Measuring Business Services in National Economies

The ongoing structural realignment being experienced by economies makes it impossible for governments to ensure that their national economic statistics are an adequate reflection of economic activity. This has always been the case. The UK Standard Industrial Classification of Economic Activity (SIC) is a measure of economic activity, but essentially it is a backward looking measure; the SIC cannot be constantly amended to take into consideration ongoing developments in the division of labor. New functions are created and firms are established that deliver new types of products and services that do not fit with the existing SIC. It takes some time for the SIC and academics to take into consideration these new types of economic activity and to alter the existing classification system. The United Kingdom’s SIC has a long history of periodic change as it attempts to mirror the current structure of the economy; it was first introduced in 1948 and the classification was revised in 1958, 1968, 1980, 1992, and 1997.

During the late 1980s it became apparent that something rather interesting was happening in both the British and American economies and this was the rapid and unexpected growth of a heterogeneous group of activities that came under the label business services. The SIC was less than helpful in monitoring this development as it was designed to measure an economy centered on manufacturing rather than services. The SIC has always provided an excellent tool for measuring manufacturing industries but has until relatively recently failed to capture the diversity of the service side of the economy. An indication of this problem is that initially geographers working on the growth of business services had to rely on SIC 8395 (other business services not elsewhere specified) as the primary measure for business services. The number of employees in this category doubled in only 6 years, 1981–87 (up by 160 000 workers, to 316 000 in 1987). At this time, this SIC code was problematic as it included heterogeneous assortment of activities including management consultants, market research and public relations consultants, document copying, duplicating and tabulating services, and other services ‘primarily engaged in providing services to other enterprises’ such as employment agencies, security services, debt collection, press agencies, freelance journalists, translators, and typing services.

The growth in the number of firms categorized under SIC 8395 was noticed by some academics and policymakers and alerted them to the structural realignment that was been experienced by developed market economies. This is an important point in that it draws attention to emergent economic sectors that are hidden by the current composition of the SIC. It is essential that economic geographers explore the ‘miscellaneous’ SIC groupings as these include new high growth emergent activities. It is perhaps worth noting that the difficulty of classifying business services still exists. The European Union’s nomenclature generale des activites economiques dans le communautes europeennes (NACE) classification categorizes most business services under the residual category ‘Other Business Services’ (NACE 74). Both the SIC and NACE are constructed using a negative or residual classification of services. In this approach, miscellaneous categories are deployed to account for economic activities that cannot be accounted for by other SIC or NACE codes.