SIC of those sector codes?

| Beauhurst

Category: Product

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.

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). SIC codes are often too broad. 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.

We at Beauhurst have worked hard to develop sector groupings that overcome all the problems with SIC codes. And we offer consultancy services as well as subscriptions; perhaps if Companies House and the Office for National Statistics wanted to overhaul their sector taxonomy they could give us a shout?

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