Research suggests the government is seriously underestimating the size of the UK’s digital economy.
A report by the National Institute for Economic and Social Research (NIESR) commissioned by Google sets out to establish the true size of the UK’s digital economy. The UK government has been using industry classification codes (SICs) to estimate that there are approximately 120,000 digital economy companies in the UK. However, the NIESR research suggests that this figure is far too conservative. Its own lowest estimate is 270,000.making digital businesses 14.4% of the total number of businesses in the UK (the government estimates 10%).
The report calls for improved measurement of the UK’s digital economy. By switching from SIC-based models to measures derived from big data, the country could gain a richer picture of the digital economy. Using this type of data for example would show that the digital economy’s share of jobs in the UK is 11%, not the 5% currently stated by government measures. Other interesting findings derived from this type of rich analysis include the fact that the digital economy is not made up mostly of start-ups but that companies in this area have roughly the same average age as other companies. Digital economy companies employ more people on average than other companies and are reporting faster growth rates.
The challenge of measuring aspects of the digital economy is being addressed by the EU, which in May 2013 announced it is launching a project to measure the size of Europe’s ‘app economy’. According to David Dean of The Boston Consulting Group (speaking at a European Internet Forum dinner) Europe is already a winner in the digital economy. He estimates that Europe’s internet economy will be worth 1 trillion Euros by 2016.
However some European countries are lagging behind and there are several countries catching up on Europe as digital economies, including Mexico, South Africa and Indonesia.