Measuring The UK Internet Sector

Introduction

Look around you next time you’re out. Nine out of every 10 people you see were recently on the internet. If they’re young adults, 99 out of every 100 you pass will have been online recently.1

The internet is no small phenomenon; it is arguably the most important technological and social development of the last 50 years. Its prevalence in our everyday lives and the amazing array of services and benefits that it brings to consumers are evident. It allows people to connect with loved ones, build online communities, and instantly access useful information. It is helping us solve broader global and social issues, from improving healthcare to tackling climate change. And it is providing important boosts to economies around the globe, including in the UK.

The internet is an economic engine and, in the right policy environment, will drive prosperity throughout the 21st century. Understanding and measuring these economic contributions are crucial for getting our policies right. Without an accurate assessment of the internet sector’s economic contributions – past, present, and future –, we risk making mistakes. But armed with this knowledge, we can ensure balanced policy that grows the internet’s significant benefits to society while mitigating the impact of undesirable online activity. Policymakers must remember that many people rely on online services for a range of needs, from grocery shopping to staying in touch with family to pursuing education.

Striking an appropriate balance requires contributions from all stakeholders. Internet Association has conducted a thorough set of analyses to provide estimates of the internet sector’s contribution to the UK economy. It presents them here, along with its full methodology, for public review and will continue to work with the UK Government to ensure we secure the right basis for the industry to continue to thrive. In 2016 alone, the data show the internet contributed approximately £45 billion in Gross Value Added, from nearly 80,000 businesses supporting approximately 400,000 jobs. Twenty-eight IA members have offices in the UK, contributing every day to the economy and society.

Those contributions mean the internet sector is among the most important components of the UK economy. The sector provides contributions on the same scale as economic Sections, the largest divisions of the economy according to ONS. It provides nearly the same number of enterprises to the UK as the Human health and social work activities sector. It contributes twice as much to UK value added as the Arts, entertainment and recreation sector. And it provides more than three times the combined number of jobs as mining and agriculture put together.

Internet Association views this report as its initial contribution to a new, better-informed and more balanced debate on the role of the internet in the 21st century UK economy. We look forward to working with all of those stakeholders to improve our collective understanding of the internet sector and its contributions in the UK. Understanding the contribution that the internet makes to the UK economy will ensure that decisions are taken in full knowledge of what is at stake. We hope this report can serve as another step forward in a positive and informed dialogue. 

Table 1: Summary of Internet Sector Economic Contribution Estimates

  2012 2016 5-Year Growth Avg. Annual Growth
Number of enterprises 58,784 78,238 33.1% 6.6%
Approximate gross value added at basic prices (aGVA; £ million) 36,785 44,552 21.1% 4.2%
Total employment – average during the year (thousand) 338 382 12.8% 2.6%
Total net capital expenditure (Inc NYIP) (£ million) 5,046 1,918 -62.0% -12.4%

Note: Figures reported from IA Methodology – USA Industry Equivalent Scenario; Note: five-year and annual growth rates are derived from raw datasets and not the rounded estimates presented here; consequently, percentages may round differently in the table. Please note that all reported figures are rounded in table (e.g. enterprises are rounded to nearest 100) and that reported 5-year growth and average annual growth percentages reflect raw figures. Rounding may cause slight discrepancies in figures in table.

Findings

This paper examines the evolution the internet sector’s economic contribution and offers more insight into the nature of those contributions over the past several years. This kind of analysis has not been attempted before.

In this section, the report provides a summary of key economic estimates for the internet sector along with national comparators. Figures 1-4 provide graphs of time series information for IA’s scenario analyses.

The report offers four key findings:

  1. The internet sector is a major contributor of jobs, businesses, and output to the UK economy.
  2. The UK internet sector has grown faster than the overall economy.
  3. The internet is among the largest sectors in the UK economy.
  4. The internet sector invests heavily in the UK economy.

IA calculates these estimates using a modification of its internal sector identification methodology developed for IA by Economists Incorporated in 2015 for the US market. The estimates in this report are mid-range figures from a variety of scenarios. Section C provides more details on the methodology.

