ICT sector - value added, employment and R&D
Data extracted in March 2021.
Planned article update: March 2022.
In 2018, value added by the EU’s ICT sector was equivalent to nearly 3.7 % of GDP.
Between 2013 and 2018, value added by ICT services in the EU grew each year and increased by almost 27 %, while valued added by ICT manufacturing increased by 31%.
In 2018, the largest ICT services subsector in the EU, 'Computer programming, consultancy and related activities', employed 10 times more persons than the largest ICT manufacturing subsector, 'Electronic components and boards'.
Development of value added for the ICT sector, EU, 2013 - 2018
Developments in the information and communication technology (ICT) sector have led to significant changes in the methods of production and patterns of employment across the European Union (EU). Indeed, most economic commentators would agree that ICT plays a considerable role in determining the competitiveness of knowledge and information-based economies. This article provides an overview of economic developments within the EU’s ICT sector; the primary sources of information that are used for this article include structural business statistics (SBS), national accounts and research and development (R & D) statistics.
The size of the ICT sector as measured by value added
The total value added of the EU’s ICT sector was over EUR 479 billion in 2018; this estimate is based on summing the latest data available for ICT manufacturing and ICT services (individually) across each of the EU Member States. To give some context to this figure, the ICT sector was nearly equivalent to 3.7 % of the EU’s gross domestic product (GDP) in 2018 (see Figure 1; again, this estimate is based on available information for a limited number of EU Member States — only those for which a complete time series was available for 2013-2018). ICT services accounted for the vast majority of ICT activity, as they were more than 12 times as large as ICT manufacturing when measured in value added terms. The ratio of the value added in ICT manufacturing relative to GDP remained stable between 2013 and 2018 with the highest value recorded in 2015 and 2018. By contrast, with the exception of 2013 and 2014, the ratio of value added from ICT services to GDP grew throughout the period from 2013 to 2018.
Among the EU Member States for which data are available (see Figure 2), the relative weight of the ICT sector — as measured by the ratio of its value added relative to GDP — was highest in Malta, with ICT services and ICT manufacturing generating a value added equivalent to 7.1 % of GDP. In 2018, the ratio of ICT value added to GDP was also relatively high in Luxembourg with 6.0 % only for ICT services. Cyprus and Bulgaria both following with 5.4 %, showed a different pattern: only information on ICT services was available in Cyprus, whereas Bulgaria presented data for both ICT services and ICT manufacturing. By contrast, value added by the ICT sector was equivalent to less than 3.0 % of GDP in Spain, Italy, Lithuania and Portugal (for Portugal available information only for ICT services). Greece recorded the lowest ratio with 2.1 %.
Figure 3 shows the development of value added for the EU’s ICT manufacturing and ICT services sectors during the period 2013-2018; this index is based on information expressed in current prices and for which coverage is limited to 14 of the EU Member States. For this group of Member States, the value added for ICT services increased every year during the period 2013-2018, rising overall by 26.8 %. During the same period, the value added for ICT manufacturing grew even stronger by 31.0 %.
An analysis of ICT manufacturing in the EU (see Figure 4) reveals that it was dominated in 2018 by the manufacture of electronic components and boards, which provided more than half (52.6 %) of the total value added by ICT manufacturing. The second largest share was recorded for the 'Manufacture of communication equipment', which accounted for almost one third (31.5 %) of the value added by ICT manufacturing. The 'Manufacture of computers and peripheral equipment' (8.7 %) and the 'Manufacture of consumer electronics' (7.0 %) followed, while the smallest share was presented by the 'Manufacture of magnetic and optical media' with 0.1 %.
