UK Tech Sector 40 Percent Bigger Than Government Estimates

A study co-authored by the National Institute for Economic and Social Research (NIESR) and Tech City start-up Growth Intelligence suggests that there are about 40 percent more “digital” businesses in the UK than previously thought.

The discrepancy is due to “outdated” Standard Industrial Classification (SIC) codes used by the government, banks and the insurance industry, which are published by the Office for National Statistics (ONS).

According to the report, the government recognises 187,600 digital companies, but there are another 82,400 businesses in the “traditional” industries that focus on Internet and technology.

ONS denies its estimates are off the mark. The agency told the BBC its metrics are in keeping with “best international practice”.

Defining digital business

The report was commissioned by Google and written by NIESR, Britain’s longest established independent research institute. It was based on the data provided by Growth Intelligence, a sales software start-up which tracked data movement in real-time in order to draw up a new map of the UK’s digital economy.

The SIC codes were introduced 65 years ago, and are designated to the company “according to its principal economic activity”. The report says that digital technology is no longer the sole preserve of start-ups and software companies, and unlike the government numbers, it also lists “digital” companies in traditional industries such as engineering, publishing and manufacturing. This brings the total number of tech businesses in the UK to 270,000.

Of course, you could argue that most modern companies rely on Internet and technology in one way or another. But misclassified businesses could be losing out on specific funding opportunities and tax arrangements aimed at the tech sector.

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 “Rather than relying on outdated codes or static lists, our new technology and internet data reveals new opportunities and insights for growth.”

The report also found that the revenue reported by digital companies is growing 25 percent faster than that reported by non-digital companies, and employers from digital companies hire 15 percent more people.

“With the rise of social technologies and the proliferation of mobile devices, data is everywhere, so it’s no surprise that the number of digital businesses in the UK is on the rise,” said Geoffrey Taylor, head of Academic Programme at SAS UK and Ireland.

“It’s imperative that the technology industry collaborates with government to ensure that the national curriculum is equipping the future generation with the skills required by UK businesses today, or the UK will lose out. This will be crucial to the UK’s ability to compete on the international stage.”

Do you remember British IT in the Thatcher years? Take our quiz!