Key Finding 1 – The Internet Sector Is A Major Contributor Of Jobs, Businesses & Output

The UK internet industry contributes2 approximately 382,000 jobs, 78,000 enterprises (businesses), and £44.6 billion in Gross Value Added to the UK’s Gross Domestic Product (GDP). These equate to about 1.2% of UK jobs, 3.1% of UK enterprises, and 2.3% of UK GDP. They also equate to approximately 1.6% of employment, 3.2% of establishments, and 3.7% of value added for the UK non-financial business economy, specifically. Table 2 summarises these figures.

These statistics provide a set of crucial reference points for understanding how the internet contributes in tangible ways to UK society.

The economic contributions of free search services, streaming music, fast delivery, and other aspects of internet services are innately understandable, but they have been harder to capture in statistics. These estimates, which IA derives from government datasets, provide the sort of base needed to appreciate the sector’s contributions now and to improve their measurement moving forward.

It is also important to note two things regarding the estimates in this report. First, IA’s estimation methodology uses a widely-accepted approach for calculating industry footprints through national statistics. While imperfect, like all estimation methodologies, the figures here are the product of an established methodology endorsed by independent third parties, and serve as an important benchmark for the internet economy.

Second, these figures are fairly conservative estimates because they focus on online digital platforms, while excluding industries like broadband. Look across other third party estimates of the UK’s internet industry’s economic footprint and you will encounter larger figures (see Dean et al., 2012 for an example; see Manyika and Roxburgh, 2011 and Hooton, 2017 for more discussion). The more conservative numbers in this report are a result of IA’s decision to use a more stringent estimation approach that excludes large portions of UK telecom activity. This decision arose from the importance of methodological consistency with IA’s US estimates and overall methodology. It is also because of different perspectives on how technology industries (e.g. the internet) should be identified and measured. IA focuses more narrowly on online, digital platforms, which represent a unique sector that will play a key role in future economic growth. To properly understand their role, these platforms require dedicated study that is separate from entities like broadband providers.

Table 2: Summary Of Internet Sector Economic Contribution Estimates

  Internet Sector 2012 Internet Sector 2016 UK National Total (All Industries) – 2016 Internet As % of National (All Industries) – 2016 UK National (A-S (Part) 2) – 2012^ UK National (A-S (Part) 2) – 2016^
Number of enterprises 58,784 78,238 2,554,510 3.1% 1,945,158 2,414,695
Approximate gross value added at basic prices (aGVA; £ million) 36,785 44,552 1,970 2.3% 937,039 1,193,185
Total employment – average during the year (thousand) 338 382 31,725^^ 1.2% 21,717 24,089
Total net capital expenditure (Inc NYIP) (£ million) 5,046 1,918   0.6% 110,965 175,098

Note: Figures reported from IA Methodology – USA Industry Equivalent Scenario; ^Non-financial business economy; ^^Average of employment levels for All in employment for four quarters of 2016. Please note that all reported figures are rounded in table (e.g. enterprises are rounded to nearest 100) and that reported 5-year growth and average annual growth percentages reflect raw figures. Rounding may cause slight discrepancies in figures in table.

Key Finding 2 – The UK Internet Sector Has Grown Faster Than The Overall Economy

The internet industry has also grown faster than the overall UK economy. Across each of IA’s three key metrics, the internet sector outpaced the UK national economy. While this may sound intuitive to the average observer, this paper offers actual estimates of internet sector growth.

The number of internet industry enterprises in the UK grew by 33.1% between 2012-2016. That is an annual average growth rate of approximately 6.6%. The national economy, by comparison, added new enterprises at approximately 2.9% per year over that same period while the non-financial business economy saw enterprise growth of approximately 4.8% per year.

The internet sector contribution to Value Added grew by 21.1% between 2012-2016, which equates to approximately a 4.2% average annual growth rate. Similar to enterprise growth, that is more than double the national growth rate per year of approximately 2.0% for total UK productivity.

