The simple answer to how many businesses there are in the UK is 4.9 million. This is the official figure produced by the Department for Business, Innovation and Skills (BIS). The image below is part of the Methodology Note that accompanies their figures to show how they were produced.
As you can see working out the number of businesses in the UK is not simply a matter of counting them up. Instead it is a complex formula which includes a fair degree of assumptions and some guesswork. This is partly because there is no central register of businesses in the UK and partly because where there are registers the government does not trust their figures.
As part of their figures the Department for Business counts 1.4 million companies. Companies House, who keep the official register of Companies for the UK say there are 3.1 million companies in the UK of which 2.8 million are active. The Department for Business discounts the extra 1.4 million to 1.7 million companies on the Companies House register because they are not on the Inter Departmental Business Register (IDBR). The IDBR is not an official public register, like Companies House, it is a list put together for the government’s internal use based on PAYE and VAT registrations. The problem with this is that there are potentially a lot of limited companies who are genuine businesses and who would not appear on the IDBR and therefore would not be counted.
Businesses do not currently have to register for VAT until they reach a turnover of £79,000. Lots of companies do not reach this level and are not VAT registered. They would therefore not appear on the IDBR list. Many limited companies with a small turnover will be run by a single individual who can pay themselves through dividends. They would therefore not need to be registered for PAYE and would not appear on the IDBR list. As far as the Department for Business statistics are concerned limited companies which do not need to register for PAYE or VAT are not real businesses and do not count.
The figure of 4.9 million businesses in the UK can therefore only be seen as a rough guess. It potentially misses a lot of small businesses being run through limited companies. If we were to use the ‘active companies’ figure used by Companies House rather than rely on companies on the IDBR then we could add an extra 1.4 million businesses to the UK total, bringing it up to 6.3 million.