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Digital economy 'neglected by official statistics' Digital economy 'neglected by official statistics'
(about 4 hours later)
Britain's economy is being rapidly re-shaped by a digital revolution that is proving more far-reaching than government figures suggest, according to a new report.Britain's economy is being rapidly re-shaped by a digital revolution that is proving more far-reaching than government figures suggest, according to a new report.
A study by the National Institute for Economic and Social Research (NIESR) – one of the UK's leading thinktanks – found that the digital economy was 40% bigger than previously believed.A study by the National Institute for Economic and Social Research (NIESR) – one of the UK's leading thinktanks – found that the digital economy was 40% bigger than previously believed.
The report said that the 65-year-old system for classifying companies used by the Office for National Statistics had failed to detect how businesses in sectors such as manufacturing, engineering and architecture are embracing new digital technologies.The report said that the 65-year-old system for classifying companies used by the Office for National Statistics had failed to detect how businesses in sectors such as manufacturing, engineering and architecture are embracing new digital technologies.
Using data from Growth Intelligence, a company that tracks businesses, NIESR calculated that the UK had 270,000 digital companies, far higher than the ONS estimate of 188,000. The study found that the revenues of digital companies were growing 25% faster than non-digital companies, and that they employed more people. Using data from Growth Intelligence, a company that tracks businesses, NIESR calculated that the UK had 270,000 digital companies, far higher than the ONS estimate of 188,000.
Dr Max Nathan, senior research fellow at NIESR, said: "Policymakers have identified the digital economy as one of the UK's key economic strengths. That means they need to be aware of the true numbers of digital businesses around the country. The old image of tech businesses as start-ups that make no money is out of date too: using big data we show a broad array of active businesses selling digital products and services." The study found that the revenues of digital companies were growing 25% faster than non-digital companies and had employment levels above those of non-digital companies.
While official figures show that 5% of Britons work in the digital sector, the NIESR report put the figure at 11%.
The findings – disputed by the ONS – suggested that the traditional method of classifying companies had missed out a large number of enterprises such as those involved in business and domestic software and engineering-related scientfic and technical consulting.
Max Nathan, senior research fellow at NIESR, said: "Policymakers have identified the digital economy as one of the UK's key economic strengths. That means they need to be aware of the true numbers of digital businesses around the country.
"The old image of tech businesses as start-ups that make no money is out of date too: using big data we show a broad array of active businesses selling digital products and services."
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."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."
According to the report, the areas with the highest concentration of digital companies are outside London and spread right across the country, in places such as Aberdeen, Middlesbrough and Manchester.
The business secretary, Vince Cable, said: "This is an interesting alternative report. As our recently published Information Economy Strategy highlights, innovation, entrepreneurship and growth are spread throughout the UK. The information economy transforms every other business sector, driving productivity and creating new opportunities for growth."
An ONS official said: "We are confident ONS statistics reliably measure the size and shape of the economy according to best international practice."An ONS official said: "We are confident ONS statistics reliably measure the size and shape of the economy according to best international practice."