Gains in employment were more modest, but still outpaced national growth by a large amount. Internet sector employment grew by 12.8% between 2012 and 2016. The annual average growth in internet sector employment was 2.6% compared to 1.7% for all industries nationally.

These figures (summarised in Table 3 and Figures 1-3) give us a clear sense of the internet sector’s rapid growth. They also reinforce other research showing a high growth rate for the internet industry (see Hooton and Kaing, 2018). In other words, the internet has been growing rapidly and on a fundamentally different, steeper trajectory than other parts of the economy over the past five years.

Table 3: Summary Of Internet Sector Growth, 2012-2016

  Internet Sector 2012 Internet Sector 2016 Internet 5-Year Growth Internet Avg. Annual Growth UK National (All Industries) – Avg. Annual Growth UK National (A-S (Part) 2) – Avg. Annual Growth^
Number of enterprises^^ 58,784 78,238 33.1% 6.6% 2.9% 4.8%
Approximate gross value added at basic prices (aGVA; £ million) 36,785 44,552 21.1% 4.2% 2.0% 5.5%
Total employment – average during the year (thousand) 338 382 12.8% 2.6% 1.7% 2.2%
Total net capital expenditure (Inc NYIP) (£ million) 5,046 1,918 -62.0% -12.4% 3.4% 11.6%

Note: Figures reported from IA Methodology – USA Industry Equivalent Scenario; ^Non-financial business economy. Please note that all reported figures are rounded in table (e.g. enterprises are rounded to nearest 100) and that reported 5-year growth and average annual growth percentages reflect raw figures. Rounding may cause slight discrepancies in figures in table.

Figure 1: UK Internet Industry Enterprises – Scenario Estimates

Figure 2: UK Internet Industry GDP – Scenario Estimates

Figure 3: UK Internet Industry Employment – Scenario Estimates

^Utilises IA industry identification methodology described in Siwek (2015); converts US industries to their UK equivalent; counts the same percentage weight of total industry output found in US industry as internet-relevant
^^Utilizes IA industry identification methodology described in Siwek (2015); converts US industries to their UK equivalent; uses 25% weight of total industry output as internet-relevant
^^^Utilises IA industry identification methodology described in Siwek (2015); converts US industries to their UK equivalent; uses 50% weight of total industry output as internet-relevant
^^^^Utilizes IA industry identification methodology described in Siwek (2015); converts US industries to their UK equivalent; uses 75% weight of total industry output as internet- relevant
^^^^Utilises TechNet (2017) industry identification methodology; converts US industries to their UK equivalent; uses 50% weight of total industry output as internet-relevant

Key Finding 3 – The Internet Is Among The Largest Sectors In The UK Economy

Context is crucial. There is a difference between simply stating numbers and placing those numbers in context so that they can be appreciated. Table 4 lays out this context, providing a ‘league’ table of the UK largest industries (Sections) with the addition of IA’s estimates for the internet sector. And in context, the UK internet sector is one of its most important, rivalling other major Sections.

The internet sector is the 9th largest out of 18 economic sectors in the UK in terms of value added. It is the 12th largest sector in terms of the number of enterprises it creates. It is the 14th largest in terms of employment.

The table shows that the internet resides solidly in the middle of the pack among all UK economic sectors. The internet industry, in other words, is just as important to the UK economy and society as the Real estate activities sector and the Accommodation and food service activities sector. It contributes twice as much to UK value added as the Arts, entertainment and recreation sector. It provides nearly the same number of enterprises to the UK as the Human health and social work activities sector. And it provides more than three times the combined number of jobs from Mining and quarrying and Agriculture, forestry and fishing.

Most importantly, this analysis shows that the internet is not a niche sub-industry dominated by only a few tech firms; rather, the internet ranks among the most important and largest Sections of the UK economy.

