What is a principal activity?

A principal activity is the activity that contributes most to the value added of a unit, and it is the basis on which the unit is coded in statistics. The Central Statistics Office states that NACE coding is based on the principal activity of a unit, where most of the gross value is added, and that a unit should be classified to the category that best describes its activity. A unit can carry on more than one activity, and the principal activity is the one that dominates, by value added, among them.

The other activities are secondary activities. The principal activity is a statistical basis, described in the introductory guidelines, and this guide describes that basis only. It does not apply the basis to any specific business, and it does not advise any reader on which activity is principal for a particular unit.

How is principal activity distinguished from secondary activities?

Principal activity and secondary activities are distinguished by their contribution to the value added of the unit. The principal activity contributes most. Secondary activities contribute less, and they produce goods or services for third parties, in addition to the principal activity. A unit can have one principal activity and several secondary activities, and it is coded, for statistical purposes, to the category of its principal activity. The secondary activities are not ignored in statistics: they are recorded in the unit’s activity description, and they can be the basis for kind of activity units, which aggregate the parts of an enterprise involved in one activity. A reader who sees a single code for a unit should therefore understand that the code describes the principal activity, not the whole range of activities, and that a unit with a single code can carry on secondary activities that are not shown in that code. A code is a summary by principal activity, not a complete description of the unit.

What is value added, in this context?

Value added, in this context, is the value created by the unit’s production, measured as the value of its output less the value of its intermediate consumption, in the national accounts sense in which the Central Statistics Office uses the phrase gross value added. The principal activity is the activity where most of that value is added, in the CSO wording. Value added is a statistical measure, compiled from the unit’s accounts and survey returns, and it is not the same as turnover, employment, or profit, although those measures can be used as proxies where value added cannot be measured directly, under the rules in the introductory guidelines. A reader should not assess a principal activity from turnover alone, or from employment alone, without checking the guidelines for the unit type and the data available, because the measure used affects the result, and the guidelines state the hierarchy of measures to be used. This guide does not state that hierarchy in detail, because the guidelines text was not consulted in full for it, and a hierarchy from a secondary source would be unverified. The reader should open the introductory guidelines for the hierarchy, and should cite them for any statement about it.

Why is the principal activity basis described, but not applied here?

The principal activity basis is described here because a reader needs to understand what a code means: it means the category of the principal activity, not a list of all activities. It is not applied here, to any specific business, because applying it requires the unit’s value added by activity, which this site does not hold, and because the guardrail for this site forbids determining a reader’s correct or principal code, and forbids advising on the top down method as applied to a specific business. The top down method, in the introductory guidelines, is the method for applying the principal activity basis down the hierarchy, from section to division to group to class, and it is a method for statisticians working with unit data. A general description of the method, without a unit, is information about the classification. An application of the method to a named business, with that business’s data, is a determination, and it belongs to the institute or register that holds the record, on the evidence that holder requires. This guide stays on the general side of that line, and it states the line plainly wherever the method is mentioned.

Term	Meaning
Principal activity	Activity contributing most to the value added of the unit
Secondary activity	Activity producing goods or services for third parties, in addition to the principal activity
Value added	Output less intermediate consumption, in the national accounts sense
Coding basis	Category of the principal activity, as stated by the Central Statistics Office

The table is a glossary, not a method. It defines the terms used in the principal activity basis, in the terms the Central Statistics Office uses, and it does not add a step by step method for applying them. A reader who needs the method should open the introductory guidelines, and should cite them for the method.

What does principal activity not decide?

Principal activity does not decide tax, licensing, funding, collective agreement or social security questions, and the code assigned on that basis does not decide them either. The EUR-Lex summary gives the limit: the legislation applies only to statistical purposes. A code based on principal activity is a statistical summary, and its use by another system is governed by that system, not by the classification. A reader who is told that a principal activity code decides an obligation should ask for the instrument that states the rule, and should check whether the rule refers to the code, to the activity, or to other facts entirely. The code is evidence of the statistical basis. The obligation, where one exists, is decided elsewhere.

Where is principal activity confirmed?

The basis is confirmed in the Eurostat introductory guidelines and in the Central Statistics Office account of NACE coding. The entry for a specific unit is confirmed with the national statistical institute or the business register that holds the record, which holds the coding for that unit on the basis the holder uses. A reader should cite the guidelines for the basis, and the register for the entry, and should never cite one for the other.

Describe the basis in general terms, cite the guidelines for the method, and confirm a business entry with the institute or register that holds it.