The Internet - the engine of European economic growth?

We’ve all heard the stories of companies that find a niche product they can sell via the Internet to large numbers of people. Companies that maybe started out around a farmhouse kitchen table or in someone’s bedroom and are now fantastically successful global Internet businesses.

Amazingly, despite more than 10 years of constant growth in ecommerce, neither the EU not a European Government has yet tried to get to the bottom of these stories and work out what the real economic impact of the Internet is.

At a time of global economic uncertainty, establishing the difference that the Internet makes to our local economies seems like a sensible thing to do. So we asked The Boston Consulting Group, a well respected adviser on business strategy, to make a start on the real facts and figures here in the UK.

After many months of data-crunching, their Connected Kingdom report reveals for the first time some surprising and significant facts. Here are some of the headline figures they’ve established:

• In 2009, the Internet contributed £100 billion to the UK economy. That represents 7.2% of GDP.
• The Internet’s contribution to UK GDP is bigger than that of many other industries, for example utilities or transport.
• The UK is the no1 country in the world for e-commerce and is a net exporter of ecommerce goods and services: we export £2.80 for every £1 we import.
• The companies that enable the online economy (ie, provide the infrastructure, access and services that constitute the Internet) employ an estimated 250,000 people in the UK and have revenues of over £50 billion.
• The Internet economy is expected to grow by 10% per year

BCG’s research also highlights the fact that not all economic activity is captured by GDP measures, and so the significance of the Internet to the UK economy is actually greater than £100 billion. For example: consumers benefit from the Internet by purchasing products in the high street which they researched online (valued at around £40 billion per year), by saving money through online shopping (around £18 billion per year) and by consuming free online content (around £5 billion per year).

In truth, the headline numbers are bigger than any of us thought when we first commissioned the report. It’s very exciting to see that UK companies that are becoming global success stories through their innovations on the Internet. From companies exporting tartan to those building online games for kids, these are the home-grown success stories that we need to celebrate and foster here in the UK.

This report is just the start. The tough policy questions have yet to be answered. How do we ensure this 10% growth really happens? What barriers are these UK companies facing in trying to grow their start ups into global businesses? And we know that some of the answers will also have to come from the EU.

The next step has to be a conversation between the UK’s Internet sector and the Government about how to make the online economy a Government priority and a UK success story. In November, we’re running an event with the Oxford Internet Institute to discuss the policy implications of BCG’s report. And if you’d like to get involved yourself, please do have your say about the way forward on www.connectedkingdom.co.uk.

Posted by Sarah Hunter, Senior Policy Manager, Google UK