Perhaps most crucially, UK statistical agencies haven’t been measuring all aspects of the internet economy, leading to undercounting of the internet sector. The UK government does excellent work monitoring internet usage as well as e-commerce sales, but there are two key elements missing in the analysis. First, agencies lump online activity and information and communications technology (ICT) activity together, which oversimplifies both. Second, they have not yet translated their data into figures on the broad economic contributions of the internet. The measurements and comparisons provided here demonstrate that the lack of such figures translate into a lack of clarity regarding the relative importance of the internet industry. Again, context is crucial, particularly in policymaking.

Table 4: Putting The Internet Industry Into Context

SIC (Revised 2007) -Section, Division, Group, Class Description Approximate Gross Value Added At Basic Prices (aGVA) GVA Rank Number Of Enterprises Enterprises Rank Total Employment – Average During The Year Employment Rank Total Net Capital Expenditure (Inc NYIP) Capital Expenditures Rank
G Wholesale and retail trade; repair of motor vehicles and motorcycles 200,838 1 373,686 2 4,933 1 20,885 2
C Manufacturing 166,309 2 135,756 7 2,533 3 19,260 3
M Professional, scientific and technical activities 160,841 3 478,459 1 2,448 4 11,786 7
J Information and communication 120,956 4 213,504 5 1,271 9 13,918 4
N Administrative and support service activities 120,692 5 231,309 4 2,591 2 12,598 6
F Construction 96,805 6 314,891 3 1,410 7 11,004 8
H Transport and storage 80,180 7 105,064 9 1,381 8 13,430 5
I Accommodation and food service activities 47,688 8 149,066 6 2,263 5 7,639 10
Internet Industry 44,552 9 78,238 12 382 14 1,918 17
L Real estate activities 42,689 10 93,459 10 532 13 8,619 9
Q (Part) 2 Human health and social work activities 33,471 11 81,910 11 1,800 6 4,345 14
D Electricity, gas, steam and air conditioning supply 26,020 12 5,017 17 141 16 22,987 1
P (Part) 2 Education 22,599 13 43,100 14 1,148 10 7,127 13
R Arts, entertainment and recreation 22,072 14 62,920 13 730 11 4,318 15
E Water supply, sewerage, waste management and remediation activities 19,898 15 7,406 16 172 15 7,238 11
S Other service activities 18,327 16 105,275 8 625 12 2,112 16
B Mining and quarrying 11,677 17 1,204 18 61 17 7,175 12
A (Part) 2 Agriculture, forestry and fishing 2,124 18 12,669 15 52 18 657 18

Key Finding 4 – The Internet Invests Heavily In The UK Economy

Investment is part of the reason why the internet sector has been contributing greatly and growing rapidly in the UK since 2012. The industry puts billions into its Total net capital expenditure every year. 3 IA estimates total industry capital expenditures was approximately £1.9 billion in 2016. This paper shows the cyclical nature of the internet sector’s capital expenditures in Figure 4, which masks the 2016 industry net capital expenditures as ‘low’. The figure shows that net capital expenditures reached approximately £5.5 billion in both 2011 and 2014 followed by typical reductions for one to two years before the cycle went back up. At peak investment periods between 2008 and 2016, the internet industry would have ranked 14th among all economic Sections – which are again the largest components of the UK economy – for net capital expenditures.

Figure 4: UK Internet Industry Capital Expenditures: Scenario Estimates

^Utilizes IA industry identification methodology described in Siwek (2015); converts US industries to their UK equivalent; counts the same percentage weight of total industry output found in US industry as internet-relevant
^^Utilises IA industry identification methodology described in Siwek (2015); converts US industries to their UK equivalent; uses 25% weight of total industry output as internet-relevant
^^^Utilizes IA industry identification methodology described in Siwek (2015); converts US industries to their UK equivalent; uses 50% weight of total industry output as internet-relevant
^^^^Utilises IA industry identification methodology described in Siwek (2015); converts US industries to their UK equivalent; uses 75% weight of total industry output as internet- relevant
^^^^Utilizes TechNet (2017) industry identification methodology; converts US industries to their UK equivalent; uses 50% weight of total industry output as internet-relevant.

