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UK internet economy to represent 12.4 percent of GDP by 2016

Britain is leading the world in e-commerce, according to a report by BCG

The internet contributed £121 billion to the British economy in 2010, representing 8.3 percent of GDP, making the UK the most web-dependent country in the G-20, according to a new report by The Boston Consulting Group (BCG).

According to BCG's report, "The $4.2 Trillion Opportunity: The Internet Economy in the G-20," the UK's internet economy is growing at a rate of 10.9 percent, and is expected to be contributing £225 billion to the overall economy by 2016 - more than healthcare, construction or education. This growth is significantly faster than other developed countries in the G-20, which are growing at an average rate of 8.1 percent.

In particular, the report highlights the proliferation of mobile devices, widespread use of social networks and the rise of online commerce as key factors in driving the internet economy. The share of total retail carried out online in the UK is projected to reach 23 percent by 2016, and the internet also influences an additional 11.5 percent of total retail, with consumers researching online and purchasing offline.

"This report is massively encouraging and shows that the UK Internet is leading the world in e-commerce," said Dan Cobley, Managing Director of Google UK, commenting on the report. "At a time of financial uncertainty, the UK Internet economy continues to grow at an incredible rate, creating thousands of new businesses and jobs."

The BCG report describes small and medium businesses (SMEs) as "the growth engines of the economy", with companies that use the internet for marketing, sales and interactions with customers recording revenue growth of 12 percent over the past three years, compared to only 4 percent for those who made low or no use of the Internet.

"Around the world SMEs which embrace the Internet are growing faster and adding more jobs than those that don't," said David Dean, BCG Senior Partner and co-author of the report. "By encouraging businesses to adopt the Internet, countries can improve their competitiveness and growth prospects."

However, Sean Dolan, SVP of Juniper Networks for EMEA, threw some cold water on the report, claiming that BCG had overstated the edge that the UK has over the rest of the G-20.

"It's probably only about 5 percent of the total GDP that's going through e-commerce, but it is doubling, and that's the exciting part," he said. "This digital economy is growing at 100 percent, and I don't see that stopping. It's not about people spending more time on Facebook or people sending their emails faster or surfing the internet; it's about business."

Meanwhile, the BCG report states that the big winners of the Internet economy are the consumers, with UK respondents saying they would have to be paid an average of £2,175 per year to live without Internet access. A quarter of those surveyed even said they would consider giving up sex for a year in order to maintain their broadband connection.

But technology performance company Compuware warned that the UK needs to continue increasing average internet speeds in order to maintain its leadership position.

"Only last week a study from Equation research showed that 4 out of 10 tablet users have experienced problems accessing websites," said Michael Allen, director of APM for Compuware. "It's key that everyone involved from retailers to ISPs pay close attention to this area and ensure that consumers' expectations around the experience of using the internet are met."

"The $4.2 Trillion Opportunity" report builds on three years of research conducted by BCG. The value of the Internet economy was estimated using the expenditure approach to GDP measurement, covering consumption, investment, government spending and net exports.


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