Last week, an interim report of the independent review of UK economic statistics launched, commissioned by the Chancellor and led by Sir Charlie Bean, the former Deputy Governor of the Bank of England. Whilst much of the coverage was focused on the ONS's move to Newport leading to detrimental outputs over the last decade, there are some interesting developments for those with a burning interest in data and tech policy.
The pace and growth of the UK tech industry, and its impact on the wider digital economy, has presented new challenges in how new forms of economic value are defined and measured. Many, including Sir Charlie Bean himself, have argued that the scale and pace of the internet revolution have rendered much of the approach to official statistics out of date.
In the last two years, there have been a number of emerging new measurement methods – including most notably from Accenture, Deloitte, Nesta, NIESR and Tech City UK (techUK hosted a half-day research symposium 'Capturing the scale and pace of the digital economy' on the topic in September with the Review team).
It is the intention on the Bean Review to expand on the particular challenges and opportunities posed by the digital economy in the Final Report (for publication next year), but there are a number of interesting recommendations in the interim report. Recommendation 2 highlights the need to make the most of existing and new data sources and the technologies for dealing with them. Recommendation 3 urges improvements in understanding and interrogating data (including Big Data Sets), and Recommendation 5 champions greater agility in the provision of statistics that properly reflect the changing structure and characteristics of the economy, with emphasis on the nature of the digital economy.
The interim report highlights that the challenges that come in measuring services activity are likely to intensify as the economy evolves. New digital technologies, such as increasingly powerful and portable electronic devices, represent significant enablers for the provision of services. The report also acknowledges that technological innovation also increases the scope for mass customisation to fit specific consumer preferences, leading to greater variety across services.
The interim report also addresses the global nature of the modern digital economy, highlighting that "advances in information technology also facilitate increased international trade in services and even quite specialised services can now be supplied over the internet from anywhere in the world". This has traditionally posed a tricky problems for bodies such as the ONS, where the destination of global trade flows is not straightforward to pinpoint.
Technologically-induced disintermediation and unconventional business models are also an area highlighted in the report. The report highlights that the digital economy and the internet have made assumptions on market prices less tenable by blurring boundaries between work, domestic activity (what is sometimes referred to as 'home production') and leisure. As the report observes, this has led to "business models where it is harder for the statistician to observe both transactions and a corresponding price".
Widespread accessing of information online has led to new value being created which is not captured through the national accounts (take for example the value that is gained through accessing Wikipedia or a free online newspaper). Bean's Review reports: "This trend to the disintermediation of information-intensive service activities has a considerable way to run, with potentially significant implications for the interpretation of conventional measures of productive activity."
Finally, the report identifies that a key feature of the provision of many internet-based services is that, although the fixed costs of developing a suitable platform and apps may be high, "the marginal costs of their subsequent use is negligible". Conventional approaches to the measurement of economic activity driven by digital technologies will not necessarily be picked up.
So, what does this all mean for UK tech? Sir Charlie Bean is right to focus on addressing the very nature of how national statistics are captured and measured - particularly in understanding how new waves of value are being generated through the development and adoption of new technologies. Digital economy businesses should throw their weight behind an approach that shows how tech is transforming the economy in ways that don't yet get captured, which in turn impacts the evidence base from which politicians and officials decide major policy initiatives. Through an approach which takes into account the changing structure and characteristics of the UK economy, the UK can be a world-leader in mitigating risks and understanding how policy-making on digital can secure a positive future for UK businesses and citizens alike.