Methodology

Internet Association conducted its analysis using its primary sector identification methodology. Economists Incorporated, led by Stephen Siwek, developed this methodology using a standard approach for industries without formal industry code assignments. Internet Association’s 2015 report, “Measuring the US Internet Sector,” provides this methodology in full for IA’s United States estimates.

In short, the methodology uses an expert review of all formal industry codes used in national statistical accounts – North American Industrial Classification System (NAICS) codes in the US case – to identify potentially internet-related industries. The method then requires an examination of the individual product line receipts reported for each industry to again identify potentially internet-related transactions. Those flagged receipts are then summed together and run through multipliers/weights to estimate specific economic metrics, such as employment.

The current report uses this same approach, but applied to the UK’s national economic statistics system. First, IA reviewed all UK Standard Industrial Classification (SIC) codes and descriptions of all Sections, Divisions, Groups, and Classes to identify equivalent UK industries for each US industry identified in Siwek (2015). As a secondary approach and comparator, IA also identified and used the list of “Digital Tech SIC Codes” named in TechNation’s report Tech Nation 2017. The list from TechNation provided methodology comparison for IA and a robustness check in the analysis. Table 5 provides the full list of relevant UK industry codes identified as IA-equivalent or listed by TechNation is given in the first column.

IA was unable to find completely equivalent industry and regional multipliers to those in its US methodology. Consequently, IA ran analysis for four scenarios using different assumptions for what percentage of each relevant industry’s activity came specifically from the internet. These were: a) 25%, b) 50%, c) 75%, and d) an IA Equivalent Industry scenario. In the 25%, 50%, and 75% scenarios, IA assumed that 25%, 50%, and 75% of each relevant industry output came from internet businesses. In the IA Industry Equivalent scenario, IA assumed the share of economic output from each relevant industry was the same as it was for its US equivalent industry. For example, if NAICS code XXXX is equivalent to SIC code ZZZZ and IA flagged 30% of XXXX’s output as coming from internet businesses, then IA assumed 30% of ZZZZ’s economic output also came from internet businesses. Conservatively, IA assumes these percentage weights remain the same in every year of observation. Internet Association used the TechNation list of industries and an assumption of 50% of activity coming from internet businesses as a fifth scenario. Table 5 again provides details.

Tables 6-9 provide the time series estimates for each of the five scenarios run in this analysis. Figures 1-4 (presented earlier) chart these estimates to provide visualisations of the internet sector’s growth over the past 10 years.

It is important to clarify some distinctions of IA’s conceptualisation of the internet. First, IA represents internet companies, but not telecommunications companies or internet-service providers (ISPs). These types of companies are obviously related to provision of the internet as a service, but they are not ‘internet companies’ according to the industry’s self-identification. This report includes several telecommunication industry codes in its list of internet-related industries; however, the analysis flags only a proportion of these code’s economic output as coming from the internet (see Table 5). This distinction also explains the discrepancy between IA’s economic output estimates (which, as stated, are conservative) and larger estimates from other groups. Many other groups include ISP activity in their ‘internet sector’ or ‘internet economy’ estimates. Second, it is important to note that the internet industry is not the same as the “digital economy” or the “technology sector”. These other two terms are similar conceptually, but broader terms. The “internet industry,” is a component of both the digital economy and technology sector. You can find further clarification in IA’s 2015 report “Measuring the US Internet Sector”.

