulation, an ancillary legal unit serving several enterprises cannot be split.

4.2. The use of administrative sources

4.2.1 Administrative sources for business registers

As underlined previously in this report Eurostat respects the principle of subsidiarity leaving to Members States the sources used to update BR as well as their use. The European statistical system encourages the use of administrative sources for statistical purposes when possible. Also the BR regulation states in its article 7 that NSIs are authorised to access administrative sources or legal registers in accordance with the conditions determined by national law. The annex 3 illustrates that administrative sources such as tax registers, social security registers and trade registers have been used by a majority of Members States to update the BR, particularly to compile data at enterprise level.

Eurostat has in the recent years developed work regarding the use of administrative sources for statistical purposes. A seminar was organised in Luxembourg in January 1997 whose aim was to encourage the exchange of national experiences. The contributions of the participants showed the interest to use administrative sources, as well as the difficulties linked to their use and the possible further developments.

A handbook of national good practices: Use of Administrative Sources for Business Statistics Purposes (Version 1) has been developed. This will serve as a base to study the possible contribution of these sources regarding the implementation of the different regulations newly adopted in the field of business statistics. It has to be underlined that a special attention has been given to small enterprises having in mind the reduction of the response burden.

This handbook will be a good opportunity to develop ways in which countries can work together with each other and with Eurostat to exploit administrative sources for business statistics purposes to the fullest extend possible.

4.2.2 Satellite registers

Satellite registers are not part of the BRs but they are closely linked to it. They are more limited in scope, e.g. in terms of NACE Rev.1, but they contain one or more characteristics that are not found in the BR, especially variables for stratification purposes. Having some additional characteristics for some specific NACE section(s) can make a survey on these sections more efficient and decrease response burden. The use of satellite registers is entirely based on subsidiarity, there are neither existing nor planned legal acts.

At the moment satellite registers are mainly used in transport, tourism and trade. Some MS have plans for several satellite registers in many areas. The use of satellite registers has so far been studied in two areas, tourism and distributive trade. Work on the general treatment of satellite registers, to be included as a chapter in the Manual of Recommendations on BRs is ongoing.

4.3. Enterprise groups and globalisation

After the BR Regulation has been completely implemented, the need for information on enterprise groups (EGs) and on globalisation is very probably the greatest challenge for the development of BRs during the next few years. The information needed concern both EGs operating in single national territory only (all-resident EG) and in several countries (transnational EG or TEG), although usually only the part of a TEG operating in national territory (truncated EG) can be observed in the BR of a country. The most important information needed for EGs are demographic (changes in group structure etc.) and financial. EGs can also be used as a frame for delineation of enterprises.

Although EGs are not in the BR Regulation, they are already included or planned to be included in the near future in the BRs of about half of EU Member States. This is due to their great importance at national level. Other countries are planning a stepwise approach by starting to record links of control between enterprises or considering the use of commercial sources. The inclusion of EGs has thus advanced well, but the solutions and the recording of resident and transnational EGs are country-specific and not harmonised. Because the situation of EGs in BRs is unknown, a feasibility study was started in December 1998. The work will continue on the operationalisation of the definition of EG and the definition of control.

The development of statistics on globalisation is very much dependent on the central role of BRs as a framework tool in which much has been invested already. While the information concerning EGs in BRs has developed rapidly, an optional variable g of legal unit in the BR Regulation, "name and address of any non-resident legal unit, other than natural person, which controls the legal unit", is according to the last inquiry in the BRs of two EU countries. This situation should be rapidly improved.

The state of art and proposals for development of globalisation statistics is treated in the report of Globalisation Reflection Group: "The Impact of Globalisation on Statistics - Summary, Conclusions, Recommendations" and work based on the report has been started. This includes how to develop BRs, starting with the feasibility study and preparing the methodology for the treatment of EGs. To develop statistics on globalisation requires work in several areas in addition to BRs. The most important are the development of Foreign Affiliates Trade statistics (developed in the framework of structural business statistics), External Trade statistics, Foreign Direct Investment and Balance of Payments statistics.

4.4. The manual of recommendations

The Manual of Recommendations is an important means for harmonising statistics, and it also has an instructional purpose towards the MS and Applicant countries.

