ICT sector - value added, employment and R&D
Data extracted in December 2018.
Planned article update: January 2020.
In 2016, value added by the EU’s ICT sector was equivalent to 3.75 % of GDP.
Between 2010 and 2016, value added by ICT services in the EU grew each year and increased by 18.3 %, while valued added by ICT manufacturing increased by 2.5 %.
In 2016, the largest ICT services subsector in the EU, computer programming, consultancy and related activities, was 10 times the size of the largest ICT manufacturing subsector, electronic components and boards.
Development of value added for the ICT sector, EU, 2010-2016
Developments in the information and communication technology (ICT) sector have led to significant changes to 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 just over EUR 580 billion in 2016; note this estimate is based on summing the latest data available for ICT manufacturing and ICT services (individually) across each of the EU Member States, including previous reference periods for some countries and activities. To give some context to this figure, the ICT sector was equivalent to 3.75 % of the EU’s gross domestic product (GDP) in 2016 (see Figure 1; note that this estimate is based on information for a limited number of EU Member States — only those for which a complete time series was available for 2010-2016). ICT services accounted for the vast majority of ICT activity, as they were approximately 10 times as large as ICT manufacturing when measured in value added terms.
Looking at developments between 2010 and 2016, this gap between the EU’s ICT services and ICT manufacturing initially widened, as the impact of the global financial and economic crisis continued to be felt within ICT manufacturing; the ratio of its value added relative to GDP declined at quite a fast pace in both 2011 and 2012 and remained unchanged in 2013 and 2014. By contrast, with the exception of 2013, the ratio of value added from ICT services to GDP grew throughout the period from 2010 to 2015. While there were positive developments for both ICT manufacturing and ICT services in 2015, both recorded a fall in the ratio of their value added to GDP in 2016.
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 Ireland, where ICT services alone generated value added equivalent to 9.2 % of GDP in 2016 (note this figure only concerns ICT services, not ICT manufacturing). In 2016, the ratio of ICT value added to GDP was also relatively high in Luxembourg (6.1 %; also excluding ICT manufacturing), Malta (6.0 %), the United Kingdom (5.2 %) and Sweden (5.1 %; 2014 data). By contrast, the value added by the ICT sector was equivalent to less than 3.0 % of GDP in Italy, Spain (2014 data), Portugal (information is only available for ICT services), Poland, Lithuania and Greece, where the lowest ratio was recorded, at 1.8 %.
Figure 3 shows the development of value added for the EU’s ICT manufacturing and ICT services sectors during the period 2010-2016; note that this index is based on information that is in current price terms and for which coverage is restricted 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 2010-2015, rising overall by 18.3 %. By contrast, there was a less regular development for ICT manufacturing, with value added falling in 2011 and again — more strongly — in 2012. However, the value added by ICT manufacturing rebounded and by 2016 had returned to just above its level of 2010. It is interesting to note that value added for ICT manufacturing in these Member States grew at a faster pace than value added for ICT services in both 2014 and 2015; however, this pattern was reversed in 2016, as the annual growth rate of value added for ICT services (2.9 %) was somewhat higher than that for ICT manufacturing (2.0 %).
An analysis of ICT manufacturing in the EU-28 (see Figure 4) reveals that it was dominated in 2016 by the manufacture of electronic components and boards, which provided more than half (55.5 %) of the total added value by ICT manufacturing. The next largest share was recorded for the manufacture of communication equipment, which accounted for just under one quarter (22.9 %) of the value added by ICT manufacturing. The manufacture of computers and peripheral equipment (13.9 %; 2014 data) and the manufacture of consumer electronics (7.6 %) followed, while the smallest activity was the manufacture of magnetic and optical media (0.1 %).
As noted above, ICT services were approximately 10 times as large as ICT manufacturing. Across the EU (note that the information presented excludes Ireland, Luxembourg and Malta and includes 2015 data for Estonia, Slovenia and Slovakia), computer programming, consultancy and related activities accounted for almost half (49.2 %) of the value added that was generated within ICT services in 2016. ICT services were even more concentrated than ICT manufacturing, as telecommunications accounted for almost one third (31.2 %) of the value added by ICT services. As such, the two largest activities together accounted for more than four fifths of the value added by ICT services, while each of the remaining activities had single-digit shares (see Figure 5).
As may be expected, the five largest EU economies as measured by their share in EU-28 GDP — Germany, the United Kingdom, France, Italy and Spain — were the five 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 Hungary, the ICT sector accounted for almost one tenth (9.8 %) of the total value added generated within the non-financial business economy in 2016, while shares of at least 9.0 % were also recorded for the United Kingdom, Finland (2015 data) and Romania. At the other end of the range, the ICT sector contributed a 5.8 % share of the added value generated within the Austrian non-financial business economy in 2016, while among the two EFTA countries shown in Figure 6 an even lower share was reported in Norway (5.5 % in 2015).
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 2016, 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 Finland (2015 data), the United Kingdom and Bulgaria (2015 data). The relative importance of telecommunications was highest in Greece, where it accounted for 4.3 % 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 1.8 % 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 rates of relative specialisation.
The EU’s ICT sector employed approximately 6.6 million people in 2016; note that 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 2010-2016 (see Figure 7 for data coverage); by 2016, this workforce had grown by 23.0 % overall when compared with 2010. By contrast, the number of persons employed in ICT manufacturing fell for four consecutive years (2010-2014) followed by two years of relative stability; between 2010 and 2016 there was an overall reduction of 13.6 % in the number of persons employed in the EU’s ICT manufacturing workforce.