Table 5: Internet Sector Identification And Weights

Equivalencies 2016 Totals For Each Metric In Each Component
Standard Industrial Classification (Revised 2007) – Section, Division, Group, Class Description Internet Association NAICS Equivalent Pct Of Relevant IA Equivalent Industry Receipts Included?* Included In TechNation Digital Tech list? Number Of Enterprises In Industry Total Approximate Gross Value Added At Basic Prices (aGVA; £ million) Total Employment – Average During The Year (thousand) Total Net Capital Expenditure (Inc NYIP) (£ million)
62.02 Computer consultancy activities Computer Systems Design and Related Services, NAICS 54151 34% Yes 106,366 27,633 383 1,158
62.03 Computer facilities management activities Computer Systems Design and Related Services, NAICS 54151 0% Yes 700 139 2 34
62.01 Computer programming activities Na 34% Yes 32,285 15,282 173 505
63.11 Data processing, hosting and related activities Data Processing, Hosting, and Related Services, NAICS 518210 46% Yes 3,085 4,254 36 348
26.2 Manufacture of computers and peripheral equipment Na 0% Yes 867 716 0 20
63.9 Other information service activities Computer Systems Design and Related Services, NAICS 54151 34% No 3179 2,983 21 59
63.99 Other information service activities n.e.c. Computer Systems Design and Related Services, NAICS 54151 34% No 2,561 600 10 23
62.09 Other information technology and computer service activities Computer Systems Design and Related Services, NAICS 54151 34% Yes 18,765 10,208 127 791
58.29 Other software publishing Na 0% Yes 2,166 1,225 0 100
61.9 Other telecommunications activities All Other Telecommunications, NAICS 517919 70% Yes 5,078 25,024 163 0
58.21 Publishing of computer games Na 0% Yes 236 267 0 12
95.11 Repair of computers and peripheral equipment Na 0% Yes 4,190 1,912 29 47
47.91 Retail sale via mail order houses or via internet Various – Selected Services – E-Commerce (Net Mail Order) 69% No 23,577 5,298 0 765
61.3 Satellite telecommunications activities Na 0% Yes 144 -83 15 0
63.12 Web portals Internet Publishing and Broadcasting And Web Search Portals, NAICS 51913 84% Yes 1,251 1,518 10 203
61.1 Wired telecommunications activities Wired Telecommunications Carriers, NAICS 5171 29% Yes 1,663 1,065 0 58
61.2 Wireless telecommunications activities Wireless Telecommunications Carriers (Except Satellite), NAICS 5172 11% Yes 1,442 4,807 0 1,677

Notes: *Report ran scenarios using these percentages and with 25, 50, and 75% scenarios – i.e. the report only counted a certain percentage (e.g. 25%) of each potentially relevant industry (e.g. Web Portals) in each scenario

Table 6: Number Of Enterprises

  2008 2009 2010 2011 2012 2013 2014 2015 2016
IA Methodology – USA Industry Equivalent Scenario^ 49,879 48,296 50,270 55,183 58,784 64,606 67,104 72,308 78,238
IA Methodology – 25% of Potential Scenario^^ 33,387 31,598 32,429 35,383 37,318 40,826 42,908 46,621 49,813
IA Methodology – 50% of Potential Scenario^^^ 66,774 63,196 64,857 70,767 74,636 81,652 85,816 93,241 99,626
IA Methodology – 75% of Potential Scenario^^^^ 100,161 94,794 97,286 106,150 111,954 122,477 128,724 139,862 149,439
TechNation Methodology – 50% of Potential Scenario^^^^^ 59,276 56,723 57,293 62,140 64,266 69,584 73,936 80,904 84,968

Table 7: Approximate Gross Value Added At Basic Prices (aGVA; £ million)

  2008 2009 2010 2011 2012 2013 2014 2015 2016
IA Methodology – USA Industry Equivalent Scenario^ 16,799 34,779 34,030 35,576 36,785 38,706 44,056 42,771 44,552
IA Methodology – 25% of Potential Scenario^^ 11,511 17,755 17,679 18,506 19,265 20,387 22,904 23,564 24,668
IA Methodology – 50% of Potential Scenario^^^ 23,022 35,509 35,357 37,013 38,530 40,774 45,808 47,128 49,336
IA Methodology – 75% of Potential Scenario^^^^ 34,533 53,264 53,036 55,519 57,795 61,160 68,712 70,692 74,004
TechNation Methodology – 50% of Potential Scenario^^^^^ 20,202 32527.5 32,640 34302.5 35,562.5 37,725 41,824.5 42,878 44,895.5

