Software investment to raise UK GDP

UK software investment has provided chancellor Gordon Brown a much needed additional boost in his attempt to raise the nation’s productivity.

UK software investment has provided chancellor Gordon Brown a much needed additional boost in his attempt to raise the nation’s productivity.

Today’s Financial Times reports that government statisticians have admitted they had seriously understated the contribution of software investment in the overall productivity figures.

As a result, revisions in the way business investment in software is measured will instantly boost figures for economic output, business investment, and overall prosperity, reports the FT.

The changes will raise future years’ gross domestic product (GDP) by 1% - more than half the level of economic growth last year. The change will also revise UK annual growth rates upwards by almost 0.1% for all years going back to 1992.

The Office for National Statistics (ONS) said the value of software developed within companies was five times higher than had been first thought.

The ONS said its estimate for such investment in 2003 was likely to rise from £2.5bn to £13bn.

ONS officials told the Financial Times that estimates for software investment had been based on outdated assumptions stemming from a Department of Trade and Industry survey of the computer services industry between 1971 and 1991.

The new method will use current employment surveys to estimate the number of people working in the software sector, along with assumptions about how much of their time is sorting out present IT problems versus developing new products.

The changes are likely to enter official statistics in summer 2007, said the FT.

The results will put the UK's total software investment on a par with other countries and show that UK in-house software development as a share of GDP is higher than in the US.

IT industry association Intellect said the Treasury should now give the sector more prominence in its deliberations.

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