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The Department for Science, Innovation & Technology (DSIT) is currently undertaking new research to define and measure the digital economy (DMDE), split into multiple phases of work.

Phase 1, completed in May 2024, focused on developing a definition and application framework, informed by an in-depth review of relevant literature, existing frameworks, and extensive stakeholder engagement.

Phase 2 work, completed in May 2025, uses the framework and recommendations from the Phase 1 work to implement a pilot test of the new definition across multiple economic measures.

Phase 1

This study was carried out by Technopolis for the Department for Science, Innovation and Technology and involves the following key elements:

• assessment of existing definitions of the digital economy to capture the extent to which they meet UK stakeholder needs and international standards
• stakeholder consultation to develop a rigorous, comprehensive and measurable definition that meets stakeholder and user needs
• design of a measurement methodology setting out how the new definition of the digital economy will be operationalised

The methodology paper proposes the following revised statistical definition for the UK digital economy:

All economic activity derived from the production of digital content, ICT goods or ICT services.

• Tier 1 of the digital economy refers to economic activity derived from firms that are primarily involved in the production of digital content and/or ICT goods and/or ICT services

• Tier 2 of the digital economy refers to economic activity derived from diversified firms which produce digital content and/or ICT goods and/or ICT services as part of a broader diversified product or service offer and which have a higher level of digital intensity in their inputs than firms in the traditional economy

Phase 2

The Phase 2 work, delivered collaboratively by Cambridge Econometrics, The Innovation and Research Caucus, The Data City, and DSIT, uses the framework and recommendations from the Phase 1 work to:

• Identify and implement a new, overarching, Tier-based Standard Industrial Classification (SIC) definition of the digital economy, that allows comparability and consistency with national statistics and accompanying statistical products/datasets, and:
• Integrate a keywords-based approach (using The Data City鈥檚 Real-Time Industrial Classifications (RTIC) methodology) within this definition to identify subsectors/technologies (and associated groupings) within the digital economy not identifiable using SIC codes.

Using this new framework, the primary objective of the Phase 2 work has been to create an initial enterprise-level database and generate insights into the size and state of the UK Digital Economy.