The UK Government Underestimated Its Digital Economy

A new report released by the National Institute of Economic and Social Research (and backed by Google) indicated that Britain’s digital economy is more than twice the size of what the government previously thought, reported The Financial Times. The report reveals that the UK government has an inaccurate measure of the country’s digital companies and their influence in driving financial growth and productivity.

The report states that the UK has about 270,000 digital companies, which is significantly higher than the 120,000 companies projected by the government. The research discovered the misconception stemmed from digital companies incorrectly categorized under traditional sectors. 

“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, such as Hadoop, to monitor every aspect of their processes,” explained Hal Varian, chief economist at Google.

The government only accounted for Internet startups, technology companies and small dotcoms as part of the digital economy, when the reality is that many businesses have been making a shift towards digital methodologies in how they operate. The report indicated that the majority of companies being overlooked were namely software companies, architecture services, engineering, technical and scientific operations.

Additionally, the study revealed that the digital economy is growing steadily, and faster than other sectors. There is more job opportunities emerging from digital companies, with an average of 23 employees per company, compared to the 20 from those outside the digital economy.

The Financial Times noted that London is historically a hub for trade and finance, as well as the financial center in Europe. Telecommunication and media companies in London are moving into spaces that once belonged to traditional banks and other financial services. The Google-backed study reinforces London’s strong position as a financial leader in Europe, which should be strengthened as the digital economy expands and further encourages innovation.

To read the full story at The Financial Times click here.