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Ecommerce drives £100bn UK internet economy

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Online shopping is driving a £100bn internet economy in the UK that is leading the world, a new report has found.

Collectively, 31m UK adults spent £50bn on goods and travel over the web in 2009, the report from The Boston Consulting Group, commissioned by Google UK, found.

The report, The Connected Kingdom: How the internet is transforming the UK economy puts a figure for the first time on the value of the internet economy to the UK. It found that in total,

economic activities over the internet contributed £100bn to the UK economy in 2009, equivalent to 7.2% of UK GDP. Ecommerce and other internet businesses employ an estimated £250,000 and have an annual revenue of £50bn.

Of the total £100bn value of the internet economy, 60% came in the form of online shopping and in spending on access to the internet, both through internet tariffs and on devices needed to access the internet. That makes the UK, said the report, “the world’s leading country for ecommerce”.

The UK’s internet economy is expected to grow by 10% a year, reaching 10% of GP by 2015. Already the sector is larger than construction, transport or utilities.

Overseas expansion is an important part of this growing industry, the report found. The UK is a net exporter of ecommerce goods and services, exporting £2.80 for every £1 imported. In the offline economy, exports account for 90p for every £1 imported.

The research also found that nearly a third of internet users (31%) have accessed the internet on their mobile handsets, up from 23% in 2009, and that more than 19m households have an internet connection.

Paul Zwillenberg, partner with BCG in London, said, “The Internet is pervasive in the U.K. economy today, more so than in most advanced countries. Whether they are driving international expansion, improving their interactions with customers or the efficiency of their supply chains, UK companies are increasingly embracing the Internet’s potential. Several industries – including media, travel, insurance, and fashion – are being transformed by it.”

Matt Brittin, managing director for Google in the UK and Ireland, said, “We all know how the Internet has changed the way people access information and communicate. Now for the first time we can see how its adoption by British business has become a major contributor to the UK’s GDP, and that the Internet is a central pillar of the UK’s economy. The sector has come of age, and with great prospects for further growth the UK internet economy, will be vital to the UK’s future prosperity.”

Andy Houstoun, global head of marketing for ecommerce platform provider, Venda, said the report showed that retailers who are not focusing on a multi-channel approach will very quickly be left behind in a competitive, post-recession market.

He said: “The boom in ecommerce also shows that there are no single channel consumers anymore; it is about enabling the customer to transact wherever and whenever they want to. Ecommerce is now a highly-valuable channel as a stand alone and integrated into other channels, like mcommerce. Mcommerce was unknown 12 months ago but analysis carried out by Venda in June showed that 1-6 per cent of visits come from a mobile device. In the last quarter this has risen 150 per cent. Retailers now need to focus on a multi-channel approach, maximising the potential of both the online and mobile channels to better service customers and ultimately increase profits.”

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