The Eurostat publication 'Business Registers for Statistical Purposes: Methodological recommendations, Volume 1' (1996) includes the first 10 chapters. It has been translated into 11 EU languages and Russian. In these chapters there are already some outdated and incomplete matters and references. Moreover, it is not always clear which parts of the chapters are an interpretation of the BR Regulation and which parts go beyond that. That needs to be clarified, as well as the first 10 chapters' relation to the forthcoming additional chapters, before the Manual can be revised. A revision is therefore foreseen in year 2000.

The following chapters no. 11-16 are close to final. The chapters are being translated into German and French, finalised and published as volume II in 1999. A future translation into other EU languages is possible.

For chapters no. 17-19 various levels of drafts exist. There are also some draft outlines and inputs from MS for new chapters. The schedule for these new chapters depends on their urgency and on the development of the methodological work needed, e.g. concerning enterprise groups and quality.

A discussion on improving the formal status of the Recommendations has started. This deals with if the most important parts that can be considered as interpretation of the BR Regulation should have a more binding status.

4.5. Conclusion: a work plan for the future

As was explained in paragraph 1.2.2, the adoption of the BR Regulation was meant as a first step, to be followed by a second stage sometime in the future. Because the implementation still requires work to be done, the time has not yet come to embark on the second phase in the evolution of business registers, only to prepare for that.

The most important issues subject for development are listed below, there are also obvious links between them.

- Quality improvement requirements are treated in item 3. To improve the quality of the compulsory part of BRs still requires a great deal of work, but the quality of optional sections and characteristics as well as the new statistical units like EGs also need to be assessed (later measured where possible). The work on quality will also result into a new or revised chapter in the Manual of Recommendations.

- Manual of Recommendations. Work on the development of the manual shall be continued. The plan is presented in item 4.4 above. The manual can be continuously disseminated to the users, mainly in an electronic format (printed when necessary), giving the status of each chapter (final, first draft, etc.).

- Harmonisation of statistical units. This means to develop further the operational rules for statistical units and making case studies (as presented in 4.1.3 above). The development of operational rules will result to one or more new chapters for the Manual of Recommendations and for revising some of the existing chapters. The "case law" will be a separate (possibly electronic) document.

- Research such as developing of a data-model, development of tools such as for sampling. Technological matters and research and development in the field of BRs are, as before, done in co-operation with unit "Research and development and statistical methods".

- Annual reporting and co-ordination. The annual report serves several purposes. It monitors the implementation of the BR Regulation, it includes information on sources used and legislation, it includes quality-related issues, which are not proposed to be included into the quality report (item 3), and it includes data concerning business demography, which at the same time have a co-ordination and quality function. Therefore the annual report must be developed further (development of the annual report will also be discussed in the future in more detail). The numbers of enterprises and local units have been collected at NACE Rev.1 section level as from 1995. According to the SBS Regulation the numbers of enterprises and local units are also collected, but not for all NACE Rev.1 sections. It is important to bear in mind, that the SBS Regulation covers market activities, while BRs must, according to the BR Regulation, in addition cover non-market contributing to the GDP. Short-term statistics, the SME project, Labour Force Survey, National Accounts etc. include also relevant information for business demography. This information should be co-ordinated both in Member States and at European level when the statistics are produced and especially before they are published. Because BRs are a central tool for business statistics and have a wider coverage than SBS, it is the task of BR to work as the co-ordinator of business demography and survey frames, naturally in close co-operation with SBS, STS and other statistics. Therefore is was discussed at the BR Working Group meeting in June 1998 to include in the annual report also persons occupied (or the size class) and public enterprises. The inclusion of employed persons is important firstly due to the co-ordination aspect, especially with the SBS Regulation and its development. Secondly, it is important due to the slow process of unit delineation. If the numbers of enterprises are not comparable, the employment figures give extremely valuable information. Employment of local units (and enterprise groups, to be included later) is also indispensable. The inclusion of public enterprises is also connected to the SBS, where this information is collected, but only for NACE Rev.1 sections Mining and quarrying, Manufacturing and electricity Gas and water supply and Construction, which cover less than 30 % of public enterprises. The changing role of public enterprises is equally or even more interesting for other sectors: transport, telecommunications, community services etc, where over 70 % of public enterprises operate. This change should be monitored. The character of public undertaking is compulsory according to the BR Regulation.

- Enterprise groups and globalisation, as presented in 4.3 above. The methodology of EGs is very complicated and it will be developed during and after the feasibility study. The result will be presented as a chapter in the Manual of Recommendations. Information on EGs is also proposed to be included later into the annual report on BRs.

