UK’s digital technology sector bigger than estimated: report

22 Jul 2013

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The scale and importance of digital technology firms to the UK's economy had been underestimated by the government according to a new report.

According to a study by the National Institute for Economic and Social Research (NIESR), there were around 270,000 active companies in the UK as against conventional measurements that put the figure at 167,000 firms.

In a report, theclaimed the revenue reported by digital companies was growing 25 per cent faster than that of traditional firms.

Researchers believed they had compiled a wider range of data for analysis.

The report said, the study drew on information gathered by software firm Growth Intelligence rather than the official Standard Industrial Classification (SIC), which was first devised 65 years ago and which failed to properly classify a range of digital firms, the report said.

Max Nathan, senior research fellow at NIESR, said, policy makers had identified the digital economy as one of the UK's key economic strengths.

He added, that meant they needed to be aware of the true numbers of digital businesses around the country.

He said, the old image of tech businesses as start-ups that made no money was also out of date and using big data, it was possible to show a broad array of active businesses selling digital products and services.

The Google-funded report carried a foreward by the firm's chief economist Hal Varian, "The UK is one of the world's strongest internet economies yet the myth persists that it consists largely of tiny dotcom or biotech startups in a few high technology clusters that quickly bubble up and often go bust.

"The reality, as this report shows, is that the digital economy has spread into every sector, from architecture firms whose activities have become almost entirely digital to machine tool manufacturers who now use huge online data-processing facilities ... to monitor every aspect of their processes."

Additionally, while London may be assumed to be the main hub of growth, there are a number of other areas around the country that have seen a strong digital performance, such as Aberdeen, Middlesbrough and Manchester.

According to Tom Gatten, chief executive of Growth Intelligence, the research demonstrated the need for a new way of understanding the economy, both for government and for businesses. He added, rather than relying on outdated codes or static lists, the company's new technology and internet data revealed new opportunities and insights for growth.

Commentators said, the importance of this research was not solely in the figures it had unearthed, but instead, its true value was in highlighting just how inaccurate the government's outdated measures were. but then again, it seemed even the government knew its measurement tools were not up to scratch.

The government noted alongside its own digital economy estimates from last month, that it might not have an exact picture of the number of businesses in the information economy, or its employment or the value it brought to the UK economy.

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