Business & Economic Data

Market Size, VAT Registrations, Turnover, and Regional Analysis

Data Sources:

Analysis Date: October 2025

Summary

This report presents official government data on the UK hair and beauty sector (SIC 96020), covering market size, business numbers, turnover, and regional distribution. Three primary measurements provide different perspectives on sector size, from total consumer demand through formal business operations to large VAT-registered businesses only.

Total Consumer Market

£9.10bn

Consumer spending on hair & beauty (2025)

ONS household survey data

Formal Business Sector

£5.78bn

All VAT/PAYE registered businesses (2024)

49,320 businesses

VAT-Registered Businesses

£3.15bn

Businesses above £90k threshold (2022-23)

14,900 businesses

London Dominance

£1.03bn

London VAT turnover (32.7%)

Highest regional concentration

Understanding the Three Measurements

Why three different figures? Each measurement answers a different question about the sector:

  • Consumer Spending (£9.10bn): Total market demand - what consumers actually spend
  • Formal Business Turnover (£5.78bn): Registered business supply - what formal businesses declare
  • VAT-Registered Only (£3.15bn): Large operators - businesses above £90k threshold

The gaps between these figures reflect legitimate below-threshold operators, measurement methodology differences, tips/gratuities, and some informal economy activity. None of these figures is "wrong" - they measure different aspects of the market.

1. Market Size Analysis

Three-Tier Market Measurement

Tier 1: Total Consumer Market (Demand Side)

ONS Consumer Spending Data (COICOP 12.1.3):

£9.10 billion (2025)
  • What it measures: Total consumer expenditure on hair & beauty services
  • Includes: ALL spending on hair/beauty regardless of business size or formality
  • Coverage: Formal salons, mobile operators, chair renters, below-threshold businesses, tips
  • Method: Household surveys asking "How much did you spend on hairdressing/beauty?"
  • Represents: Total market demand - the complete consumer spending pool
  • Best for: Understanding total market size and consumer demand trends

Source: ONS Consumer Trends, COICOP category 12.1.3 "Hairdressing salons and personal grooming establishments"

Tier 2: Formal Business Economy (Supply Side)

ONS Business Population Estimates (March 2024):

£5.78 billion turnover
  • What it measures: Declared turnover from formal businesses
  • Includes: All VAT and/or PAYE registered businesses
  • Business count: 49,320 total businesses
  • Employment: 179,236 total employment; 160,602 employees
  • Method: Business surveys and administrative tax data
  • Represents: Formal business sector - what registered businesses report earning
  • Best for: Tracking registered businesses and formal employment

Source: ONS Business Population Estimates, Table AH1703, SIC 96020. ONS caution: "Turnover data should be treated with caution as it is not independently verified."

The £3.32bn Gap Between Consumer Spending and Formal Business Turnover

Consumer spending (£9.10bn) - Formal business turnover (£5.78bn) = £3.32bn

This gap reflects:

  • Legitimate below-threshold operators (self-employed under £90k)
  • Tips and gratuities (included in consumer spending, not always in business turnover)
  • Measurement methodology differences (household surveys vs business surveys)
  • Chair renters and mobile operators not captured in business statistics
  • Some informal economy activity

This gap does NOT indicate £3.32bn in tax evasion - most represents legitimate structural factors in how the sector operates and how data is collected.

Tier 3: VAT-Registered Businesses Only (Large Operators)

HMRC VAT Registration Data (2022-23):

£3.15 billion turnover
  • What it measures: Actual VAT returns from businesses above threshold
  • Includes: ONLY businesses with turnover above £90,000
  • Business count: 14,900 VAT-registered businesses
  • Method: Actual VAT tax returns (verified government data)
  • Represents: Large operators sector - businesses above VAT threshold
  • Best for: Most reliable turnover data, but covers only 30% of businesses

Source: HMRC VAT Registration Data, FOI2024/15284

The £2.63bn Gap: Below-Threshold Businesses

Formal business turnover (£5.78bn) - VAT-registered turnover (£3.15bn) = £2.63bn

This represents approximately 34,420 businesses operating legitimately below the £90,000 VAT registration threshold. These are:

  • Small salons and sole traders (turnover £30k-£89k)
  • Mobile hairdressers and beauticians
  • Part-time operators
  • Micro-businesses registered for PAYE but below VAT threshold

These businesses operate completely legally, declaring income for Income Tax purposes but not required to register for VAT.

Market Structure Implications

The three-tier measurement reveals important structural characteristics of the UK hair and beauty sector:

Policy implications: Any policy affecting VAT thresholds, business rates, or employment regulations must consider that 70% of formal businesses operate below £90k turnover, with substantial additional economic activity in the below-formal-threshold space.

2. VAT Business Registrations

National Totals

VAT-Registered Businesses by Tax Year:

Note: These figures represent businesses with turnover above £90,000 (VAT registration threshold). Businesses below this threshold are not included in VAT registration data.

Tax Year Number of Businesses Change vs Previous % Change
2018-19 14,300 - -
2019-20 14,100 -200 -1.4%
2020-21 13,200 -900 -6.4%
2021-22 13,900 +700 +5.3%
2022-23 14,900 +1,000 +7.2%
Total Change 2018-23 - +600 +4.2%

Source: HMRC VAT Registration Data (FOI2024/15284)

2018-19 to 2022-23:

By Period:

3. Sector Turnover Analysis

VAT-Registered Business Turnover (HMRC Data)

This is the most reliable turnover data, based on actual VAT returns. However, it covers only 30% of businesses (those above £90k threshold).

