The relationship between businesses’ investment in their digital footprint and growth in the wider economy

\\ Academic research exploring the relationship between the digital presence of companies and institutions such as airlines and universities has long suggested a strong link between website quality and business performance. One feature of Foresight SI is the capability to measure, retrospectively if required, the frequency and scale and of work undertaken by companies to develop and maintain their websites. Hence we are in a position to examine a potential relationship between the rate of investment in digital properties and the performance of an individual business and perhaps even the wider economy. If successful this would create a new and highly relevant measure of economic activity in this age characterised by the significance of the digital economy. Just as interesting would be the ability to derive such measures both quickly and at scale.

In late 2020 we decided to conduct a simple test for a relationship between the pattern of investment in commercial web site maintenance of a large sample of businesses in Wales (going back more than five years) and more general economic trends. In the event we noted a sharp decline in the volume of work and the number of companies updating their web materials when compared to the background rate of work in the period between 2015 and 2020. Commencing in October 2019 we noted a significant reduction in the overall level of maintenance, much reduced below the background rate recorded since 2015. Given the nature and timing of this effect we are fairly certain that it originates in the impact of Brexit upon the economy as a whole.

Interestingly this change in behaviour can be shown to be associated, presumably for the same underlying reasons, with the beginning of the reduction in output the UK economy that occurred before the onset of Covid-19 at the end of 2019. This finding underlines the possibility that our data might be useful as a leading indicator of activity in the information economy and potentially the wiser economy as a result.

As can be seen in Figure 1 below, the contribution of information & communication activities to growth in the UK services sector dropped markedly in 2019-2020. It is also fair to say that our data follows the national trend for output in the services sector more generally as evidenced in Figure 2 below.

Index of Service Growth

Figure 1: Information and communication, which has previously contributed strength to the three-month on a year growth, has weakened significantly in February 2020. Contribution of information and communication to the Index of Services growth, seasonally adjusted, UK, February 2016 to February 2020.
Source: Office for National Statistics – Index of Service

Digital Housekeeping Index GDP

Figure 2: Digital Housekeeping Index shown against % change in UK GDP.
Source: Foresight SI