Britain's digital economy twice as big as government thought

Britain’s digital economy is significantly larger than official estimates, according to National Institute for Economic and Social Research (NIESR).

The report, commissioned by Google, tracked digital footprints left by companies online to determine if they were a digital or non-digital company.

It found at least 270,000 companies form the digital economy – well above the previous government estimate of 188,000.

The report claims the areas with the highest concentration of digital companies can be found outside London, in places like Aberdeen, Middlesbrough and Manchester.

But a report out last week found that 17 of the top 20 startup areas in the country are found in London, with the area around Silicon Roundabout far outstripping everywhere else with 15,000 new companies set up in the area in the last year.

The NIESR report also found that the revenue reported by digital companies is growing 25 per cent faster than that reported by non-digital companies. The research also found that digital employers hire three more people on average than non-digital companies.

The researchers argue that Britain is using an out-dated business classification system which means hundreds of thousands of digital companies are being incorrectly identified by government and financial services and missing out on vital support as a result.

The researchers said that Growth Intelligence, a London-based sales software company, allowed them to spot digital companies working in 'traditional' sectors, such as software companies in architecture, publishing and engineering.

Tom Gatten, chief executive of Growth Intelligence, said: “This research demonstrates the need for a new way of understanding the economy, both for government and for businesses. Rather than relying on outdated codes or static lists, our new technology and internet data reveals new opportunities and insights for growth.”

More UK digital firms than thought

 The NIESR report says many technology firms are being wrongly classified Britain has many more technology firms than the government estimates, according to a new report.


Under its classification the government recognises 187,600 digital companies.
Research by the National Institute for Economic and Social Research (NIESR) says there are almost 270,000 such companies in the UK, 40% more than the government estimate.
NIESR says the government's classification is "outdated" and misses out many tech firms.
The report used data from Growth Intelligence, a company which tracks the activity of firms on the internet and sells that information to clients.

Tom Gatten, chief executive of Growth Intelligence, said: "This research demonstrates the need for a new way of understanding the economy, both for government and for businesses.

"Rather than relying on outdated codes or static lists, our new technology and internet data reveals new opportunities and insights for growth."

In response, an official at the Office for National Statistics (ONS) said: "We are confident ONS statistics reliably measure the size and shape of the economy according to best international practice."
'New measurement'

The report was commissioned by Google and its chief economist, Hal Varian, is one of the people behind Growth Intelligence.

"This is a groundbreaking and important report by NIESR not just because it shows that the spread of the digital economy into other sectors is driving growth and jobs throughout the UK but because - for the first time in 65 years - it presents us with a new way of measuring the economy," he said.
The report says that official statistics use only a basic definition of the digital economy.
The new research goes further by identifying digital companies that are working in traditional sectors including architecture, publishing and engineering, according to the report.

It cites case studies, including Scottish firm Kelton Engineering, which sells hi-tech equipment to the oil industry, but at the moment is classified as "business support".

Another is a publishing company, Stonewash, which provides web design and other internet services, but is classified as "other publishing".


Companies like those are being wrongly classified and could be missing out on investment, because investors use classification to identify potential investment targets.