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Technology / Hardware

40% more UK tech firms than government classifications show

There are 40% more technology firms based in Britain than the government estimates, according to a new report.
Government records show there are 187,600 digital companies in the UK, but new research suggests the number is as high as 270,000.

The National Institute for Economic and Social Research (NIESR) published its findings today, and claimed tech companies are "poorly served" by the government’s definitions and recordkeeping methods.

Using big data crunched by a new startup, Growth Intelligence, NIESR found the digital economy comprised nearly 14.4% of all companies, as of August 2012.

SaaS firm Growth Intelligence offers software to B2B corporations wanting to search for potential customers.
The software tracks the performance activity of every registered company in the UK by analysing the firm’s web behavior, using publicly available data from the Internet.

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And NIESR claimed the method works much better than the government’s existing standard industrial classification (SIC) system, which categorises businesses by the type of activity they are involved in – definitions which NIESR claims are often outdated.

The report read: "The digital economy is poorly served by conventional definitions and datasets. Big data methods can provide richer, more informative and more up to date analysis.

"SIC-based definitions of the digital economy miss out a large number of companies in business and domestic software, architectural activities, engineering, and engineering-related scientific and technical consulting, among other sectors."

It cites case studies including Communique Publishing, which provides many services such as SEO-optimisation, domain name registrations and web page design, yet which is classified by the government under SIC code 58190 – ‘other publishing activities’.
The report found that digital companies provide 11% of jobs, mainly in London but also in Manchester, Birmingham, Brighton and Reading.

And while the average tech firm has a lower revenue than the rest of the economy, the median digital company has far higher revenues than a median company elsewhere in the economy.

The data also demonstrates that digital businesses have a similar age to others outside the sector, despite the perception of it being a startup-dominated industry, and that on average tech firms are growing faster than those outside the digital economy. The average tech firm also employs 23.37 people compared to an average 20.40 in other sectors.

The report added: "This is a groundbreaking and important report by NIESR not just because it shows that the spread of the digital economy into other sectors is driving growth and jobs throughout the UK but because – for the first time in 65 years – it presents us with a new way of measuring the economy that can only help us to take the right steps to support growth and jobs."
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