The UK government has seriously underestimated the scale and importance of digital technology firms to Britain’s economy, it has been claimed.
A Google-commissioned study by the National Institute for Economic and Social Research (NIESR) estimated there were 270,000 gaming and digital media firms in the UK today, 103,000 more than official Government projections.
NIESR also found companies operating in the digital space reported 25% higher revenues than other firms and recruited at a significantly faster pace than other employers.
The institute said the discrepancy between the Government data and its own was because it had used modern software for its calculations whereas the official standard industrial classification (SIC), which was first adopted 65 years ago, failed to properly categorise digital firms.
NIESR said it had found evidence of thousands of software companies which had been classified wrongly.
The report states the digital sector is potentially losing out on vital financial support as a result of being incorrectly classified as politicians, banks and insurers base policy decision on SIC codes.
“Policy-makers have identified the digital economy as one of the UK’s key economic strengths,” according to Dr Max Nathan, senior research fellow at NIESR.
“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“The old image of tech businesses as start-ups that make no money is out of date too using big data we show a broad array of active businesses selling digital products and services.”
Abertay University director of academic enterprise Gregor White welcomed the report and said the sector was a vital part of Scotland’s economy.
He said: “It’s great to see new research proving exactly what we see happening across Dundee and Scotland digital technology firms flourishing, new businesses being started all the time, and technology companies becoming absolutely essential to every part of the economy.
“Computer games have always been a success story for Dundee, but in recent years we’ve seen many more companies being formed.”
Google chief economist Hal Varian said it was important data being used to shape policy decisions was as accurate as possible.
He said: “The UK is one of the world’s strongest internet economies yet the myth persists that it consists largely of tiny dotcom or biotech start-ups in a few high technology clusters that quickly bubble up and often go bust.
“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 to monitor every aspect of their processes. The digital economy has spread into every part of the United Kingdom, not just in London and the south east but throughout the country.”
UK Business Secretary Vince Cable described NIESR’s study as an “interesting alternative report”.