Local kind of activity unit (Establishment)

A local kind-of-activity unit is a production unit that is owned by one enterprise, is located on one site and operates within one industry, in other words, produces goods and services of mainly one particular type.

A local-kind-of-activity unit proper engages in the enterprise's normal production activity. Local kind-of-activity units include a factory, a shop, an office or a workshop. In transport and construction, the local kind-of-activity unit is the head or district office from which activities are managed.

An ancillary establishment is located separately from the actual production activity of an enterprise and only produces services (not goods) for the enterprise itself. Examples of ancillary establishments include head offices, warehouses or repair shops for the enterprise's own vehicles.

The statistics comprise local kind-of-activity units that operated for more than six months in an examined year as well as employed more than one half of a person or had a turnover exceeding a certain threshold limit. In 2003, the threshold for turnover was EUR 9,134. The threshold is reviewed annually against the price index of GDP at market prices.

The definition of a local kind-of-activity unit is based on an EU regulation concerning statistical units (EEC 1993/696) and on a regulation concerning Business Registers (EEC 1993/2186).

An establishment is a production unit:

- owned by one enterprise or quasicorporate unit,
- located on one site, and
- producing goods or services of mainly one particular type.

Establishments include, e.g., farms, factories, shops, market stalls and kiosks. Establishments within public administration include tax offices, municipal libraries and health care centres.

The establishment is a key unit in the application of the SIC because

- data by establishment gives the best picture of the structure of the economy,
- establishments can be used for collecting data and producing statistics on the activities of enterprises by geographical and administrative area,
- establishments make it possible to obtain data by industry on enterprises operating within several industries,
- establishments offer the quickest and most economical way to collect many raw data on production, such as commodity prices and monthly sales figures,
- all statistics on persons describe the distribution of the population by industry or economic activity through establishments.

An establishment is often defined on the basis of the data provided by the enterprise's accounting system and the raw data required for the statistics.
The units of different enterprises are different establishments even if they have an identical location. Thus a merchant department store, a shopping centre or an industrial estate does not constitute a single establishment, because it accommodates several enterprises. On the other hand, each enterprise operating in it has at least one establishment at the location in question.

Each part of an enterprise that has an address of its own is an establishment. In certain instances, however, it is necessary to compromise on this principle: it is not always possible to obtain sufficiently detailed data on the enterprise's establishments; and sometimes the activity is of such short duration or is relocated so frequently that it is not sensible to use the address as a criterion of an establishment. For this reason, especially in the construction and transport industries, the establishment is often the regional, district or other permanent office from which activities in the area are conducted.

If an enterprise carries on distinctly different activities at the same location, it is often divided into different establishments. This helps to bring out the different activities in statistics. On the other hand, a department store, for instance, is a functionally uniform entity, which is regarded as one establishment. Decisions on the division of multisectoral enterprises into smaller establishments are based on the absolute and relative magnitude of the different activities.

As an enterprise always operates at some location, it has at least one establishment. Most enterprises have a single establishment while the largest enterprises may have hundreds of establishments in different parts of the country. Furthermore, these may operate in different economic sectors.