Britain’s digital economy is significantly larger than official estimates, according to National Institute for Economic and Social Research (NIESR).

The report, commissioned by Google, tracked digital footprints left by companies online to determine if they were a digital or non-digital company.

It found at least 270,000 companies form the digital economy – well above the previous government estimate of 188,000.

The report claims the areas with the highest concentration of digital companies can be found outside London, in places like Aberdeen, Middlesbrough and Manchester.

But a report out last week found that 17 of the top 20 startup areas in the country are found in London, with the area around Silicon Roundabout far outstripping everywhere else with 15,000 new companies set up in the area in the last year.

The NIESR report also found that the revenue reported by digital companies is growing 25 per cent faster than that reported by non-digital companies. The research also found that digital employers hire three more people on average than non-digital companies.

The researchers argue that Britain is using an out-dated business classification system which means hundreds of thousands of digital companies are being incorrectly identified by government and financial services and missing out on vital support as a result.

The researchers said that Growth Intelligence, a London-based sales software company, allowed them to spot digital companies working in 'traditional' sectors, such as software companies in architecture, publishing and engineering.

Tom Gatten, chief executive of Growth Intelligence, said: “This research demonstrates the need for a new way of understanding the economy, both for government and for businesses. Rather than relying on outdated codes or static lists, our new technology and internet data reveals new opportunities and insights for growth.”

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