As noted above, ICT services were more than 12 times as large as ICT manufacturing in 2018. Across the EU (the information presented excludes Estonia, Ireland, Luxembourg, Malta and Slovakia), 'Computer programming, consultancy and related activities accounted for almost half (49.4 %) of the value added that was generated within ICT services in 2018. ICT services were less concentrated than ICT manufacturing, with 'Telecommunications' accounting for less than one third (29.6 %) of the value added by ICT services. As such, the two largest activities together accounted for about four fifths of the value added by ICT services, while each of the remaining activities had single-digit shares (see Figure 5).
The three largest EU economies as measured by their share in EU GDP — Germany, France and Italy — were the three biggest contributors, in absolute terms, to total value added in the EU’s ICT sector. An analysis based on the relative contribution of the ICT sector to the non-financial business economy of each EU Member State (see Figure 6) provides a different picture. In 2018, the ICT sector accounted for more than one tenth of the total value added generated within the non-financial business economy in Bulgaria (10.4 %). Shares above 9.0 % were also recorded for Hungary and Finland (both with 9.5 %), together with Romania and Sweden (both with 9.3 %). At the other end of the range, the ICT sector contributed with a 6.0 % share to the value added generated within the Austrian non-financial business economy in 2018, while among the EFTA countries shown in Figure 6 an even lower share was reported in Norway (5.5 %).
Figure 6 confirms that 'Computer programming, consultancy and related activities' together with 'Telecommunications' were the two largest ICT activities in each of the EU Member States for which data are available. In 2018, 'Computer programming, consultancy and related activities' accounted for more than 4.0 % of the total value added generated within the non-financial business economies of Bulgaria, Sweden, Finland and Romania. The relative significance of 'Telecommunications' was highest in Greece, where it contributed to 4.4 % of the total value added generated within the non-financial business economy. It is interesting to note that the high share of non-financial business economy value added that was generated within the Hungarian ICT sector could, at least in part, be attributed to a specialisation in ICT manufacturing, which accounted for 2.2 % of the total value added in the Hungarian non-financial business economy. Furthermore, this pattern was repeated for all three of the principal ICT manufacturing subsectors (as shown in Figure 6), with Hungary systematically recording the highest rate of relative specialisation.
The EU’s ICT sector employed more than 5.6 million people in 2018; this estimate is based on summing the latest data available for each of the EU Member States and includes previous reference periods for some countries.
In keeping with the information for value added, there was a continuous increase in the number of persons employed within ICT services across the EU during the period 2013-2018 (see Figure 7 for data coverage); by 2018, this workforce had grown by 26.0 % overall when compared with 2013. By contrast, the number of persons employed in ICT manufacturing fell after one year, followed by three years of relative stability, until 2017. In 2018, however, a two-digit annual growth rate was registered, leading to an overall increase of 8.7 % in the number of persons employed in the EU’s ICT manufacturing workforce between 2013 and 2018.
Aggregating the data for the EU Member States for which a complete set of data is available (see Figure 8 for more information on the coverage), the ICT sector provided work to 4.6 % of the non-financial business economy workforce in 2018. In 2018, the ICT sector accounted for 7.1 % of the non-financial business economy workforce in Sweden and for 6.6 % in Finland, while shares within the range of 5.0 % to 6.0 % were recorded in Hungary, Denmark, Latvia, Romania and Bulgaria. By contrast, the Greek ICT sector made the smallest contribution to its non-financial business economy workforce, with 2.6 %.
Figure 8 shows that 'Computer programming, consultancy and related activities' was the principal employer within the EU’s ICT sector in 2018, accounting for more than half of the sector workforce. 'Computer programming, consultancy and related activities' had the largest share of the ICT workforce in all of the EU Member States for which data are available in 2018. The relative share of 'Computer programming, consultancy and related activities' in the total ICT workforce reached more than three out of every five in Belgium (65 %), Sweden (62.6 %) and Finland (60.6 %). This activity also accounted for half and more of the ICT workforce in further eight Member States: Spain, Bulgaria, Germany, Denmark, Poland, Lithuania, Czechia, and Slovakia; Norway and Switzerland followed the same pattern.