^Utilises IA industry identification methodology described in Siwek (2015); converts US industries to their UK equivalent; counts the same percentage weight of total industry output found in US industry as internet-relevant
^^Utilizes IA industry identification methodology described in Siwek (2015); converts US industries to their UK equivalent; uses 25% weight of total industry output as internet-relevant
^^^Utilises IA industry identification methodology described in Siwek (2015); converts US industries to their UK equivalent; uses 50% weight of total industry output as internet-relevant
^^^^Utilizes IA industry identification methodology described in Siwek (2015); converts US industries to their UK equivalent; uses 75% weight of total industry output as internet-relevant
^^^^Utilises TechNet (2017) industry identification methodology; converts US industries to their UK equivalent; uses 50% weight of total industry output as internet-relevant

Table 8: Total Employment – Average During The Year (Thousand)

  2008 2009 2010 2011 2012 2013 2014 2015 2016
IA Methodology – USA Industry Equivalent Scenario^ 401 309 315 348 338 310 344 363 382
IA Methodology – 25% of Potential Scenario^^ 222 171 179 192 185 182 210 220 231
IA Methodology – 50% of Potential Scenario^^^ 444 342 357 384 370 363 420 441 462
IA Methodology – 75% of Potential Scenario^^^^ 665 513 536 576 555 545 629 661 692
TechNation Methodology – 50% of Potential Scenario^^^^^ 397 342 357 350 334 363 408 427 446

Table 9: Total Net Capital Expenditure (Inc NYIP) (£ million)

  2008 2009 2010 2011 2012 2013 2014 2015 2016
IA Methodology – USA Industry Equivalent Scenario^ 5,436 528 4,628 5,503 5,046 1,154 5,702 1,757 1,918
IA Methodology – 25% of Potential Scenario^^ 2,228 358 1,847 2,230 2,012 651 2,382 1,332 1,397
IA Methodology – 50% of Potential Scenario^^^ 4,456 717 3,693 4,459 4,024 1,301 4,765 2,663 2,794
IA Methodology – 75% of Potential Scenario^^^^ 6,683 1,075 5,540 6,689 6,036 1,952 7,147 3,995 4,190
TechNation Methodology – 50% of Potential Scenario^^^^^ 4,221 612 3,599 4,215 3,770 1,119 4,371 2,291 2,370

^Utilizes IA industry identification methodology described in Siwek (2015); converts US industries to their UK equivalent; counts the same percentage weight of total industry output found in US industry as internet-relevant
^^Utilises IA industry identification methodology described in Siwek (2015); converts US industries to their UK equivalent; uses 25% weight of total industry output as internet-relevant
^^^Utilizes IA industry identification methodology described in Siwek (2015); converts US industries to their UK equivalent; uses 50% weight of total industry output as internet-relevant
^^^^Utilises IA industry identification methodology described in Siwek (2015); converts US industries to their UK equivalent; uses 75% weight of total industry output as internet-relevant
^^^^Utilizes TechNet (2017) industry identification methodology; converts US industries to their UK equivalent; uses 50% weight of total industry output as internet-relevant

Previous Literature & Estimates

The following are brief summaries of key economic estimates for the internet sector or related conceptual ideas from other research. Internet Association provides them for comparative purposes and to provide context to its own estimates. All figures are cited appropriately.