5. CONCLUSION

The experiences from the implementation of the BR Regulation have in general been positive. The convergence and improvements of the totally different BRs from the time before the Regulation have been enormous. The coverage is greatly improved and more than half of the MS already include also the non-compulsory NACE Rev.1 sections. The use of terminology has to a large extent been standardised by the Regulations and the Manual of Recommendations.

The establishing of BRs has involved substantial costs, but also maintaining the BRs is costly. Nevertheless the cost-benefit ratio for BRs can be very good considering the possible benefits through the efficient use of high-quality BRs. BRs can now be considered as an efficient tool to lower the response burden on businesses, especially for SMEs, and for making efficient surveys that are very cost-effective, compared with enterprise censuses. The cost-effectiveness has not been fully reached in some MS, where lack of administrative sources has caused particular difficulties. The financial support given to the MS (annex 4) has been only a relatively small part of the total costs of revising the BRs. Improving the BR system is still ongoing and the financial support is still to be continued, but to a minor extent.

Even if the results are fairly good, especially considering the fact that NACE Rev.1 had to be implemented at the same time, there remains two main issues where a great deal of work is still needed. These issues are the harmonisation of statistical units and the quality of BRs. Even though the improvements concerning these issues have also been extensive, the different enterprise delineations used in different MS have huge consequences on the comparability of enterprise statistics. Although the coverage has been highly improved and can be considered generally good, there are some NACE Rev.1 sections, especially in services, which are not covered well enough, e.g. concerning small enterprises, non-profit institutions and government units. In many MS there are also still problems to record certain compulsory variables. The importance of good quality is not questioned by the MS and the principles on which good quality should be based on are to a large extent agreed upon. However, the problems of quality measurements are, due to the use of administrative sources, extremely difficult and remain to be solved.

The use of business registers is a matter of subsidiarity and there are no plans to regulate it. The use of BRs, as well as the updating procedures, differ a great deal between MS. Since BRs have an important place in the European Statistical System, a manual of best practices has been prepared on the use of administrative sources. BRs are used extensively as survey frames and co-ordination tools but also as data source for business demography. For business demography, i.e. the numbers, characteristics, births and deaths of enterprises and local units (in the future also enterprise groups) there are also other sources and the role of BRs as co-ordination tool is extremely important. Depending on the legislation in a MS, there may also be extensive non-statistical use of BRs. It can be used for administrative purposes in some MS and its non-confidential information may also be used extensively for commercial purposes.

It is a great challenge for the future to develop BRs as a tool for globalisation statistics. This means to include optional variable g of the BR Regulation, "name and address of any non-resident legal unit, other than natural person, which controls the legal unit" into the BRs as well as including information on enterprise groups. Extensive studies and development of methodology is needed and will be carried out in the near future. In the long term a legal act may need to be considered in order to achieve a European harmonisation on enterprise groups.

The results obtained in implementing other regulations may have an effect on the development of BRs. This mainly concerns the two most important business statistics, Structural Business Statistics and Short-term Statistics, where the effects of the inconsistent use of statistical units can be studied during the next few years. Relations to the use of statistical units in other statistics like National Accounts and Intrastat is also important. At this moment no changes for the BR Regulation is foreseen from the requirements of these other regulations. Nevertheless the methodology needed for the harmonisation of the use of statistical units and for building up certain units in an analytical way requires extensive work.

To develop methodology on BRs has been, and is furthermore, a focal point and a responsibility for Eurostat. This does not concern only EU countries but also EEA, CEC and other European countries, as agreed between Eurostat and UN/ECE. In spite of the huge improvements on methodology, it is an ever evolving issue, clearly indicated by the need for new chapters as well as the need to revise old chapters in the Manual of Recommendations. The Manual is a means of harmonisation as well as an important means of instruction.

The norms for BRs have been firstly developed for areas, where statistics have a long history (like industry and trade) and the norms still need to be specified for certain services, especially on the treatment of non-profit institutions and government units.

No changes in the text of the BR Regulation are sought in short or medium term, neither on compulsory nor on optional parts of the Regulation. In the long term, the initiatives started on, especially on enterprise groups and globalisation, may lead to a need for changes in the Regulation. In that connection the role of optional variables must be reconsidered. But, to be able to prepare for the second phase of the development of BRs, the implementation phase of the BR Regulation must be completed rapidly. Some compulsory information is not yet recorded in the BRs of some MS and these MS will be requested to submit a detailed plan and timetable for their inclusion.

