The United Kingdom is far ahead of the rest of the world regarding technological advancement. According to the World Economic Forum's 2019 Global Competitive Index, the country's competitive advantage stems from its business dynamism, strong institutional pillars, funding mechanisms, and a vibrant innovation ecosystem. Since the post-World War II industrial revolution, competitiveness has been fuelled by innovation, a defining feature of the UK's competitiveness. Countries that are pioneers in developing cutting-edge technologies, prescriptive analytics, blockchain technologies, digital twins, and fully utilizing their digital economies' productive capacity can achieve a strategic competitive advantage.
Economic growth, national security, and international competitiveness are all dependent on digital technologies. The digital economy has a sizable impact on both the global economy's trajectory and the general well-being of the public. It affects every aspect of life, from resource distribution to economic growth.
Impact of Technological Trends in Economic Growth.
How do we quantify the digital economy's impact on economic growth and other relevant social indicators? Researchers recognize the difficulty of accurately evaluating a rapidly evolving digital economy. The researchers estimate that the digital economy is worth $11.5 trillion globally, or 15.5 percent of global GDP, and has grown two and a half times faster than global GDP over the last 15 years.
According to Bea's analysis, measurement difficulties result from a lack of agreement on the activities that should be included in the definition and the rapid evolution of the underlying nature of digital technologies and cloud analytics. According to the BEA, the UK’s digital economy grew at an annual average rate of 5.6 percent between 2010 and 2016, accounting for 6.5 percent of current-pound GDP.
Regardless of how difficult it is to compile accurate national statistics, tracking the digital economy's growth trajectory is critical for determining the UK's economic and global competitiveness.
To put it another way, the digital economy's goods and services were either created with or incorporated digital technologies. ICT is at the heart of this, serving as a reliable barometer of the digital economy's performance while underpinning much of this activity.
According to Niebel, between 1995 and 2010, ICT significantly contributed to economic growth in developed, developing, and emerging countries.
UK's competitive edge in the digital era will be built on innovation, entrepreneurialism, and information and information technology production. The information and communications technology (ICT) sector and the industries it supports contribute significantly to economic growth. The sector's contribution to the small business ecosystem is examined, as are its investments in retraining and skill enhancement initiatives.
Advancements in ICT.
Advanced economies rely on investments in information and communications technology (ICT) assets such as computer hardware, software, NVDA, and broadband internet infrastructure. According to Vincenzo Spiezia's OECD research, ICT investment is the primary driver of GDP growth and global competitiveness. The value of ICT capital services as a percentage of GDP enables an accurate assessment of the ICT sector's contribution to growth.
The United States leads the world in this area and enjoys a competitive advantage over other OECD members. Even though ICT assets account for a sizable portion of capital (or capital services) in GDP growth, India and China have emerged as market leaders in this space.
Apart from the obvious economic benefits, the transition from ICT manufacturing to ICT services has been transformative. This shift from hardware to software has been particularly noticeable in developing countries, where cellular networks have grown in breadth and depth. The growing number of mobile internet users and the low cost of smartphones and other portable devices have all contributed to the mobile ecosystem's maturation.
Since the financial crisis ended, the UK has experienced slow but steady economic growth, both within and outside the information technology sector. According to BEA data, between 2010 and 2018, the UK’s GDP grew at an annual rate of 2.3 percent. By examining GDP figures, it is clear that the services sector is the fastest-growing sector.
Over 80% of total output is generated by services industries, and this sector has been a critical pillar of the UK’s economy's growth and recovery since the financial crisis.
A thriving technology sector is assisting the information technology industry in consolidating its position as the industry's dominant force. However, the BEA reports that the industry represents only 6% of the total economy in absolute terms.
The information and communications technology industry has developed into a significant economic force despite its small size.
The industry has had a great four years, generating significant economic growth and job creation. With the proliferation of digital technologies, the UK’s economy will undergo unprecedented structural changes, cementing the IT industry's position as a leading engine of job creation and economic growth. However, forecasting the impact of the IT industry on various sectors of the economy is difficult.
As evidenced by this information, the IT sector has grown faster than other sectors that contribute to GDP through added value creation since the Great Recession. According to the OECD and other advanced economies, the United States is not alone in experiencing a decline in the prominence of goods-producing sectors.
The information technology (IT) industry contributes to the UK’s economy in two ways:
- it creates cutting-edge technologies and
- distributes the scale of innovation to other industries.
The IT services industry has a significant multiplier effect across the industry value chain because it distributes innovative technologies from consulting services to downstream business organizations seeking to improve efficiency. Gartner forecasts that IT spending on services, infrastructure, and software will reach $3.8 trillion in 2019, increasing 3.2 percent over the $3.7 trillion in 2018.
Additionally, the information technology sector is surprisingly robust. It has increased by 77% since 2008, from $835 billion to $1,480 billion in annual value-added. However, the services sector expanded by 20% during the same period. The goods-producing sector increased actual economic output by only 5%.
The Powers of Technology are Active.
Between 2006 and 2016, the most promising sector in terms of job creation was the information technology sector. At the sub-industry level, data reveal incremental shifts within the overall sector, most notably in professional service delivery, providing insight into the industry's employment growth trajectory.
The BEA classifies this sector into three distinct subsectors: legal services, computer system design and related services, and other types of technical services. Between 2006 and 2017, the professional services industry expanded quickly. While the traditional legal services sector expanded slowly, the other two subsectors expanded significantly faster, particularly the computer system design and related services industry. The number of new jobs nearly doubled during the same period.
As evidenced by sub-industry job growth patterns, IT service delivery contributes to the professional services sector. Employment growth in this sector also indicates that the information technology services industry is becoming more integrated into the overall economy. This recent development demonstrates how IT service delivery contributes to the growth of the US labour market.
Productivity in the Technology Sector.
Apart from the increase in employment created by the IT and related industries, their productivity has also increased. Between 2006 and 2016, each employee in the information technology and related industries generated more than twice the GDP of the overall economy. According to BEA estimates, the annual GDP output per employee in information technology and related industries increased from $321,659 to $408,129. GDP output per worker increased from $120,876 to $132,873 in the overall economy during the same period.
When evaluating productivity, consider the value of digital spillover from IT and related industries to non-ICT industries. Huawei and Oxford Economics argue that digital spillovers from primary digital industries to secondary, non-digital industries are an essential component of a healthy digital economy. Huawei and Oxford argue that in such an accounting framework, "digital spillovers" should play a critical role in estimating the actual productive capacity of a digital economy.
Between 2006 and 2016, the ICT industry consistently contributed more than 11% of total commodities and services supply in the UK, indicating growing integration between the ICT and non-ICT sectors. As a percentage of GDP, the information and communications technology sector has made a sizable contribution to job creation and economic growth in the United States.
The IT industry faces significant challenges in the future due to regulatory uncertainty and the rise of massive security breaches. Leading IT service providers' increasing use of AI, machine learning, and robotic automation bodes well for the industry's long-term prospects. While this is occurring, millions of customers and small business owners are concerned about their security.
Additionally, the industry's future is jeopardized by a sea change in political perspectives on critical domestic issues (trade and immigration). Particular care should be exercised to avoid ambiguity in data privacy, cybersecurity, data management, and international trade.
The information technology industry has a significant impact on the UK's economic policy in various ways, most notably on sectoral innovation, economic growth, and overall business operations. Despite its youth, however, the industry can contribute significantly to the UK's economy.