Introduction of a Revised Standard Industrial Classification. Copenhagen (DENMARK) October 12-16, 1992

Transcription

1 Index Number: Title: Introduction of a Revised Standard Industrial Classification Author: Date: Country: Round Table: United Kingdom 7th Round Table Copenhagen (DENMARK) October 12-16, 1992

2 7th INTERNATIONAL ROUNDTABLE ON BUSINESS SURVEY FRAMES Denmark, October 1992 Introduction of a Revised Standard Industrial Classification Contribution by UK Central Statistical Office Summary 1. The UK is publishing a revision to its Standard Industrial Classification (SIC) by the end of This SIC(1992) will align with the classification of the European Communities, NACE(Rev 1). This paper covers the implications for the CSO business register for the introduction to minimise the discontinuity on the national accounts. The paper describes methods that are being used to minimise the cost of a major conversion exercise. Introduction 2. The UK is currently introducing a revision to its Standard Industrial Classification to be published before the end of 1992 (SIC92). The new classification will be phased in from 1993 onwards. A glossary of the abbreviations is attached as annex The classification is aligned with the latest revision of the statistical classification of economic activities in the European Communities (NACE Revl), which in turn is based on the latest United Nations international standard classification (ISIC Rev3). NACE Revl has been expanded from ISIC Rev3 to deal with the extra complexities of the European economy, in such a way that the contents of ISIC headings can be obtained either directly or by the combination of NACE headings. Under the European Communities legislation, National classifications may include extensions over the NACE Revl structure and the UK has decided to do this by adding a fifth digit to the NACE four digit codes. Provisionally 60 of the 503 NACE Revl four digit classes have been split into 142 sub-classes for the UK classification. 4. Unlike the existing SIC, the SIC92 will be subject to change. After all, classifications adjust themselves to the world and not the other way round. The legislation introduces a management committee (which will include representation from the UK) as part of the Statistical Programme Committee to assist the European Commission in examination of questions concerning the NACE Revl. This Committee will be involved in interpretation, minor amendments and larger revisions to the classification. Decisions made there will affect the SIC92 directly. 5. The legislation covers only the use for statistical purposes, although this does not stop any country using the classification for other purposes. Consideration is being given in the UK to the use of the SIC92 for classification of employers by the Inland Revenue Department and for the

3 classification of VAT traders by the Customs and Excise Department. Structure of the SIC92 6. The classification is based on a five digit system, with the first two digits representing 60 Divisions. The Divisions can be grouped directly to the 17 alphabetical Sections in ISIC Rev3, some of which (mainly within manufacturing) are split into Subsections. Below the Division are 222 three digit Groups and 503 four digit Classes. Where non-zero, a fifth digit represents a Sub-class, of which there are 142. An example of the classification is shown below: Section 0 Manufacturing Sub-section DG Manufacture of chemicals, chemical products and man-made fibres Division 24 Manufacture of chemicals and chemical products Group 24.3 Manufacture of paints, varnishes and similar coatings, printing inks and mastics Class " Sub-class 24.30/1 Manufacture of paints, varnishes and similar coatings Register implications 7. There is no direct correspondence between the existing 1980 Revision to the SIC (SIC80) and the SIC92. There has been some re-arrangement within manufacturing industries and the electricity, gas and water supply industries now follow manufacturing. In addition there are numerous small changes that mean that an exact match between old and new headings is not always possible. 8. The CSO business register uses VAT data as its major input. The classification system currently in use within the administrative system is the VAT Trade Code (VTC) which is aligned to the 1968 Revision to the SIC (SIC68). As with the SIC80, there is no direct correspondence between the VTC and the SIC92 codes. 9. The ability to use the SIC92 will depend on a number of factors, the most important of which is the re-coding of business units on the CSO business register. The timing of changes will be affected by the demands from the national accounts. This means that it will be necessary, at least for a short time, to classify business units to more than one classification system. A timetable is attached at annex 2.

4 PRODCOM 10. The European Community is also requiring Member States to introduce an inquiry within the production industries to collect product detail on a basis consistent with the NACE Revl. The product classification system within the UK, PRODCOM, will be aligned to the SIC92. As a result, it will be possible for contributors to the inquiry to be coded to SIC92 from the product codes. Automatic coding 11. The Employment Department has purchased an automatic coding system from Inference Systems Pty Ltd of Australia. This will enable SIC92 codes to be generated automatically from descriptions provided by inquiry respondents for most descriptions and provide a tool for computer-assisted coding of classifications that cannot be processed automatically. 12. The CSO relies mainly on the VAT system for its classification. HM Customs and Excise (the Department that administers VAT) is proposing to introduce a new classification consistent with the SIC92 from Spring 1994 for new VAT registered traders. The stock of existing VAT traders would be re-coded using information provided by the CSO. 13. Proposals for introducing the SIC92 on the CSO register differ between the production and other industries. In the production industries the extra information provided by the product sales inquiries (see para 10) enables direct coding of contributors and the provision of relatively high quality correspondence tables between the SIC80 and SIC92 codes. An example illustrates the correspondence (to 4 digit level). The correspondence between the SIC80 and VTC is not as precise because it must be based on assessment of descriptions: SIC92 SIC Paints, varnishes and painters' fillings manufacture 81 % 2552 Printing ink manufacturing 19% SIC92 VTC Paint 2790 Other chemical industries (polishes, adhesives, explosives and fireworks, pesticides, printing ink, surgical bandages, etc photographic chemical materials) 14. A correspondence table is being set up based on contributors providing percentage allocations from SIC80 to SIC92. This will be used for non-contributors through a computerised look-up. Where a textual description is available, generally from register proving letters, clerical staff are using the look-up table to choose the most appropriate code. This approach is possible because CSO processes far fewer business textual descriptions than the ED.

