e-Economy
ICT investment outpaces total investment
Investment: ICT growth relative to the economy, UK
Business investment in information and communication technology (ICT) goods and services more than doubled in the UK between 1992 and 2004, outpacing growth in total investment. Investment in ICT grew by 165 per cent between 1992 and its peak in 2000, and by 117 per cent between 1992 and 2004. Growth in total investment rose steadily by 101 per cent over the same period.
Although growth in ICT investment has been high, investment in ICT is much smaller than the level of investment in other assets such as buildings and vehicles. In 2004 ICT investment accounted for 14 per cent of total UK investment, compared with 13 per cent in 1992.
ICT investment: by product, UK
ICT investment levels peaked at £34.9 billion in 2000, but by 2004 they had fallen to £28.6 billion – this was mirrored in other parts of the world, including the US. In the UK this decline was mainly in investment in office machinery and computers, and other ICT. Software investment, which is included under telecommunications and computer services, has flattened since 2000, dipping slightly in 2003 before rising in 2004.
There are two possible explanations for the high levels of investment in the run up to 2000 and the subsequent decline. First there was the 'dot-com' bubble in the late 1990s – a period when investing in Internet companies and technologies was particularly attractive. Once Internet companies were deemed to be overvalued, the bubble burst. This, combined with a global slowdown in economic growth at the beginning of the century, delayed firms' decisions to invest. Second was the fear that the 'Millennium Bug' would cause a large proportion of computers to malfunction at midnight on 31 December 1999. To protect against this, companies invested heavily in hardware and software in the run up to the Millennium, possibly reducing the need for further investment in later years.
Source: United Kingdom Input-Output Analyses, Office for National Statistics
Notes:
Telecommunications and computer services include electronic instruments and software. The Office for National Statistics (ONS) estimates for software investment will be revised upwards in National Accounts during 2007, to account for improved methods for estimating software written by employees outside of the software industry. These changes will accelerate the growth of software investment estimated for the UK economy. Details of the new methodology are shown in Chesson A and Chamberlin G (2006) 'Surveys-based measures of software investment in the UK', Economic Trends No. 627. See related link for details.
The 'Millennium Bug' was the risk that when the century changed, dates on computers may revert to 1900 instead of rolling on to 2000. It was also feared that some embedded systems might fail, therefore affecting utilities and other crucial infrastructure.
printer-friendly
Focus on the Digital Age home