1. General
The goal of this publication is to present annual demographic data on businesses in the Israeli economy. The data presented in this publication were produced from the Business Register which was established by the Central Bureau of Statistics, based on Eurostat’s[1] European regulations in 2003.
1.1 Business Register
The Israel Business Register was established by the Central Bureau of Statistics on the basis of European Union regulations. In 1997 there were two committees:
1. a committee for examining the legal aspects;
2. a committee for examining the practical and technical aspects.
At the end of 1998 the recommendations of both committees were submitted to, and accepted by, the Director-General of the Prime Minister’s Office and representatives of the economic ministries. The recommendations that were accepted were:
1. A statistical Business Register will be established by the Central Bureau of Statistics.
2. The Business Register will comply with international regulations (Eurostat recommendations).
3. The basic data sources will be administrative files of the tax authorities and additional elements, which have demographic information on businesses.
4. The register would not be open to the public, and cooperation between the Central Bureau of Statistics and the tax authorities would be based on Sections 15a and 18b of the Statistics Ordinance – sections that deal with joint activities and transfer of information collected jointly (information on businesses listed in the register is not transferred to the tax authorities, except for examination of their industrial category).
Business registries exist mainly in developed countries around the world (OECD[2] countries, Canada, USA, etc.), and they are general maintained by statistical bureaus or government ministries who deal with statistical subjects.
The Business Register began its activities in Israel in 2003, and since then has been used for producing annual demographic data on businesses active in the Israeli economy, such as data on openings and closings of businesses according to VAT records, with various characteristics. The register is also used for producing sample frames for various business surveys conducted by the Central Bureau of Statistics, as part of its research on the Israeli economy (wages and employment indices, revenue indices, industrial indices, available jobs survey, etc.).
The Business Register has been systematically supplied by two main files, since its establishment:
A file received from the VAT authorities (Value Added Tax)
A file received from the National Insurance Institute.
Comparing data from these two sources makes it possible to create a bank of business records, which contains monthly data on employment and revenue, and additional indicators such as the business’s industry, activity dates and address.
This publication presents annual data which make it possible to analyze and study businesses that are active in the Israeli economy, from various aspects:
· State of a number of active businesses, number of employee jobs of Israelis or foreigners, and wages data of Israelis or foreigners by industry (category or division level)[3], and by district.
· Business movements in the Business Register by industry (category level) and by district: distribution and rates of openings and closings of businesses, births and deaths of businesses, based on a quantitative data base.
· Data on survival and percentages of non-survival among new businesses by industry (category level).
The data in the present publication are presented according to the new directives of the Eurostat organization and the OECD, which were published during the past year under the name: “Manual on Business Demography Statistics 2007”[4].
2. Definitions and Findings
2.1 Active Businesses
The production of annual situation findings aspires to present the active businesses in the economy for that same year. The number of businesses for the year of activity includes businesses that recorded positive activity in at least one month of that year (employment data from the National Insurance Institute or VAT data – revenue or input).
From 2003 to 2007 there was an average annual growth of approximately 3% in the number of active businesses in the Israeli economy.
The rise in the number of active businesses in 2004 compared with 2003, as in 2007 compared with 2006, was higher than the average annual growth, and was estimated at 3.6%. In 2005 the rise in the number of active businesses compared with 2004 was estimated at only 2%, and in 2006 it was estimated at only approximately 3%, compared with 2005.
The highest percentage of active businesses among the various industries during 2003-2007 was found in Real Estate, Renting and Business Activities (an annual average of approximately 25.2%).
The lowest percentage of active businesses among the various industries during 2003-2007 was found in Banking, Insurance and Other Financial Institutions (an annual average of approximately 2.8%).
An analysis of growth in the number of businesses during 2003-2007 by industry, indicates that the rise occurred in the relative share of the following industries: Real Estate, Renting and Business Activities (from 24% in 2003 to 26% in 2007), Accommodations Services and Restaurants (from 4.2% to 4.4%), Public Administration, Education, Health Services and Welfare and Social Work (from 10.1% to 10.5%) and in Community, Social and Personal and Other Services (from 7% to 7.5%).
