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Executive summary

Introduction

The Department for Science, Innovation and Technology (DSIT) has undertaken new research to define and measure the Digital Economy (DMDE), split into two 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.

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:

1) 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:

2) Integrate a keywords-based approach (using The Data City鈥檚 Real Time Industrial Classification (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.

Definitions and methodology

Defining the Digital Economy

The Phase 1 framework defines the Digital Economy as 鈥渁ll economic activity derived from the production of Digital content, ICT goods, or ICT services.鈥� Within this framework, Digital economic activity is allocated into Tiers:

• 鈥楾ier 1鈥� of the Digital Economy refers to economic activity derived from enterprises that are primarily involved in the production of Digital content and/or ICT goods and/or ICT services.
  
  
• 鈥楾ier 2鈥� of the Digital Economy refers to economic activity derived from diversified enterprises 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 enterprises in the traditional economy.

To support the implementation of this framework, the Phase 2 consortium has worked collaboratively with DSIT to explore a new SIC-based definition of the Digital Economy informed by the Phase 1 Tier-based framework and recommendations, shown in Table 1 below.

Table 1: Digital economy SIC codes

SIC Code(s)	SIC Description	Tier
18.20	Reproduction of recorded media	1
26.1 - 26.4	Manufacture of computer, electronic and communication equipment	1
58.14 & 58.2	Publishing of journals, periodicals and software	1
59	Motion picture, video and television programme production, sound recording and music publishing activities	1
60	Programming and broadcasting activities	1
61	Telecommunications	1
62	Computer programming, consultancy and related activities	1
63.11 - 63.91	Information service activities	1
95.11	Repair of computers and peripheral equipment	1
66	Activities auxiliary to financial services and insurance activities	2
69	Legal and accounting activities	2
92	Gambling and betting activities	2

^{Source: Department for Science, Innovation & Technology, Cambridge Econometrics, Innovation and Research Caucus, The Data City.}

Using a clear and robust methodology underpinned by established, official data sources, our proposed approach classifies Digital enterprises according to their primary product. Tier 1 enterprises are identified as those within SIC codes that directly produce Digital content or ICT goods and services.

Tier 2 enterprises meanwhile are determined using input-output tables, which summarise the inputs to production for each industry. Enterprises in this category primarily produce non-ICT goods or services but have an input profile with a Digital intensity similar to Tier 1 enterprises.

Supporting this overarching SIC-based definition and ensuring the classification of key Digital industries and technologies, especially those not readily available using a standard SIC approach, is the integration of The Data City鈥檚 proprietary RTIC framework to the database and economic estimates.

The taxonomy presented in Table 2 has been adopted for the Phase 2 work, which uses RTICs in conjunction with the SIC-based definition in Table 1 to provide a complete classification framework for the Digital Economy, while retaining the ability to 鈥榙eep-dive鈥� into Digital technologies/subsectors of interest.

Table 2: Subsector taxonomy for the Digital Economy:

鈥�	Enterprises with Tier 1 SICs	Enterprises with Tier 2 SICs	Enterprises without Tier 1 or 2 SICs
Enterprises with RTICS	鈥淔rontier dedicated鈥� These enterprises represent the frontier of Digital content generation and/or production of ICT goods/services. Compared to other Digital producers, they are more likely to be developing and/or leveraging emerging Digital technologies (such as AI, Cyber, and Quantum).	鈥淎gile diversified鈥� Includes those diversified enterprises at the Digital frontier, who are more likely to be developing and/or leveraging emerging Digital technologies as part of their diversified product or service.	Excluded, but reviewed for quality assurance/validation
Enterprises without RTICS	鈥淓stablished dedicated鈥� Captures all remaining enterprises involved in the dedicated production of Digital content and/or ICT goods/services, particularly those in established ICT industries that are typically less engaged with emerging Digital technologies.	鈥淭raditional diversified鈥� Represents all remaining diversified enterprises i.e. those that produce Digital content and/or ICT goods/services as part of a broader diversified product or service.	Excluded from analysis

^{Source: Department for Science, Innovation & Technology, Cambridge Econometrics, Innovation and Research Caucus, The Data City.}

Data sources and processing

The database developed as part of the Phase 2 work encompasses data collected from the following datasets, available as of January 2025:

• Inter-Departmental Business Register (IDBR) extract: 390,000 enterprises and accompanying local sites.
• Real-Time Industrial Classifications (RTIC) dataset from The Data City:
  • RTIC sectors identified as of January 2025.
  • Lightcast dataset on job postings: between January 2020 and January 2025.
  • Dealroom dataset on venture capital (VC) funding: between January 2010 and January 2025.
• UK Research and Innovation (UKRI): 101,000 projects successfully funded since January 2000.
• UK Data Service (UKDS) Quarterly Labour Force Survey (LFS) extract from January to December 2024.
• ONS Output per job estimates: by SIC section from 2023 (to estimate enterprise-level GVA)

These datasets have been linked together to arrive at a complete, up to date enterprise-level database and economic estimates for the UK Digital Economy.

To ensure these estimates meet the required statistical standards, extensive quality assurance and data validation processes have been embedded into the methodology and approach.

This has included prioritising official data sources; using established data processing and analysis methods; cross-validating estimates against related datasets/ publications, and finally; independent verification from an academic expert.

Key findings

The following estimates consider the economic contribution of the UK Digital Economy - using the new framework and definition adopted for the Phase 2 work - across key measures such as gross value added, productivity, employees (and their characteristics), and funding (both public and private).

Table 3: Summary economic estimates for the UK Digital Economy (2024)

Digital economy taxonomy	GVA (拢m, current prices)	GVA per employee (拢, current prices)	Employees	Enterprises
Frontier dedicated	60,518	89,007	679,927	25,563
Established dedicated	74,629	89,050	838,058	175,283
Total Tier 1	135,147	89,031	1,517,985	200,846
Agile diversified	40,938	111,997	365,528	5,591
Traditional diversified	110,240	105,082	1,049,080	105,359
Total Tier 2	151,178	106,869	1,414,608	110,950
Total Digital Economy	286,325	97,636	2,932,593	311,796
DSIT Digital Sector Economic Estimates*	153,483 (2023)	Not available	1,882,622 (2022)	Not available

<sup>Source: Department for Science, Innovation & Technology, Cambridge Econometrics, Innovation and Research Caucus, The Data City.

Note: * DSIT鈥檚 current Digital Sector Economic Estimates are included here for reference. Due to the differences in underlying methods, definitions, data, and timeframes, these will be different to the economic estimates derived as part of the Phase 2 work and are only broadly comparable with Tier 1 estimates.</sup>

Gross value added (GVA) and productivity

• The UK Digital Economy is estimated to have total annual GVA of 拢286 billion (in current prices, as of 2024). This equates to approximately 13% of total annual UK national accounts GVA.
• Output (GVA) per employee in the UK Digital Economy is estimated at 拢97,600 as of 2024. This compares to a whole economy value of 拢62,300 (2023 estimate, the latest comparable value available).
• This means that the average Digital Economy employee is some two-thirds (57%) more productive than average UK employee.

Employees and employee characteristics

• Across the UK, it is estimated there are a total of 2.93 million employees working in the Digital Economy (as of 2024).
• Two-thirds (66%) of Digital Economy employees in the UK work in professional and associate professional occupations (as of 2024), compared to 39% in non-Digital Economy industries.
• Employees working in the UK Digital Economy are estimated to have a median hourly wage of 拢23.4 (in current prices, as of 2024) and median annual earnings of 拢39,500.
• This is 50% higher than the median hourly wage of 拢15.6 for employees working in non-Digital Economy industries, and 60% higher than the median annual earnings of 拢24,500.

Business demography and funding

• There are 311,800 enterprises currently active in the Digital Economy (as of 2024). In addition to this, there are 349,200 local sites associated with Digital Economy enterprises.
• A quarter (25%) of UK Digital Economy enterprises have an annual turnover below 拢100,000, which is significantly lower than the average of 34% for all UK industries during the same period. Meanwhile 10% generate turnovers over 拢900,000.
• Some 88% of UK Digital Economy enterprises employed fewer than 10 people in 2024, similar to the UK average for all industries of 89%, while 2% have more than 50 employees.
• Digital economy enterprises in the UK have received an estimated 拢72 million of UKRI funding per annum (2000-2025), and 拢4,065 million of venture capital funding per annum (2010-2025).