In Hungary, ICT manufacturing had a relatively high share of non-financial business economy employment. In 2018, some 0.6 % of the non-financial business economy workforce in Hungary was employed in the 'Manufacture of electronic components and boards' and a similar share (0.5 %) was recorded for the 'Manufacture of communication equipment', while 0.3 % of the Hungarian non-financial business economy workforce was employed in the 'Manufacture of computers and peripheral equipment'; with the exception of the 'Manufacture of communication equipment' in Finland (0.6 %;), these were the highest shares of ICT manufacturing recorded in any of the EU Member States for which data are available. Furthermore, Finland observed a marked reduction in the number of persons employed in the 'Manufacturing communication equipment' over the period 2013- 2018. Their number fell from more than 15 000 persons in 2013 to over 9 000 by 2018; in relative terms, this equates to a fall from 1.02 % of the Finnish non-financial business economy workforce in 2013 to 0.6 % in 2018.
Apparent labour productivity
Apparent labour productivity in the EU’s ICT sector was estimated to be almost EUR 79 400 per person employed in 2018 (see Figure 9 for more information on the coverage). Among the EU Member States, this ratio ranged from a high of EUR 119 300 per person employed in Belgium and upwards of EUR 100 000 in Denmark, Austria and France, down to less than EUR 35 000 in Latvia, Romania and Bulgaria.
There are considerable differences in productivity levels between the individual EU Member States. Many of these may be of a structural nature and therefore relevant to any if not all activities, rather than being specific to the ICT sector. It can therefore be more revealing to analyse apparent labour productivity based on a ratio comparing this indicator for the ICT sector with an average value for the whole of the non-financial business economy. In 2018, the apparent labour productivity of the EU’s ICT sector (see Figure 10 for more information on the coverage) was 61.8 % higher than that recorded for the non-financial business economy as a whole.
This pattern was repeated in each of the EU Member States for which data are available, with apparent labour productivity consistently at a higher level in the ICT sector than for the non-financial business economy. In 2018, apparent labour productivity for the ICT sector in Greece was almost three times as high as the average recorded for the non-financial business economy and in Bulgaria it was more than twice as high. At the other end of the range, the ICT sector recorded a level of apparent labour productivity that was less than 30 % higher than the non-financial business economy average in Sweden and Denmark. A lower ratio was recorded in Norway, but still 5.2 % higher than the non-financial business economy average.
A comparison between 2013 and 2018 reveals that the gap between apparent labour productivity ratios for the ICT sector and for the whole of the non-financial business economy was generally narrowing. There were only four exceptions to this rule among the EU Member States, namely, Greece (with almost 40 percentage points increase), France, Austria and Finland where the ratio increased (there are breaks in series in all countries over the period, and reference year data for France is 2014). This latter pattern is also revealed in Norway, the only EFTA country for which data are available over the period of reference.
Figure 11 provides a different perspective by detailing average personnel costs in the ICT sector compared with those for the whole of the non-financial business economy. In 2018, the average costs of a person working in the EU’s ICT sector (see Figure 11 for more information on the country coverage) was 57.3 % higher than the average for someone working in the EU’s non-financial business economy.
This pattern was repeated in each of the EU Member States. In 2018, average personnel costs in the ICT sectors of Bulgaria, Greece and Romania were at least twice as high as in their respective non-financial business economies. By contrast, the difference was much lower in Slovenia and Italy where average personnel costs per employee for people working in the ICT sector were no more than 40 % higher than for the whole of the non-financial business economy.
A comparison between 2013 and 2018 reveals that the gap between average personnel costs for the EU’s ICT sector and the whole of the EU’s non-financial business economy was closing somewhat. The countries to report a closing of this gap at the fastest pace were Slovakia (15.5 %, data for 2014 instead of 2013) and Croatia (12.5 %). By contrast, the gap in average personnel costs between the ICT sector and the non-financial business economy average widened in six of the 19 EU Member States for which data are available; the gap widened most rapidly in Greece, Poland (data for 2014 instead of 2013) and Estonia.
