If the UK is serious about the digital economy, we need to stay in the EU

by Callum Anderson

Just in my life time, the way we communicate both with our friends and family, as well as, perhaps more significantly, in the work place, has changed dramatically. Out has gone the fax machine, and at times the telephone, and in has come the internet, alongside email, Skype and numerous other applications.

Similarly, the way we hold data has changed. According to the European Commissioner for the Digital Agenda, Neelie Kroes, 90 per cent of our existing data has been produced during the last two years. In two days in 2013 the world produced as much data as in the year 2003.

The greatest challenge for governments in the twenty-first century will be how to utilise technology to the advantage of their citizens. Those who succeed will enable their countries to prosper, whereas those who restrict this digital revolution, or at least fail to position themselves so that they can take advantage of technological progress, will be left behind. Indeed, the governments who succeed will be successful because of their willingness to co-operate with other nations.

If the UK is to be among these successful nations, then there is no doubt that it must continue to work closely with its partners in the EU.

According to the European Commission, the digital economy is growing at seven times the rate of the rest of the economy. By implementing its Digital Agenda, the EU would raise its GDP by 5 per cent, equal to £1,200 for each EU citizen, and create 4 million jobs by 2020. This provides a compelling reason why Britain must retain its position at the heart of the EU, so that it can enjoy its share of the potential benefits this sector will bring.

A study by the Vlerick Business School in Belgium found that the internet sector provides 3.4 million jobs in the EU, with the UK representing 292,000 of this, the highest of any individual EU country. The result is that this comparatively new sector contributes €119.8 billion to the EU economy, about 1 per cent of EU GDP.

Yet the Vlerick Business School also stated that employment created by the digital economy in the EU has not yet unleashed its full potential. A likely explanation for this is the significant importation of digital goods and services from the USA.

Indeed, the importance of the internet sector is clear. It has contributed as much as 33 per cent towards economic growth over the past 15 years in the UK, whilst the internet has been found to directly contribute between 1.7 per cent and 6.3 per cent of GDP.

However there are other segments of it that can contribute substantially to economic growth.  For example, the EU’s digital advertising industry directly employs almost 80,000 people, which corresponds to approximately 5.9 per cent of the total internet sector employment.

Nowhere benefits more from the internet sector more than London. A report by the Greater London Authority found that the UK attracts one third of Foreign Direct Investments in Europe within the software industry. Indeed, private investment and venture capitalists invested £453 million in 60 technology companies in London during 2010 making it the most attractive region in the UK for private investment.

It would simply be economically reckless to pull out of the EU, when so many high skilled jobs have found themselves a home here in the UK. Indeed, a Labour government should do everything in its power to not only keep the jobs already here, but ensure that the UK can attract more companies to base themselves all over the country, not just in the capital.

Furthermore, the European Roundtable of Industrialists (ERT) has stated that internet connectivity affects four of the largest sectors of the economy – health, education, transportation and electricity – which, on average, comprise nearly 25 per cent of GDP in OECD countries.

Increased efficiency for public infrastructure, such as power grids, supports all sectors of the economy by lowering investment and operating costs. Likewise, increasing access to super fast broadband would enable these, and many other sectors of the economy to have positive impacts on growth, which would not only allow the UK government to reduce the budget deficit, but also free up money to spend in other areas.

Clearly there is more besides the digital agenda, that the EU can and must do. For instance, it must be more aggressive in pushing forward towards a telecommunications single market. Without this, we are far less likely to see market-driven consolidations, which will in turn lead to EU firms being outperformed by rivals from the United States, Japan and China.

As I discussed recently, the economic arguments for Britain retaining its EU membership is clear: the jobs, trade and investment that it facilitated by being inside the single market is emphasised by the digital sector. It is clear that this rapidly developing sector represents an exciting opportunity for Britain to create even more private sector jobs for its citizens, raising economic growth and income in the process over the next decade. Let’s not waste it.

Callum Anderson works at a national charity

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2 Responses to “If the UK is serious about the digital economy, we need to stay in the EU”

  1. Ex Labour says:

    Unfortunately this blog is based on the premise that leaving the EU would lead to some sort of economic disaster. Many economists and business people disagree with this proposition. Our businesses are continuously hamstrung by rules and regulations form the EU, which most other nations with any sense disregard. Would the French not want to sell us anymore wine, cheese, cars etc ? Similary would Mercedes or BMW say “screw you we’re off” ? NO of course not, it is not in the company or national interest. The EU has trade agreements with many countries and other trading blocks.

    Have you asked yourself the question of why the major investment is going into London ? I’ll give you a clue when answering – its not Europe.

    You say that Labour should continue to encourage this investment in the UK. Have you not been listening to your leader ? His continuous attacks on the businesses of the UK and those overseas companies who have invested here is terrible. He was denounced at the recent Davos conference by international business leaders as being anti business. Would they continue to invest in a UK led by Siliband ?

    We can precis the blog simply as ‘EU instituations say EU is great’. Well I never !

  2. Fred says:

    Same fisking as before, only with bells on. Junior get a life.

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