ABBREVIATIONS

BR Business Register for statistical purposes

CEC Central European Countries

EEA European Economic Area

ESA European System of national and regional Accounts

MS Member State(s)

NSI National Statistical Institute

SBS Structural Business Statistics

SME Small and Medium Enterprises

SPC Statistical Programme Committee

STS Short-Term Statistics

TES Training of European Statisticians

NACE Rev.1 Statistical classification of economic activities in the European Community

VAT Value Added Tax

PAYE Pay As You Earn

EU European Union

PHARE Poland-Hungary: aid for economic restructuring (Community Aid programme for central and east European countries)

TACIS Technical assistance to the Commonwealth of Independent States

ADSO Administrative Sources

FATS Foreign Affiliates Trade Statistics

EG Enterprise Groups

KAU Kind-of-Activity Unit

GDP Gross Domestic Product

REFERENCES

- European regulations

NACE Rev.1

- Council Regulation (EEC) Nº3037/90 of 9 October 1990 on the statistical classification of economic activities in the European Community

- Council Regulation (EEC) Nº761/93 of 24 March 1993 amending Council Regulation (EEC) Nº3037/90 on the statistical classification of economic activities in the European Community

Statistical Units

Council Regulation (EEC) Nº696/93 of 15 March 1993 on the statistical units for the observation and analysis of the production system in the Community

Registers

Council Regulation (EEC) Nº2186/93 of 22 July 1993 on Community co-ordination in drawing up business registers for statistical purposes

ESA

Council Regulation (EC) Nº2223/96 of 25 June 1996 on the European system of national and regional accounts in the Community

Structural Business Statistics (SBS)

- Council Regulation (EC, EURATOM) Nº58/97 of 20 December 1996 concerning structural business statistics

- Council Regulation (EC, EURATOM) Nº410/98 of 16 February 1998 amending Council Regulation (EC, EURATOM) Nº58/97 concerning structural b business statistics

Short-Term Statistics (STS)

Council Regulation (EC) Nº1165/98 of 19 May 1998 concerning short-term statistics

INTRASTAT

- Council Regulation (EEC) Nº3330/91 of 7 November 1991 on the statistics relating to the trading of goods between Member States

- Regulation (EC) No 1182/1999 of the European Parliament and of the Council of 10 May 1999 amending Council Regulation (EEC) No 3330/91 on the statistics relating to the trading of goods between Member States with a view to reducing the data to be provided

Statistics on the structure and distribution of earnings

Council Regulation (EC) No 530/1999 of 9 March 1999 concerning structural statistics on earnings and on labour costs

- Other references

- Business registers for statistical purposes: methodological recommendations, volume 1, Office for official publications of the European Community, 1996.

- Statistical Business Registers: Problems and Opportunities. Proceedings of the 82nd DGINS conference, Vienna 1996.

- Enterprises in Europe. Fourth Report. European Commission.

- The impact of diverging interpretations of the enterprise concept on statistical data, a comparison of enterprise profiling practices in Denmark, the Netherlands and the United Kingdom. Study carried out by Statistics Netherlands on behalf of Eurostat, 1998.

ANNEX 1

SUMMARY DATA PER COUNTRY

Table 1: Units registered by type of statistical unit (absolute and relative figures)

Table 2: Coverage by section of NACE Rev.1 and by type of statistical unit (absolute and relative figures)

Table 3: Variables registered by statistical unit (absolute and relative figures)

Table 4: Sources for business registers by type of statistical unit

Table 1: Units registered by type of statistical unit (absolute and relative figures)

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Table 2: Coverage by section of NACE Rev.1 and by type of statistical unit (absolute and relative figures)

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A (optional) // - Agriculture, hunting and forestry

B (optional) // - Fishing

C // - Mining and quarrying

D // - Manufacturing

E // - Electricity, gas and water supply

F // - Construction

G // - Wholesale and retail trade; repair of motor vehicles, motorcycles and personal and household goods

H // - Hotels and restaurants

I // - Transport, storage and communication

J // - Financial intermediation

K // - Real estate, renting and business activities

L (optional) // - Public administration and Defence; compulsory social security

M // - Education

N // - Health and social work

O // - Other community, social and personal service activities

P // - Private households with employed persons

Q // - Extra-territorial organizations and bodies

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A (optional) // - Agriculture, hunting and forestry