Research and development (R & D)
The main contributors to the total value of business enterprise R & D expenditure (BERD) in the EU’s ICT sector were the three largest contributors to EU GDP — namely, Germany, France and Italy. A relatively large contribution per inhabitant was also made by Finland; although only partial information is available, it is also likely that Sweden and Ireland also made considerable contributions.
Figure 12 provides an alternative analysis, which takes account of the differences in country sizes; it presents the ICT sector’s share of business enterprise R & D expenditure. In 2018, this ratio peaked in Cyprus (although data on ICT manufacturing are not available) and Estonia, where the ICT sector accounted for more than half (52.5 % both) of all business enterprise expenditure on R & D. The second highest proportions were recorded in Malta (51.8 %), followed by Bulgaria (33.7 %; ICT services only) and Croatia (27.9 %).
In approximately one third of the EU Member States for which data are available (see Figure 12 for more information on the country coverage), the ICT sector accounted for less than 10 % of business enterprise expenditure on R & D. With the exception of Germany and Denmark , these lower shares may be explained, at least in part, by missing information, as was the case for Austria, Ireland and Poland where no data for ICT services were presented.
A similar pattern is presented in Figure 13, which shows the share of the ICT sector in total R & D personnel. In 2018, this proportion peaked at 50.3 % in Malta, while high shares were also recorded in Estonia (44.2 %) and Cyprus (40.0 %, where only data for ICT services was available). The share of the ICT sector in R & D personnel was within the range of 40 % to 20 % in Ireland, Croatia, Finland (data only for ICT services), France, Bulgaria (data only for ICT services) and Czechia. The remaining EU Member States, for which data are available, present shares below 20 %, although these relatively low shares may reflect missing information, as was the case for Lithuania and Slovenia (no data for ICT manufacturing) and Austria (no data for ICT services).
Source data for tables and graphs
The ICT sector is delineated according to a definition first published by the OECD in 2006; see the OECD Guide to Measuring the Information Society (2011) for more details. It provides, among others, a classification of those activities that produce ICT goods and services, following the statistical classification of economic activities, NACE Rev. 2. At an aggregated level, information on the ICT sector may be analysed for the total ICT sector, ICT manufacturing and ICT services; definitions for these sectors are provided below.
The primary data sources that are used in this article include structural business statistics (SBS), national accounts and research and development (R & D) statistics. As ICT sector data are derived from these sources, the statistical concepts and definitions employed for the ICT sector are based on these primary sources of information. This approach has the virtue of ensuring cost-efficient and high-quality data collection. However, it also results in some limitations, such as restrictions when considering the introduction/design of new indicators or a lack of control over the timing of new data releases. For the most detailed methodological information and metadata, users should refer to the information available for the three primary sources of data.
Structural business statistics (SBS)
Structural business statistics (SBS) describe the structure, activity, competitiveness and performance of economic activities within the business economy; these statistics are available at a much more detailed level than national accounts, covering several hundred different economic activities. The data concerning structural business statistics are provided in accordance with Commission Regulation (EU) No 446/2014 amending Regulation (EC) No 295/2008.
SBS cover the business economy, which includes industry and construction, trade and services. Because of their specific nature and the limited availability of most types of standard business statistics, financial services are included in SBS but treated separately. As such, the principal aggregate for analysis is the non-financial business economy. SBS do not cover agriculture, forestry and fishing, nor public administration and (to a large extent) non-market services such as education or health. To date, this is the only primary source that provides information pertaining to the economic activity of the aggregated ICT sector, ICT manufacturing and ICT services.
National accounts provide statistics on the structure and development of economies. The European System of national and regional Accounts (ESA 2010) is the latest internationally compatible accounting framework used within the EU. It provides a systematic and detailed description of the economy; its legal basis is Regulation (EU) No 549/2013 on the European system of national and regional accounts in the European Union.
