Statistical Definition

15 March 2007

From 2008 a new Standard Industrial Classification will produce data on the facilities management sector. This should provide better statistics on FM but as Graham Jenkinson explains, the data will take time to compile and may not completely accurate for years

AN UPDATED STANDARD INDUSTRIAL CLASSIFICATION (SIC) has been agreed and will be introduced for UK and European statistics over the period up to 2011 when it should be fully adopted for the full range of published statistics. The SIC is fully updated every 15 years or so. The last full update was in 1992. These updates are the opportunity to incorporate new industries in the classification and remove industries which are no longer important. To be eligible for inclusion an industry should be both easy to define and recognise and be of reasonable size. If these criteria are not met then the classification will be difficult to use for statistics.

This latest update continues the trend of earlier updates by giving greater emphasis to the service and knowledge industries and somewhat less to the manufacturing industries. One of its changes is to identify a new Section N 'Administrative and Support Service Activities' bringing together industries which are currently spread over different parts of the classification. Within this there is a 2 digit division 81 'Services to buildings and landscape activities', reflecting a growing trend towards the contracting out of a range of services, leading to the creation of specialist suppliers of services such as facilities management, computer services etc.

In its early stages, contracting out was done on a functional basis with separate contracts for security guards, cleaners, caterers etc. Increasingly, these services are combined and this trend is reflected in this new division 81 identified in the classification.

The intended coverage of division 81 can be seen slightly more clearly from its components at the 3 digit group level:
.... 81.1 Combined facilities support activities
.... 81.2 Cleaning activities
.... 81.3 Landscape service activities
Thus general facilities management companies should be classified within division 81 together with some but not all suppliers of component services. For example those providing security, catering or computer services would be classified elsewhere.

Classified
Having this separate industry for facilities management companies is a necessary step before robust statistics can be published for the industry but is not sufficient on its own. The businesses need to be correctly classified to the industry on the register of businesses and there need to be enough of them to make it possible to publish separate reliable statistics for the industry.

The register of businesses is built up from administrative sources. The main source is the list of businesses registered for VAT but this is supplemented by other sources including those registered for PAYE and at Companies House. They are allocated to industries based on business descriptions. For all larger businesses (broadly those with more than 100 employees) and some smaller businesses, these are supplied to ONS in their Business Register Survey. These forms are addressed to the company secretary or equivalent, where there has been no previous contact with the business. For businesses not included in this survey the allocation is based on information provided in other ONS inquiries, from descriptions supplied to HM Revenue and Customs and a range of other sources.

The accuracy of the industry allocation has to depend on the descriptions supplied. Computer coding systems are used with cases referred to expert coders only when these fail to find a clear match with the industry descriptions. Our experience is that the resulting industry codes are high quality but they are not perfect in every case.

There can be issues with mixed activity businesses. Local units are allocated to their most appropriate industry. However, the business as a whole is allocated to the industry which accounts for the largest part of its employment. An additional complication is that large enterprise groups may have divisional structures within them and these divisions might then report separately. Most inquiries send forms to the business and not to its local units. Thus mixed activity businesses with facilitiesmanagement units within them may not be allocated to division 81.

Random sample
A number of factors will influence the decision on whether to show separate results for group 81.1 in ONS inquiry results. The Annual Business Inquiry is the main inquiry which will collect information at this level of detail. Information is required at the group level under the European Structural Business Regulation. The equivalent monthly inquiry does not go below the 2 digit division level. The Annual Business Inquiry selects a stratified random sample of businesses on the register and collects information using postal questionnaires.

The inquiry is statutory and there is a legal requirement for businesses to return these questionnaires. We do not know yet how many facilities management businesses will be required to complete forms. The sampling rate in the part of the present SIC that deals with real estate is around 2 per cent and in the Division that covers rental it is around 4 percent. The appropriate number for facilities management businesses cannot be known until we have fuller data on the structure of the industry.

Results of the Inquiry are published on the ONS's website, unless there are disclosure or quality issues. Publication covers variables such as the number of businesses, their employment, aggregate turnover, purchases and gross value added. Figures of capital expenditure and stocks are also given. More detailed figures can be made available for a charge, but the main factors affecting our ability to release data concern the number and size of businesses in the sector.

If there are too few businesses there may be problems over disclosure - results cannot be published if they disclose information for individual businesses. The relevance of the results for users would also be affected by the accuracy of the industry coding on the register. It may take a while before the sample is optimised and returns are fully validated.

The decision to identify 'Combined Facilities Support Services' in the revised SIC provides an opportunity for the publication of statistics for the industry. The new SIC will be reflected on the business register in January 2008 and the Annual Business Inquiry will start to use the new SIC during 2008.

More work is needed to test the viability of the new industry for statistical purposes. The earliest date for any new published statistics would be in respect of 2008 late in 2009. It may make one or two further years for statistics for a new industry to be fully checked and robust.

.... Graham Jenkinson is Director, Statistical Framework Division at the Office for National Statistics www.ons.gov.uk