Leading economists, investors, businesses, and industrial policy makers agree that the way the government classifies businesses using SIC Codes is no longer fit for purpose.
Accurate economic data is especially necessary to support emerging, innovative sectors as the UK plans for Brexit and post-Covid recovery. With the pandemic accelerating tech innovation by up to seven years in some sectors (according to McKinsey & Company) the codes are becoming more out of date by the day.
Now The Data City, based in Leeds, has created new technology that allows policy makers, economists, and analysts to view emerging industries in the UK in a way that hasn’t previously been possible. This new ‘real-time industrial classification’ could replace the current way that UK industry is classified using SIC Codes.
The campaign has already won support from Tech Nation. George Windsor, Head of Insights at Tech Nation commented, “As we live through the fastest pace of change in history, UK tech is at the forefront of some of the biggest questions and providing the answers. A better system for industrial data has the potential to super-charge the tech sector, allowing for faster, accurate, consistent analysis and targeted investment.”
The technology has been used by Greater Manchester Combined Authority to create an evidence base for their industrial strategy.
The UK economy is categorised using SIC codes, created in 1948 and last updated in 2007. They are used to standardise industry data collection and analysis, underpinning policy, and investment decisions right across the UK economy. Every company in the UK selects up to four SIC Codes with Companies House and the categories are out of date and imprecise, meaning that many businesses are wrongly classified. The Data City has published information about the flaws in the SIC Code system on its website.
SIC is used by policy makers, economists, and corporate finance to make investment decisions in the UK, and similar systems are used around the world. An independent review of economic statistics, commissioned by UK Chancellor George Osbourne and created by Sir Charles Bean in 2016, concluded, “the changing structure of the economy means that SIC will constantly lag reality, under-representing newer industries and over-representing ones that are declining in importance.”
The Data City co-founder Alex Craven said, “We’re interested in hearing from organisations and experts who can help us create new classifications for emerging and existing sectors. We’re calling for economists, policy makers and investors who want to know about UK plc in more detail than anyone has ever seen.”