National accounts describe and analyse the economic interactions (transactions) within an economy; they may be used to observe economic activity within the domestic territory. The most well-known indicator from national accounts is gross domestic product (GDP), which provides a measure of the overall size of a country’s economy, measured by the sum of the gross value added of all resident institutional units engaged in production, plus any taxes on products and minus any subsidies on products.
Research and development (R & D)
The main concepts and definitions used in research and development (R & D) statistics are presented in the Frascati Manual; it provides guidelines for collecting and reporting data on R & D. The manual also provides a definition of R & D which comprises creative and systematic work undertaken in order to increase the stock of knowledge — including knowledge of humankind, culture and society — and to devise new applications of available knowledge.
From 2012 onwards, the legal basis for the collection of R & D statistics is provided for by Commission Implementing Regulation (EU) No 995/2012 laying down detailed rules for the implementation of Decision No 1608/2003/EC concerning the production and development of Community statistics on science and technology.
The business enterprise sector includes: all firms, organisations and institutions whose primary activity is the market production of goods or services (other than higher education) for sale to the general public at an economically significant price, and the private non-profit institutes mainly serving them. The core of the sector is made up of private enterprises (corporations or quasi-corporations) whether or not they distribute profit. Among these enterprises may be found some firms for which R & D is the main activity (commercial R & D institutes and laboratories). Any private enterprises producing higher education services should be included in the higher education sector. In addition, this sector includes public enterprises (public corporations and quasi-corporations owned by government units) mainly engaged in market production and sale of the kind of goods and services which are often produced by private enterprises, although, as a matter of policy, the price set for these may be less than the full cost of production. This sector also includes non-profit institutions (NPIs) who are market producers of goods and services other than higher education.
Definitions employed to monitor indicators for the ICT sector
Total ICT sector, ICT manufacturing and ICT services are based on an OECD definition (2006). Using the statistical classification of economic activities, NACE Rev. 2, Eurostat has applied this definition to data from reference year 2008 onwards; prior to this date, an alternative definition was employed (based on NACE Rev 1.1). As a result of this break in series, users are advised not to combine the two different data collections.
The ICT sector is defined in terms of the following NACE Rev. 2 activities:
- Total ICT sector: NACE (Groups and Divisions) 26.1-26.4 + 26.8 + 46.5 + 58.2 + 61 + 62 + 63.1 + 95.1
- ICT manufacturing: NACE Groups 26.1-26.4 + 26.8
- Manufacture of electronic components and boards: NACE Group 26.1
- Manufacture of computers and peripheral equipment: NACE Group 26.2
- Manufacture of communication equipment: NACE Group 26.3
- Manufacture of consumer electronics: NACE Group 26.4
- Manufacture of magnetic and optical media: NACE Group 26.8
- ICT services: NACE (Groups and Divisions) 46.5 + 58.2 + 61 + 62 + 63.1 + 95.1
- Wholesale of information and communication equipment: NACE Group 46.5
- Software publishing: NACE Group 58.2
- Telecommunications: NACE Division 61
- Computer programming, consultancy and related activities: NACE Division 62
- Data processing, hosting and related activities; web portals: NACE Group 63.1
- Repair of computers and communication equipment: NACE Group 95.1
- ICT manufacturing: NACE Groups 26.1-26.4 + 26.8
Gross value added at factor costs: can be calculated either as the gross operating surplus (a measure of profit) plus personnel costs, or alternatively, from turnover, plus capitalised production, plus other operating income, plus or minus the changes in stocks, minus the purchases of goods and services, minus other taxes on products which are linked to turnover but not deductible, minus the duties and taxes linked to production.