However, there was a fall in the relative share of Manufacturing (from 6.7% in 2003 to 5.9% in 2007), Agriculture (from 4% to 3.6%), Construction, Electricity and Water Supply (from 9.7% to 9.4%), Wholesale and Retail Trade, and Repairs (from 21.4% to 20.6%) and Transport, Storage and Communications (from 9.6% to 8.7%).
Following is a diagram that presents the number of active businesses in all industries, during 2003-2007:
Following is a table that presents the number of active businesses during 2003-2007, by industry (category level)
Table A. – Number of Active Businesses, by Industry (Category Level)
2003-2007
Industry Year
/ 2003 / 2004 / 2005 / 2006 / 2007Total
/ 389,560 / 403,739 / 411,824 / 424,076 / 439,188Agriculture / 15,637 / 15,908 / 15,948 / 16,034 / 15,851
Manufacturing / 26,136 / 26,285 / 26,078 / 25,729 / 25,966
Electricity and Water Supply and Construction / 37,943 / 38,696 / 39,128 / 39,874 / 41,408
Wholesale and Retail Trade and Repairs / 83,635 / 86,684 / 87,664 / 88,778 / 90,541
Accommodation Services and Restaurants / 16,411 / 17,536 / 18,189 / 18,738 / 19,447
Transport, Storage and Communications / 37,460 / 38,107 / 37,852 / 38,250 / 38,323
Banking, Insurance and Other Financial Institutions / 11,117 / 11,245 / 11,305 / 11,686 / 12,244
Real Estate, Renting and Business Activities / 94,120 / 99,086 / 103,602 / 109,620 / 116,024
Public Administration, Education, Health Services and Welfare and Social Work / 39,570 / 41,167 / 42,272 / 44,143 / 46,322
Community, Social, Personal and Other Services / 27,531 / 29,025 / 29,786 / 31,224 / 33,062
2.2 Employee Jobs
The number of employee jobs includes the jobs of workers that worked at least one day that year. The jobs include Israeli or foreign workers or workers from the Judea and Samaria area (further expansion of the definition in Chapter 3).
From 2003 till 2007 there was an average annual growth of 3.7% in the number of employee jobs in the Israeli economy.
The rise in the number of employee jobs in 2004 compared with 2003 was measured at only 1.8%. In 2005 compared with 2004, the rise in employee jobs was measured at 2.2%. The rise in 2006 compared with 2005, and in 2007 compared with 2006, was higher than the annual average and was measured at 5.8% and 5.1%, respectively.
As stated, the most significant growth between years (5.8%) was measured in 2006, and it was mainly affected by the rise in employee jobs in Accommodation Services and Restaurants (9.6%), Community, Social and Personal and Other Services (8.5%) and Real Estate, Renting and Business Activities (7%).
An industry-based analysis of the growth in the number of employee jobs between 2003–2007 indicates that the rise occurs in the relative share of the industries of Real Estate, Renting and Business Activities (from 17% in 2003 to 18.5% in 2007) and of Accommodation Services and Restaurants (from 4.4% to 5.4%). In contrast, a drop occurred in the relative share of Manufacturing (from 13.2% in 2003 to 12.8% in 2007).
Following is a diagram that presents the number of employee jobs (in thousands) in all industries, during 2003–2007:
Following is a table that presents the number of employee jobs during 2003-2007, by industry (category level):
Table B. – Number of Employee Jobs, by Industry (Category Level)
2003-2007
Thousands
Industry (Category Level)/Year / 2003 / 2004 / 2005 / 2006 / 2007Total / 2,413.2 / 2,455.8 / 2,509.6 / 2,656.1 / 2,792.4
Agriculture / 62.7 / 64.7 / 66.5 / 68.5 / 73.7
Manufacturing / 318.2 / 324.3 / 329.4 / 340.8 / 357.5
Electricity and Water, Construction / 149.9 / 145.7 / 145.9 / 152.8 / 158.3
Wholesale and Retail Trade and Repairs / 316.0 / 327.6 / 343.4 / 359.6 / 379.7
Accommodation Services and Restaurants / 107.3 / 116.7 / 125.7 / 137.8 / 151.0
Transport, Storage and Communications / 128.4 / 134.4 / 138.8 / 145.2 / 153.5
Banking, Insurance and Other Financial Institutions / 74.9 / 73.9 / 75.9 / 79.9 / 85.9
Real Estate, Renting and Business Activities / 425.8 / 435.0 / 456.3 / 488.5 / 516.9
Public Administration, Education, Health Services and Welfare and Social Work / 715.8 / 717.6 / 707.3 / 752.3 / 779.1
Community, Social, Personal and Other Services / 114.2 / 115.9 / 120.4 / 130.7 / 136.8
2.3 Movement of Businesses in the Business Register
2.3.1 Openings and Closings of Businesses in a Year of Activity
The fact that businesses are required by law to report to VAT authorities makes it possible to identify the opening date of businesses, according to the date of the opening of the business listed with VAT. Concurrently, it is possible to count the number of businesses formally closed, according to the date recorded as the conclusion of their activity with VAT.