Tax Year Total Turnover Change vs Previous % Change Avg per Business
2018-19 £2.96 billion - - £207,000
2019-20 £3.08 billion +£120m +4.1% £218,000
2020-21 £2.54 billion -£540m -17.5% £192,000
2021-22 £3.12 billion +£580m +22.8% £224,000
2022-23 £3.15 billion +£30m +1.0% £211,000
Total Change 2018-23 - +£190m +6.4% -

Source: HMRC VAT Registration Data (FOI2024/15284)

Key Observations (2018-19 to 2022-23):

Estimated Below-Threshold Business Turnover

Calculation Method

Based on ONS formal business turnover (£5.78bn) minus HMRC VAT-registered turnover (£3.15bn):

  • Estimated below-threshold turnover: £2.63bn
  • Number of below-threshold businesses: ~34,420 (estimated)
  • Average turnover per below-threshold business: ~£76,000

Note: This is an estimate derived from two different data sources with different methodologies. The actual distribution of below-threshold businesses by size is not published.

4. Regional Distribution

VAT-Registered Businesses by Region (2022-23)

Region Number of Businesses Turnover % of Total Turnover Avg Turnover per Business
London 3,180 £1.03 billion 32.7% £324,000
South East 2,650 £580 million 18.4% £219,000
North West 1,910 £385 million 12.2% £201,000
West Midlands 1,230 £230 million 7.3% £187,000
Yorkshire & The Humber 1,080 £210 million 6.7% £194,000
East of England 1,050 £200 million 6.3% £190,000
Scotland 1,020 £195 million 6.2% £191,000
South West 950 £175 million 5.6% £184,000
East Midlands 760 £135 million 4.3% £178,000
Wales 385 £70 million 2.2% £182,000
North East 310 £53 million 1.7% £171,000
Northern Ireland 295 £50 million 1.6% £169,000
TOTAL 14,900 £3.15 billion 100% £211,000

Source: HMRC VAT Registration Data (FOI2024/15284)

Regional Patterns:

Historical Regional Trends (2018-19 to 2022-23)

London Region Growth

  • 2018-19: £895m turnover, 2,850 businesses
  • 2022-23: £1.03bn turnover, 3,180 businesses
  • Change: +£135m turnover (+15.1%), +330 businesses (+11.6%)

South East Region Growth

  • 2018-19: £525m turnover, 2,450 businesses
  • 2022-23: £580m turnover, 2,650 businesses
  • Change: +£55m turnover (+10.5%), +200 businesses (+8.2%)

5. Flat Rate VAT Scheme Usage

The Flat Rate VAT Scheme is a simplification scheme for small businesses that allows them to pay VAT as a fixed percentage of their turnover rather than calculating VAT on individual transactions.

Tax Year Businesses Using Scheme Change vs Previous % of VAT-Registered
2018-19 2,298 - 16.1%
2019-20 2,435 +137 17.3%
2020-21 2,201 -234 16.7%
2021-22 1,770 -431 12.7%
2022-23 1,738 -32 11.7%

Source: HMRC Flat Rate VAT Scheme Data (FOI2024/200347)

Flat Rate Scheme usage decreased from 2,298 businesses (2018-19) to 1,738 businesses (2022-23), a reduction of 560 businesses (-24.4%). During the same period, total VAT registrations increased by 600 businesses (+4.2%).

Decline in Flat Rate Scheme Usage:

6. Self-Employment Data

Self-Employed Workers in Sector

From HMRC Survey of Personal Incomes (2021-22):

210,000 Self-Employed Individuals

Reporting income from hairdressing and beauty services.

Source: FOI2024/200347 (HMRC Self-Employment Data)

Understanding Self-Employment vs Business Count

The 210,000 self-employed figure differs significantly from the 49,320 business count because:

Workforce Composition Summary

Business Entities:

Employment & Self-Employment:

Market Value by Measurement:

7. Methodology & Data Quality

Data Sources

1. ONS Consumer Spending Data (COICOP 12.1.3)

Strengths: Captures ALL consumer spending regardless of business formality

Limitations: Survey sampling error, household recall accuracy, includes tips/gratuities

2. ONS Business Population Estimates (March 2024)

Strengths: Comprehensive coverage of formal business sector

Limitations: ONS cautions "Turnover data should be treated with caution as it is not independently verified"

3. HMRC VAT Registration Data (FOI2024/15284)

Strengths: Most reliable turnover data (actual tax returns), precise and verified

Limitations: Only captures businesses above £90k threshold (30% of total businesses)

4. HMRC Self-Employment Data (FOI2024/200347)

5. HMRC Flat Rate VAT Scheme Data (FOI2024/200347)

Understanding Measurement Gaps

Consumer Spending vs Formal Business Turnover (£3.32bn gap):

Why consumer spending (£9.10bn) exceeds formal business turnover (£5.78bn):

Formal Business Turnover vs VAT-Registered Turnover (£2.63bn gap):

Why ONS business turnover (£5.78bn) exceeds HMRC VAT turnover (£3.15bn):

Data Quality Assessment

Dataset Reliability Coverage Best Use
Consumer Spending (£9.10bn) Medium (survey-based) Complete market Total market size
Formal Business (£5.78bn) Medium (mixed methods) Registered businesses Business tracking
VAT-Registered (£3.15bn) High (tax returns) 30% of businesses Large operator analysis

Calculations and Estimates

Direct Calculations:

Estimates (Clearly Labelled):

Data Verification

All primary data in this report can be independently verified through:

8. Key Data Points Summary

Market Size (Three Measurements)

Business Population

Employment & Self-Employment

VAT Business Changes (2018-19 to 2022-23)

Regional Concentration (2022-23)

Structural Characteristics