Number of persons employed: is defined as the total number of persons who work in the observation unit (inclusive of working proprietors, partners working regularly in the unit and unpaid family workers), as well as persons who work outside the unit who belong to it and are paid by it (e.g. sales representatives, delivery personnel, repair and maintenance teams). It excludes manpower supplied to the unit by other enterprises, persons carrying out repair and maintenance work in the enquiry unit on behalf of other enterprises, as well as those on compulsory military service.
Apparent labour productivity: is defined as the value added at factor costs divided by the number of persons employed. This ratio measures how efficiently labour input is combined with other factors of production and how it is used in the production process.
Average personnel costs: are defined as total personnel costs divided by the number of employees (persons who work for an employer on the basis of a contract of employment and receives compensation in the form of wages, salaries, fees, gratuities, piecework pay or remuneration in kind). In turn, total personnel costs are defined as the total remuneration, in cash or in kind, payable by an employer to an employee (regular and temporary employees, as well as home-workers) in return for work done by the latter during the reference period. Personnel costs are made up of wages, salaries and employers' social security costs. They include taxes and employees' social security contributions retained by the employer, as well as the employer's compulsory and voluntary social contributions.
Expenditures on Research and Development (R & D) for a statistical unit can be measured in three complementary ways: as intramural expenditures, as extramural expenditures, or by sources of funds. Nevertheless, the basic measure for R & D expenditure is the 'intramural expenditures', which are all expenditures for R & D performed within a statistical unit or sector of the economy, whatever the source of funds.
R & D personnel consists of all individual employed directly in the field of research and development (R & D), including persons providing direct services such as managers, administrators and clerical staff.
Digitalisation and automation can generate new business opportunities through the development of new production processes, new products and new markets. Indeed, the impact of ICT has generally resulted in increased productivity and efficiency, as well as in a range of possibilities for more flexible working practices.
ICT plays a strategic role in promoting growth and competitiveness across European economies. A developed ICT sector is essential for capitalising on digitalisation, keeping up with competitors in globalised markets, and establishing Europe’s technological leadership. Awareness of the importance of the ICT sector is reflected in the political guidelines of the European Commission A Europe fit for the digital age, stressing the need for Europe to lead the transition to a healthy planet together with a new digital world.
This new EU digital strategy, empowering people with a new generation of technologies, aims to make this transformation work for people and businesses. While helping to achieve its target of a climate-neutral Europe by 2050, the digital strategy is centred around two objectives:
- Shaping Europe's digital future, ensuring that the digital transition solutions will benefit everyone;
- Europe’s Digital Decade, exposing the vision and avenues for Europe’s digital transformation by 2030 symbolised by a digital compass that will translate the EU’s digital ambitions in more concrete terms.
- ICT sector (isoc_se)
- Percentage of the ICT sector in GDP (isoc_bde15ag)
- Business expenditure on R&D (BERD) in ICT sector as % of total R&D expenditure by NACE Rev. 2 activity (isoc_bde15ar2)
- R&D personnel in ICT sector as % of total R&D personnel by NACE Rev. 2 activity (isoc_ic_biper2)
- SBS - main indicators (sbs_na)
- Annual enterprise statistics for special aggregates of activities (NACE Rev. 2) (sbs_na_sca_r2)
- SBS - industry and construction (sbs_ind_co)
- Annual detailed enterprise statistics - industry and construction (sbs_na_ind)
- SBS - trade
- Annual detailed enterprise statistics - trade (sbs_na_dt)
- SBS - services
- Annual detailed enterprise statistics - services (sbs_na_serv)
- National accounts, see:
- Annual national accounts (nama10)
- Main GDP aggregates (nama_10_ma)
- GDP and main components (output, expenditure and income) (nama_10_gdp)
- Main GDP aggregates (nama_10_ma)
- ICT sector (isoc_se) (ESMS metadata file — isoc_se_esms)
- Annual national accounts (nama10) (ESMS metadata file — nama10_esms)
- Structural business statistics (sbs) (ESMS metadata file — sbs_esms)
- Statistics on research and development (rd) (ESMS metadata file — rd_esms)