In 2007 a growth of 4.1% was noted in the number of business openings, and 3.1% in the number of closings, compared with 2006. However, in 2006 a drop of 2.1% was noted in the number of business openings, concurrent with a rise of 3.2% in the number of business closings (for further details – see Definitions in Chapter 3).
Following is a table that describes the number of openings and closings of businesses from 2003 till 2007 (these data were published in Press Releases, in the 2008 Statistical Abstract of Israel – Table 18.4, as well as in previous abstracts):
Table C. – Openings and Closings of Businesses
2003–2007
2003 / 2004 / 2005 / 2006 / 2007Openings / 42,175 / 50,355 / 47,868 / 46,876 / 48,812
Closings / 34,321 / 37,323 / 35,784 / 36,944 / 38,086
2.3.2 Business Births and Deaths in a Year of Activity
In light of the time lapse that exists between the time of being listed by the tax authorities and the beginning of a business’s financial activities, or their actual stopping of activities, it was decided – in accordance with the new definitions of Eurostat and the OECD[5] - to relate to the “appearance” or “disappearance” of quantitative reports as an indicator of the date of a business’s beginning of activities or their conclusion; i.e., its birth or death (for additional expansion – see the definition in Chapter 3).
This is the first year that annual data of business births and businesses deaths, which were produced according to these definitions, have been published.
Business Births
The definition of a ‘birth’ is more complex than that of opening a business, and the main and deciding factor is the timing. One definition, which is impossible to apply, would be the time of conceiving the idea of the business; when was the idea of the project conceived. Therefore, a business’s birth date has been determined according to international definitions, in the year in which measurable activity first appeared in the business, which is expressed in reports of having employees and/or positive revenue data from VAT.
In a schematic manner, ‘birth’ is defined for businesses that were found among the active business population (businesses with VAT reports or employee reports) as occurring in the year ‘t’ (e.g., 2007 = t), but were not found among this population in t-1 (e.g., 2006) and/or in t-2 (e.g., 2005)[6].
During 2005-2007 an annual average of approximately 43,910 businesses were born, and they constitute approximately 10.4% of all active businesses in the Israeli economy[7] during those years.
Business Deaths
For the sake of consistency, the method of comparing the population of active businesses, which is used to produce data regarding business births, should be identical to that used when determining the population of business deaths. These businesses are defined as businesses that were found in the population of active businesses (businesses with VAT or employee reports) in year t (e.g., 2003 = t) but were not found in this population in t +1 (e.g., 2004) and/or in t +2 (e.g., 2005)[8].
During 2003–2005 an annual average of approximately 33,370 businesses died, and they constitute approximately 8.3% of all active businesses in the Israeli economy7 during those years.
From a methodological point of view, identifying business births and deaths includes examining the existence of quantitative reports during the two years before the potential birth, and the two years after the potential death.
Because the Business Register in Israel was established in 2003, it was impossible to calculate births for years prior to 2005. As for business deaths, since at the time this publication went to press there were no final data for 2008 yet, it was not possible to calculate their numbers past 2005.
From the above, it appears that the only year for which it was possible to calculate full demographic data, including business births and deaths, is 2005.
Most of the business movements were recorded in the group of self-employed and in companies that do not have employees: 59% of all businesses that were born in 2005 are those of the self-employed or companies that do not have employees; in addition, 65% of all dead businesses in 2005 were companies that do not have employees.