The UK’s digital economy is evolving quickly, but traditional ways of measuring it haven’t kept pace. That’s starting to shift.
We’re proud to have an ongoing partnership with the Department for Science, Innovation and Technology (DSIT), and recently collaborated with them on Phase 2 of the “Defining and Measuring the UK Digital Economy” project. This work is helping to shape a more accurate and forward-looking approach to identifying the industries driving digital activity across the country.
Together with Cambridge Econometrics and the Innovation and Research Caucus, The Data City contributed to a new methodology that challenges the limitations of SIC codes and captures digital enterprises that would otherwise go unnoticed.
Moving beyond outdated classifications
The project builds on Phase 1, which laid the groundwork with a new definition of the Digital Economy – splitting it into Tier 1 (dedicated digital producers) and Tier 2 (diversified companies with high digital intensity). Phase 2 brought that definition to life through data.
Enter The Data City.
Our Real-Time Industrial Classifications (RTICs) – built using AI, and website text were integrated into the project’s taxonomy to uncover companies that fall outside traditional SIC-based classifications. This was especially vital for identifying businesses working in cutting-edge areas like AI, Cyber and Quantum.
Without RTICs, these companies simply wouldn’t show up in the data.
A more complete view of the Digital Economy
Together, the consortium developed a new classification system that combines:
- SIC-based definitions to ensure comparability with national statistics
- RTICs to surface emerging digital technologies and frontier firms
- A new taxonomy that groups enterprises by both their SIC and RTIC profile
This blended approach gives policymakers and analysts a live, enterprise-level view of the UK’s Digital Economy that’s both structured and dynamic.
As part of the project, we helped classify over 311,000 enterprises and estimate the size, productivity and economic impact of the UK’s Digital Economy in 2024.
The impact: evidence you can act on
Here’s what this new methodology revealed:
- The UK Digital Economy contributes £286 billion in GVA annually – roughly 13% of the total UK economy
- Productivity in the Digital Economy is 57% higher than the national average
- Over 2.9 million people are employed across digital industries
- Digital firms are receiving an average of £4 billion in VC funding annually
Crucially, our RTIC methodology enabled DSIT and its partners to differentiate between ‘established’ and ‘frontier’ digital firms, helping them better understand who is leading on innovation and where support might be most effective.
Why this matters
This isn’t just about better data – it’s about better decisions.
When digital enterprises are misclassified or invisible, they miss out on support, recognition and funding. Policymakers lose the ability to target interventions where they’re needed. Investors can’t see the real size or shape of the opportunity.
By integrating The Data City’s RTICs into DSIT’s framework, the UK now has a living, breathing view of its Digital Economy – not just a snapshot in time.
And this is just the beginning.