B (optional) // - Fishing

C // - Mining and quarrying

D // - Manufacturing

E // - Electricity, gas and water supply

F // - Construction

G // - Wholesale and retail trade; repair of motor vehicles, motorcycles and personal and household goods"

H // - Hotels and restaurants

I // - Transport, storage and communication

J // - Financial intermediation

K // - Real estate, renting and business activities

L (optional) // - Public administration and Defence; compulsory social security"

M // - Education

N // - Health and social work

O // - Other community, social and personal service activities

P // - Private households with employed persons

Q // - Extra-territorial organizations and bodies

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A (optional) // - Agriculture, hunting and forestry

B (optional) // - Fishing

C // - Mining and quarrying

D // - Manufacturing

E // - Electricity, gas and water supply

F // - Construction

G // - Wholesale and retail trade; repair of motor vehicles, motorcycles and personal and household goods

H // - Hotels and restaurants

I // - Transport, storage and communication

J // - Financial intermediation

K // - Real estate, renting and business activities

L (optional) // - Public administration and Defence; compulsory social security

M // - Education

N // - Health and social work

O // - Other community, social and personal service activities

P // - Private households with employed persons

Q // - Extra-territorial organizations and bodies

Table 3: Variables registered by statistical unit (absolute and relative figures)

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Table 4: Sources for business registers by type of statistical unit

SOURCES

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Other sources: // English translation

//

B - Fichier "comptes annuels" de la Centrale des Bilans de la BNB // "Current accounts" file of the BNB financial reporting centre

DK - Feed-back from customers and sections in Statistics Denmark producing business statistics //

D - Gewerbeanzeigen bei der Gemeindeverwaltung // Job announcements at the Council administration

F - les CFE( Centre de Formalités des Entreprises) // The CFEs (Centres for Company Compliance)

F - Répertoire des unités contrôlés majoritairement par l'Etat, // Register of units under majority State control

F - Enquêtes annuelles d'entreprises, //

I - Istituto Nazionale sulla assicurazione sugli infortuni sul lavoro // INAIL (National Insurance Institute against Accidents at work)

I - Banca d'Italia // Bank of Italy

L - Service Répertoire national des personnes physiques et morales // National Registry of Persons and Companies

A - Mitgliederdatei der wirtschafstkammer Osterreich // Austrian Chamber of Commerce membership file

P - Quadros de Pessoal - Ministério do Trabalho e Solidariedade // Personnel Registry - Ministry of Labour and Solidarity

P - Banco de Portugal // Bank of Portugal

FIN - files from National Board of Customs // Files from National Board of Customs

S - Statistics Sweden. //

S - PRV, direct information from Swedish Patent and Registration office and annual accounts //

S - SVAAB (subsidiary to the Swedish Post) which handles change in mailing addresses. //

UK - Companies House Register //

UK - Dun and Bradstreet (World-dbase) - also used for enterprise group //

N - Business licences files //

N - Register of legal units //

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Other sources:

B - Fichier "comptes annuels" de la Centrale des Bilans de la BNB

DK - Feed-back from customers and sections in Statistics Denmark producing business statistics

D - Gewerbeanzeigen bei der Gemeindeverwaltung

F - Enquêtes annuelles d'entreprises,

IRL - Public utility listing

IRL - Local Authority and Governemt listings (1997 onwards)

L - Enquêtes structure et activité

A - Mitgliederdatei der wirtschafstkammer Osterreich

P - Quadros de Pessoal - Ministério do Trabalho e Solidariedade

P - Banco de Portugal

S - PRV, direct information from Swedish Patent and Registration office and annual accounts.

N - Business licences files

N - Register of legal units

>TABLE>

Other sources:

DK - Feed-back from customers and sections in Statistics Denmark producing business statistics

D - Gewerbeanzeigen bei der Gemeindeverwaltung

F - les CFE( Centre de Formalités des Entreprises)

F - Enquêtes annuelles d'entreprises,

IRL - Public utility listing

IRL - Local Authority and Governemt listings (1997 onwards)

I - Ente Nazionale per l'energia elettrica

L - Enquêtes structure et activité

P - Quadros de Pessoal - Ministério do Trabalho e Solidariedade

S - Statistics Sweden.

S - SVAAB (subsidiary to the Swedish Post) which handles change in mailing addresses.

N - Business licences files

N - Register of legal units

ANNEX 2

Overview of financial support to Member States, 1993-1997

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