Structural business statistics of enterprises

Break in time series for 2019

NOTES ON METHODOLOGY

(Since the 2019 reference year, the Croatian Bureau of Statistics has been adapting the statistical concept of enterprises for measuring economic activity.)

In coordination within the European Statistical System (ESS), a harmonised business demography and structural business statistics is established, as well as a new practical application of the statistical concept of enterprises. Until 2018, the Croatian Bureau of Statistics, as most of the national statistical institutes of EU Member States, equalised the statistical unit enterprise with legal entities or natural persons engaged in economic activity (legal units).

However, the progressive complexity of the manner in which groups of business entities operate has prompted the ESS to improve the manner in which their activities are presented in official statistics, by bringing the statistical unit enterprise at the forefront. The statistical definition of an enterprise is laid down in Council Regulation (EEC) No 696/93 on the statistical units for the observation and analysis of the production system in the Community as “the smallest combination of legal units that is an organizational unit producing goods or services, which benefits from a certain degree of autonomy in decision-making [...]''. Consequently, an enterprise may consist of several legal units, that is, of the smallest legally independent units which, due to tax or trade legislation, keep a set of business accounts.

The manner in which business entities interact internally affects their ability to make decisions relating to their operation in the market, management of own resources, employment, etc. Sometimes these units are responsible for one factor of production or provide services exclusively within the group, without market orientation or decision-making power for the entire production process. In the context of economic globalisation, one business entity can be managed from another unit, inside or outside the EU. Therefore, coherence and cooperation between all EU Member States is key for both national and European aggregates, as structural business statistics produced by the Croatian Bureau of Statistics serve both European and national purposes.

At the level of ESS, a number of operational rules have been adopted to improve the practical implementation of the definition laid down in Council Regulation (EEC) No 696/93 on the statistical units for the observation and analysis of the production system in the Community and to achieve comparable application in all EU Member States. For example, if different legal units carry out different stages of the same production process and the outputs of one legal unit are the inputs of another, they all form, for statistical purposes, a single enterprise. In practice, there are also cases when legal units provide services or perform ancillary activities mostly for other, related units. Then the company will be formed from all of them together and it will be assigned economic variables (employment, turnover, value added, investments, etc.). In the last few years, the Croatian Bureau of Statistics has been implementing these rules to ensure quality business statistics and their comparability.

It should be noted that the result of the application of these rules to business entities operating independently on the market does not imply any changes. As they also make up the majority of enterprises operating in the Republic of Croatia, the total changes (enterprise vs. legal units) in the entire population will not be as significant as in the previous period. The number of enterprises in the 2019 reference year, due to internal flows, decreased by 0.64%, while the turnover decreased by 3.36%. It is important to point out that in business performance indicators (value added, operating gross profit rate), as well as in the level of employment, as a rule, there should be no change or they should be minimal because these are aggregate, consolidated variables.