UK digital economy is double official estimate, says report Britain's digital economy is more than twice as large as the government has estimated, according to an independent research body using a measuring method backed by the internet giant Google. The finding reflects the shift of traditional businesses to new ways of working with technology. A report from the National Institute of Economic and Social Research reckons the UK has at least 270,000 digital companies, compared with the 120,000 estimated by the government, which uses the Standard Industrial Classification of Economic Activities (SIC). The NIESR says its least-conservative estimate puts the figure as high as 471,000. The study also found that digital companies were growing faster on average, and now employed more people than those outside the digital economy - at 23 employees per company on average, compared with 20. Tech hotspots The authors of the report say the government needs a better understanding of the digital economy as a potential driver of economic growth. "But as it stands, the UK's digital economy is also poorly understood by researchers, policy makers and many in business," says Tom Gatten, chief executive of Growth Intelligence, a research group that helped to compile the report. He pointed to misconceptions that the industry was dominated by small start-ups with low revenue, low employment and based in a few London clusters such as Tech City. The report, which uses a real-time database compiled by Growth Intelligence, highlights the breadth of digital businesses across the country. It shows strong concentrations of technology-focused groups in regional areas such as Basingstoke and Aberdeen that belie the popular image of start-up clusters limited to east London. The study found that businesses were being inaccurately defined by traditional sectors - overlooking the shift to digital ways of working. It said a "myth pervades that the internet economy consists largely of tiny dotcom or biotech start-ups in a few high-technology clusters that quickly bubble up and go bust." The reality, it says, is that the digital economy has spread into every sector, from architecture firms whose activities have become almost entirely digital, to machine-tool manufacturers that now largely use online data-processing facilities. The authors of the report reference several examples, such as Communique Publishing, a company that makes brochures but also provides consultancy, web design and hosting, e-marketing and QR coding services. Vince Cable, the business secretary, who will be speaking at the launch of the report in London on Monday, said the research showed that "innovation, entrepreneurship and growth are spread throughout the UK." He added: "The information economy transforms every other business sector, driving productivity and creating new opportunities for growth." The report says that SIC-based definitions of the digital economy miss a large number of companies in software, architectural activities, engineering and scientific and technical consulting. Switching from SIC-based to Growth Intelligence measures, which track companies in the UK using real-time analysis of their digital activities, increases the digital economy's share of employment from about 5 per cent to 11 per cent of jobs. The report shows London still dominates the digital economy. Other areas with the most digital economy companies include Manchester, Guildford, Aldershot, Luton, Watford, Wycombe and Slough. Other areas with a high concentration of digital activity include Basingstoke, Reading, Newbury, Aylesbury, Milton Keynes and Poole. An official at the Office for National Statistics said: "We are confident ONS statistics reliably measure the size and shape of the economy according to best international practice."