Bean counters are weighing digital’s contribution to the UK economy
Bean counters are weighing up how they could count the contribution of smartphones and the digital content we consume on them – from watching Netflix to reading a newspaper online – to the British economy.
Traditional economic measures have failed to keep up with the rise of digital and the online economy created by technology, and experts believe their contribution to GDP and productivity are being under estimated as a result.
“The challenges of measuring output in the digital sector, as well as rapid growth of the e-economy are key issues," said Richard Heys chief economist at the Office of National Statistics which today published the initial findings of its investigation into the matter with the Institution of Engineering and Technology.
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It has suggested new data needs to be collected on digital and technology goods and services because GDP may not be able to "wholly capture the scale of welfare gains arising from technological improvements".
While the government started producing some experimental data measuring the contribution of digital as a sector to the economy – estimating Gross Value Add (GVA) at £118.3bn in 2014, exports at £43bn and jobs at 1.4m – other ways it may be boosting economic growth are now being looked at by the ONS.
"These welfare gains include higher quality of goods and services, increased choice, convenience, time saving and consumer surplus gained through transactions within the e-economy, including the proliferation of free digital products, which have an impact on national accounts, household production and consumer leisure activities," the report concluded.
Will Stewart, vice president of IET said: "There is a pressing need to update the way we measure output in the service and digital industries of the economy, as well as assessing the impact of the rapid growth of the electronic economy.
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“Huge advances over the last 30 years in technologies such as communications and lighting have dramatically changed all our lives and we need to ensure these are captured in published data. GDP and productivity are only two measures of welfare, but the work we are undertaking indicates these measures do not adequately capture progress in quality of life terms and decision makers need to be aware of this.”
Similar work is also looking at how the sharing economy can also be accounted for in official measures while the country's fintech sector is eyeing up ways that its contribution to the wider economy can be calculated.
Top economist Diane Coyle said: “Capturing the full extent of technological improvement is key to ensuring we can produce the accurate and reliable productivity figures policy makers need, both in terms of GDP and other measures of welfare gains from technological change.”
Productivity for the first time returned to pre-crisis levels, notching up its best performance since 2008 in figures released today.