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Government 'massively underestimating' UK’s digital economy

Government’s ‘outdated’ system underestimated the size of the sector by as much as 40 per cent

Britain’s digital economy has been massively underestimated by the Government, according to a new report, which found that it is around 40 per cent larger than previously believed.

There are almost 270,000 digital companies in the UK, according to a new study by the National Institute of Economic and Social Research (NIESR), a leading think-tank. Conventional measurements put the figure at only about 188,000.

The study found the digital economy is “poorly served” by the 65-year-old government classification system, which it says fails to include a large number of companies in business and domestic software, architecture, engineering and technical consulting.

The research draws on a wider range of data provided by Growth Intelligence, a software firm that tracks digital footprints left by companies online.

Max Nathan, a 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.

“The old image of tech businesses as start-ups that make no money is out of date too: using big data we show a broad array of active businesses selling digital products and services.”

Revenues of digital companies were growing 25 per cent faster than non-digital companies, the Google-funded report found. Digital companies also hire more people than other firms. London and the South-east is also not the only digital hotspot. There are also high concentration of digital companies in Aberdeen, Middlesbrough and Manchester.