EU Referendum

Reality Check: Are 1.2m businesses involved in exports to the EU?

Sajid Javid saying: 1.2 million SMEs (small and medium enterprises) are involved in exports to the European Union

The Claim: 1.2 million small and medium businesses are involved in exports to the European Union.

Reality Check verdict: This figure is based on imperfect data which means assumptions have been made, some of which are open to challenge. The definition of "involved" includes firms anywhere on the supply chain of an exporter, which is why the figure is so high.

Business Secretary Sajid Javid says: "Figures that have been released today show that 1.2 million SMEs (small and medium enterprises) are involved in exports to the European Union."

This is an estimate that comes from the Department for Business Innovation and Skills. These figures were released on Monday last week so as not to contravene the civil service regulations about what may be released in the month before the referendum.

The first thing to say is that the government is not claiming that all of these businesses export to the EU - it says 400,000 of them are actual exporters and the rest are suppliers to companies that export, or suppliers to companies that supply companies that export and so on down the supply chain.

The figure for businesses exporting to the EU is a considerable increase on the 200,000 used by Britain Stronger in Europe earlier in the campaign.

These are difficult figures to calculate, because large numbers of very small businesses are not registered because they do not have any employees and are too small to be above the threshold for VAT.

To be registered for VAT you need to be selling at least £83,000 of goods or services.

The figures for the proportion of companies that export come from the Office for National Statistics Annual Business Survey, which does not include unregistered businesses. As a result, the government has assumed that the same proportion of unregistered businesses export as the smallest registered businesses. This seems like a big assumption to make because surely having no employees or having a turnover of less than £83,000 a year would be expected to make a business less likely to export.

The survey also doesn't cover Northern Ireland, so this research assumes that firms in Northern Ireland behave in the same way as those elsewhere in the UK.

So the final estimate is that 8% of small and medium-sized businesses export to the EU and another 15% of businesses are involved in their supply chains.

The latest figures from 2015 found that there were 5.4 million private sector businesses in the UK, 23% of which is 1.24 million.

There are also assumptions in the methodology that would depress the estimate of the number of businesses involved, such as that businesses are assumed to sell either to consumers or to other businesses, but not both.

Read more: The facts behind claims in the EU debate

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