  • ONS (2018) estimates:
    • The average internet company in the UK earns £2.64 million in revenues annually
    • 270,000 UK companies (14.4% of all companies) make up the UK digital economy
    • A total of 199,460 businesses made website/app sales (2015)
      • 161,500 of these (81%) had fewer than 10 employees
    • E-Commerce sales by businesses in the UK non-financial sector: £511 billion (2016)
      • Website sales: £236 billion
      • Electronic Data interchange (EDI) sales: £274 billion
  • DCMS (2018a; 2018b) estimates that the digital sector contributes the following to the UK economy:
    • Employment, 1.46 million (2016); 1.5 million or 4.6% (2017)
    • Gross Value Added, £121.5 billion (2016); £130.5 billion or 7.1% (2017)
  • AT Kearney estimates the UK Internet economy was worth £82 billion or 5.7% of GDP in 2015.
    • £37 billion is from the internet value chain
      • £45 billion is from e-commerce supported by the internet value chain
  • Max Nathan and Anna Rosso (with Tom Gatten, Prash Majmudar, and Alex Mitchell) (2013) estimate:
    • The UK digital economy accounts for 11% of jobs in the country
    • Digital economy firms employ 23.37 people on average compared to only 20.40 people on average for non-digital economy firms
    • The UK digital economy cuts across dozens of unique industries providing jobs in everything from internet firms to aviation/aerospace
  • Boston Consulting Group (Dean et al., 2012) estimated the following:
    • The UK’s internet sector leads G20 countries in terms of its contribution to GDP
    • 2016 estimated UK Internet sector GDP contribution: £347 billion or 12.4% of the economy
    • 2010 estimated UK Internet sector GDP contribution: £187 or 8.3% of the economy
  • Manyika and Roxburgh (2011) estimate the internet provides $28 of Net value per Internet user and $13 billion in Total Internet user surplus
  • McKinsey (du Rausas et al., 2011) estimated the internet sector internet sector provided 23% of the UK’s GDP growth between 2004-2009, the third highest contribution among mature economies.

References & Other Research

  • AT Kearney. (2015). “The Internet Economy in the United Kingdom.” Report. AT Kearney.
  • Burt S., Sparks L., Teller C. (2010) “Retailing in the United Kingdom – a Synopsis.” In: Schnedlitz P., Morschett D., Rudolph T., Schramm-Klein H., Swoboda B. (eds) European Retail Research. Gabler Verlag, Wiesbaden., pp. 173 – 194, 2010.
  • Clarke G., Thompson C. & Birkin M. (2015). “The emerging geography of e-commerce in British retailing”, Regional Studies, Regional Science, Vol. 2, Issue 1, pp. 371-391, 2015.
  • Curran, J., Fenton, N., Freedman, D. (2016). “Misunderstanding the Internet.” London: Routledge, 2nd edition, 2016.
  • (DCMS) Department for Digital, Culture, Media & Sport. (2018a). “DCMS Sectors Economic Estimates 2017: Employment.” London, United Kingdom.
  • (DCMS) Department for Digital, Culture, Media & Sport. (2018b). “DCMS Sectors Economic Estimates 2017 (provisional): Gross Value Added.” London, United Kingdom.
  • Dean, David, Sebastian Digrande, Dominic Field, Andreas Lundmark, James O’Day, John Pineda, and Paul Zwillenberg. (2012). “The Internet Economy in the G-20: The $4.2 Trillion Growth Opportunity.” The Connected World. BCG Report. The Boston Consulting Group. Available from: https://www.bcgperspectives.com/content/articles/media_entertainment_strategic_planning_4_2_trillion_opportunity_internet_economy_g20/
  • du Rausas, Matthieu Pélissié, James Manyika, Eric Hazan, Jacques Bughin, Michael Chui, and Remi Said. (2011). “Internet matters: The Net’s sweeping impact on growth, jobs, and prosperity.” McKinsey Global Institute, McKinsey & Company. Available from: http://www.mckinsey.com/industries/high-tech/our-insights/internet-matters
  • Ellis-Chadwick F., Doherty N., Hart C. (2001). “Signs of change? A longitudinal study of Internet adoption in the UK retail sector.”, Journal of Retailing and Consumer Services, Vol. 9, Issue 2, pp. 71-80, 2002.
  • Garnham, N. (2005) “From cultural to creative industries.” International Journal of Cultural Policy, Vol. 11, Issue 1, pp. 15-29, 2005. DOI: 10.1080/10286630500067606.
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Washington DC – IA Senior Vice President, Global Government Affairs Michael Bloom issued the following statement on the Online Privacy Act:  “The internet industry commends Congresswomen Eshoo and Lofgren for recognizing the urgent need for comprehensive federal privacy legislation and appreciates their hard work and commitment on this issue. More work remains to ensure all… Read more

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