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  1. Leadership
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November 1, 2010

UK Net sector nearly as big as the City of London, GDP wise

Google has claimed that the web is worth £100bn to the UK economy. Gary Flood takes a look behind the headline figures and asks just what the numbers really mean


Remember that great line from Godfather II, when the older gangster, Hyman Roth, is talking to his organised crime buddies and looking for a metaphor to show how big and important the Mafia is now, and he points out: "We’re bigger than US Steel"? (To put that in context – in the late 1950s, when this movie was set, US Steel was a hugely powerful company, in terms of its impact on American society, government and business pretty much where IBM was in the 1980s or Microsoft in the early 2000s. After all, it was the largest steel producer and largest corporation of any type in the world at one time.)

Last week we were told something similar about the UK Net industry – though of course not by gangsters, or at least any companies marketing themselves as such. Specifically, a report by Google and Boston Consulting Group has valued the UK internet industry as contributing no less than £100bn to the national economy, which would make it bigger as an industry than the restaurant, construction, transport and utilities sectors on an individual basis.

At around 7.2% on this measurement of UK GDP, the UK Internet sector could hit 10% by 2015, putting its contribution on a par with our much vaunted source of all our ‘invisible exports,’ the City and our financial sector.

How is that big chunk of change made up? Around 60% of the £100bn figure came from the amount that individuals and households spend on online shopping and on the cost of their connections and devices to access the Web. So that’s good news for e-commerce, ISPs and increasingly of course, mobile service providers. UK online advertising is worth around £3.5 billion a year, second only to the US, for instance.

The other 40% is said by the researchers to come from public and private investment in the nation’s overall internet infrastructure, as well as Government IT spending and exports. NB, that’s an important point. This analysis found we were a net exporter of eCommerce goods and services, exporting £2.80 for every £1 imported; in contrast the "off-line" (read real world, oldies) economy exports 90p for every £1 imported.

ECommerce is now a very healthy business in its own right, employing we are told 250,000 people, kept busy servicing the £50bn Brits spent for things online last year. That’s no less than 62% of all UK adults buying goods or services like travel and what have you in 2009 alone. Maybe not that surprising as it seems 73% (19 million) of UK households now have an Internet connection, with broadband penetration doubling since 2005, which is in itself a remarkable statistic.

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It’s interesting that so much of this is eCommerce. One wonders if that’s enough of a metric to track Internet usage; don’t intra-company communications count, for example? If we add in all the corporate, public sector and (as we must all now not forget, Big Society and all that) Third Sector Net doings, one suspects that the ‘bigger than utilities et al’ metric might actually already be passed.

Does this survey mean that much? It’s a useful reminder that online is now very much a part of the way we Brits work, rest, play and spend. I’d have liked more data on commercial use but then Google’s probably less interested in that.

But for anyone working in IT, next time someone at a party makes a face when they tell them what you do, you might want to say you work in the sector that’s bigger than the Square Mile – and hope they don’t hate the City as much as some do.

Or even jealous Mafiosi.

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