Digital Reality defines the data economy as the financial and economic value created by the storage, retrieval and analysis of large volumes of high-speed business and organisational data. It calculates that, in 2012, the data economy in the UK was worth £55 billion in terms of gross value added, but this increased to £73.3 billion by 2016, a positive change of 33%.
According to the data centre provider, in 2016, the data economy represented 4.2% of the national economy and was responsible for 1.15 million direct jobs or 3.3% of the total workforce. However, it was found that this is still far below its potential, with the full potential GVA (gross value added) estimated at £125.6 billion, meaning current GVA is just 58% of the full potential. This means that the UK is missing out on up to £52 billion that data and related economic activities could be adding to the economy.
Businesses have recognised the potential, but have been unable to convince leaders.
The report's authors stated that there are three reasons for this underperformance. The first is under-investment by businesses, usually (but not always) by SMEs. This takes the form of not prioritising investment in data and analytics capabilities, failure to recognise the competitive advantages and cost-efficiencies that can be gained through analysis of operational and customer data. In some cases, businesses have recognised the potential of data and analytics, but have been unable to make a convincing enough case to leaders for financial resources.
The second reason is inadequate infrastructure. Poor telecommunications, especially 4G mobile, constrains the implementation of precision farming technologies, for example.
Skills gaps and shortages, a significant issue for many businesses, is the third reason for underperformance of the data economy, with companies of all sizes experiencing difficulty in recruiting and retaining workers with the skills needed to develop and maintain analytical systems.
Bear in mind, the data sector is one of several industries feeling the effects of a severe digital skills shortage at a national level that is expected to cause the UK to experience an annual of shortage of 150,000 skilled digital workers by 2020. This is before taking into account the possible negative effect leaving the European Union will have on recruitment by UK-based data and analytics firms.
The data economy is predicted to be worth £94.6 billion by 2025.
The report also predicts the size of the data economy from 2017 to 2025. If current trends continue with no improvement or worsening of existing constraints, the data economy will be worth £94.6 billion by 2025, and increase of £21.3 billion. The number of jobs would increase by 371,000 to 1.52 million.
However, constraints could worsen with an extreme shortage of skilled workers, and widespread failure of business users to recognise potential productivity or revenue growth opportunities offered by more extensive and efficient use of data. In this scenario, the data economy would grow by £12.6 billion to £85.9 billion. In this case, the number of jobs attributable to the data economy would increase by 333,000 to 1.48 million by 2025.
Taking a more positive hypothetical view, the constraints on growth of the data economy could be relaxed by policy initiatives put in place reduce to skills shortages and gaps, as well as widespread recognition by business users of opportunities, cost efficiencies and greater productivity offered by data and analytics. In this scenario, the data economy is expected to grow from £73.3 billion to £101.6 billion, an increase of £28.3 billion. The number of jobs would increase by 403,000 to 1.55 million.
The report lays out a set of nine actions for industry groups and individual businesses to help realise the potential of the data economy. Among them were; all businesses with more than 250 employees should appoint a CDO who reports to the CEO; sector networking groups should create programmes to raise awareness and address sector specific constraints; and SMEs should use cloud computing to analyse their own data and create productivity gains.
Government should enable the data economy to work closer to maximum capacity.
There were six actions that government could execute to enable the data economy to function at a level closer to its maximum capacity. These included: continuing to improve the curriculum and enhance the quality and relevance of teaching of maths, statistics and computer science; helping to promote the data economy to young people, especially young women; and playing a key role in making its own data open, available and sharable for others to use. (It should be noted, though, that the UK is ranked top globally for the openness of government data.)
Research for this report involved detailed economic modelling of the data economy combined with forecasting of the potential future contribution of data, as well as the large-scale review of documents and targeted consultations with stakeholders.