SIC of those sector codes? 

Beauhurst, 17 August 2023

When we started Beauhurst we didn’t want to use SIC codes because we thought they were, well, a bit rubbish. We thought it might be useful to sum up why.

First thing’s first: what are SIC codes? 

Standard Industrial Classification (SIC) codes are used to group companies in the UK based on their business activities.

So, what do we think?

For a start, SIC codes can be too broad. Software development is a huge sector in the UK, with many branches: mobile apps, SaaS, server software, etc. Yet all software development companies belong to one generic software development sector (code 62012). This is why many companies belong to unhelpful umbrella sectors that include in their name “Other” or “n.e.c.” (not elsewhere classified).

Another problem is that SIC codes sometimes lump together sectors in a strange way. Biotech (72110) and software development rely heavily on IP. But biotech belongs to a sector group called “Professional, scientific and technical activities”, which means it has strange bedfellows like PR (70210). And software development belongs to a sector group called “Information and communication”, which bizarrely includes sectors like “Motion picture distribution activities” (59131).

Finally, SIC codes aren’t just about sectors. Some SIC codes classify companies as dormant (99999) or non-trading (74990). Why is this odd? Because it’s like asking a zoologist whether an animal is a leopard or a tiger, only to receive the answer that it is dead. “Being dead” is not a species. Likewise, “non-trading” is not a sector.

In short: SIC codes often miss the wood for the trees and try to do work they are not meant to be doing. These problems are compounded by the fact that companies choose their own SIC codes, so there’s really no guarantee that SIC codes are applied consistently across the board. SIC codes make it hard to have a clean and modern view of the sectoral composition of British companies, without which it is hard to assess how the economy is doing and what the business fabric of the country looks like.

What’s our alternative to SIC codes?

Here at Beauhurst, we’ve worked hard to develop sector groupings that overcome all the problems with SIC codes to ensure we’re actively reflecting (and tracking) all the companies in the UK private market.  We tag companies with sectors, so users can easily and accurately search across our data. And it doesn’t stop there—we also categorise using buzzwords. This allows us to track trends that don’t fit into normal sector classifications (take agritech, for example).

If you have any questions about how this works, or if Companies House and the Office for National Statistics wanted to overhaul their sector taxonomy, give us a shout.

See it for yourself.

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