5 Statistical units 15. The SIC92 classification system will include definitions of units based on European Communities legislation. The units will be: enterprise group, enterprise, local unit, kind of activity unit (KAU) and local KAU. The new business register (but not the existing register) will support directly the enterprise group, enterprise and local unit. KAUs will be available where required as reporting units within enterprises. It is expected that the SIC92 will be stored as follows: Local unit - from description of activity provided by the business Enterprise - from dominance in terms of employment of local units at 5 digit level Reporting unit - from dominance in terms of employment of local units at 5 digit level and directly from the reporting unit for the PRODCOM industries (where the two classifications conflict, the directly reported will be used for analytical purposes and the discrepancy flagged for clerical inspection) Enterprise group - from the dominance of the local units at 2 digit level From initial work, maintaining consistency between units and sources will be difficult. Rules are being established. Conclusion 16. The approach by the UK in conversion to the SIC92 has been to use automatic tools where possible (look-up tables, text interpretation and conversion from product to industry codes). The adoption of the SIC92 by the administrative agencies that provide the major input to the business registers will ease the task. UK CSO

6 GLOSSARY Annex 1 ASI Annual product sales inquiry for production industries (to be replaced by PRODCOM) ISIC Rev3 International Standard Industrial Classification (Revision 3) NACE Revl PAYE PRODCOM QSI The industrial classification system of the European communities - consistent with ISIC Rev3 "Pay As You Earn" tax - employee tax collected through employers Production commodities inquiry to be conducted on SIC92 basis for the European Communities Quarterly product sales inquiry for production industries (to be replaced by PRODCOM) SIC68 UK Standard Industrial Classification (Revised 1968) SIC80 UK Standard Industrial Classification (Revised 1980) SIC92 UK Standard Industrial Classification (Revised 1992) VAT VTC Value Added Tax VAT Trade Code (based on SIC68)

7 Annex 2 CSO BUSINESS REGISTER ASPECTS OF THE INTRODUCTION OF THE SIC92 Table 1: General Timetable for Introduction of New Classification System February 1992 March 1992 April 1992 June 1992 November 1992 December 1992 January 1993 NACE codes and headings finalised Five digit SIC92 codes finalised EC Regulation confirming NACE SIC92 circulated within government NACE published SIC92 published NACE used by Member States Table 2: Timetable for Introduction of New classification on to CSO Business Register March 1992 June 1992 July 1992 September 1992 November 1992 March 1993 Provisional VTC/SIC80/SIC92 look-up tables available on-line Preliminary SIC92 (based on look-up tables prepared by Classification Section) sorted for legal units, establishments and local units within the production industries Coding to SIC92 started on small production units on the basis of response to proving. Those between QSI/ASI and lower PRODCOM cut-offs completed early August. Smaller proven units and new responses to proving started in August. SIC92 based on ASI response for 1991 and QSI response for Q1/Q Improved look-up table generated for production industries. PRODCOM warning letter sent. QS1 Q and ASI 1992 selections on SIC80 basis Quarterly PRODCOM Q on SIC92 basis

8 July 1993 September 1993 October 1993 November 1993 January 1994 February 1994 April 1994 October 1994 January 1995 March 1995 October 1995 Produce improved look up tables on the basis of PRODSTATS/PRODCOM responses using 1992 data. Coding of small proving...(unable TO REPRODUCE) SIC92 codes available from the Employment Department for all industries from responses to the 1991 Census of Employment Annual Census and Production selected on SIC92 basis Annual PRODCOM selected on SIC92 basis Start using IDBR for SCO...(UNABLE TO REPRODUCE) Start receiving PAYE data on SIC92 basis for new units. Start receiving 1993 Census of Employment data on SIC92 Send SIC92 classifications to HM Customs and Excise Start receiving VAT data on SIC92 basis for new units (subject to HM Customs and Excise implementing their proposed change in classification) Purchases inquiry on SIC92 basis Monthly manufacturing stocks, sales and receipt on SIC92 basis Quarterly manufacturing... (UNABLE TO REPRODUCE) inquiries on SIC92 basis Annual distribution and service trades inquiries on SIC92 basis