Aggregating the data for the EU Member States for which a complete set of data are available (see Figure 8 for more information on the coverage), the ICT sector provided work to 4.4 % of the non-financial business economy workforce in 2016. In 2016, the ICT sector accounted for 6.4 % of the non-financial business economy workforce in Finland (2015 data), while shares within the range of 5.0 % to 6.0 % were recorded in 2016 in Hungary, France (2015 data) and Latvia. By contrast, the Greek ICT sector made the smallest contribution to its non-financial business economy workforce, at 2.7 %.
Figure 8 shows that computer programming, consultancy and related activities was the principal employer within the EU’s ICT sector in 2016, accounting for more than half of the ICT workforce. Computer programming, consultancy and related activities had the largest share of the ICT workforce in all but one of the EU Member States for which data are available in 2016; Greece was the only exception, with a slightly higher number of persons employed in telecommunications. The relative share of computer programming, consultancy and related activities in the total ICT workforce reached almost three out of every five (59.8 %) in Germany, while computer programming, consultancy and related activities accounted for more than half of the ICT workforce in seven additional Member States: Belgium (2015 data), Spain (2014 data), Finland (2015 data), Slovenia, Bulgaria (2015 data), Poland and Lithuania; this was also the case in Norway.
In Hungary, ICT manufacturing had a relatively high share of non-financial business economy employment. In 2016, some 0.5 % of the non-financial business economy workforce in Hungary was employed in the manufacture of electronic components and boards and the same 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 (0.9 %; 2015 data) these were the highest shares recorded in any of the EU Member States for which data are available. Note there was a marked reduction in the number of persons employed manufacturing communication equipment in Finland. Their number fell from almost 30 000 persons in 2008 to just over 12 000 by 2016; in relative terms this equated to a fall from 2.1 % of the non-financial business economy workforce in 2008 to 0.9 % in 2015 and 0.8 % in 2016.
Apparent labour productivity
Apparent labour productivity in the EU’s ICT sector was estimated to be EUR 83 800 per person employed in 2016 (see Figure 9 for more information on the coverage). Among the EU Member States, this ratio ranged from a high of EUR 118 400 per persons employed in Belgium and upwards of EUR 100 000 in the United Kingdom and Sweden (2014 data), down to less than EUR 30 000 in 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 2016, the apparent labour productivity of the EU’s ICT sector (see Figure 10 for more information on the coverage) was 70.0 % 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 2016, apparent labour productivity for the ICT sector in Greece and Bulgaria was more than twice as high as the average recorded for the non-financial business economy. At the other end of the range, the ICT sector recorded a level of apparent labour productivity that was 45 % to 50 % higher than the non-financial business economy average in Estonia, Slovenia, Finland (2015 data), Austria and Sweden (2014 data); an even lower ratio was recorded in Norway (18.9 % higher than the non-financial business economy average; 2015 data).
A comparison between 2010 and 2016 reveals that the gap between apparent labour productivity ratios for the ICT sector and the whole of the non-financial business economy were generally narrowing. There were only two exceptions to this rule among the EU Member States, namely, Greece and Sweden where the ratio increased marginally (note there is a break in series for the former, while the most recent data for Sweden relate to 2014); there was a similarly small fall in the ratio observed in Austria. By contrast, both of the EFTA countries shown in Figure 10 recorded an increase in this ratio (both 2010-2015; note there is a break in series for Switzerland) as the apparent labour productivity of the ICT sector in these two countries rose at a faster rate than the gains recorded for the whole of the non-financial business economy.
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 2016, the average cost of an employee working in the EU’s ICT sector (see Figure 11 for more information on the coverage) was 58.3 % 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, which is perhaps unsurprising given some of the highly skilled jobs that are carried out by the workforce in the ICT sector, coupled with skills shortages in some areas (which may lead to salaries being driven upwards). Furthermore, the ICT sector is often characterised by a relatively high share of foreign-controlled and multinational enterprises and these tend to pay higher wages and salaries than domestic competitors.
In 2016, average personnel costs in the ICT sectors of Bulgaria, Romania and Greece were at least twice as high as in their respective non-financial business economies. By contrast, the difference was much lower in Sweden (2014 data), France, Slovenia, Italy and Malta, where average personnel costs per employee for people working in the ICT sector were no more than 50 % higher than for the whole of the non-financial business economy.
A comparison between 2010 and 2016 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, although this was at least in part due to a relatively rapid reduction in the premium paid to employees in the United Kingdom‘s ICT sector (note there is a break in series). The other countries to report a closing of this gap at a faster pace than the EU average were Malta, Latvia, Slovenia, Italy and Belgium. By contrast, the gap in average personnel costs between the ICT sector and the non-financial business economy average widened in a majority (13) of the 22 EU Member States for which data are available; the gap widened most rapidly in Greece (note there is a break in series), Bulgaria and Romania.
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 four largest contributors to EU-28 GDP — namely, Germany, the United Kingdom, France and Italy — although a relatively large contribution was also made by Finland and 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 2016, this ratio peaked in Cyprus (2015 data for ICT manufacturing) and Malta, where the ICT sector accounted for more than half (61.0 % and 51.3 % respectively) of all business enterprise expenditure on R & D. This was considerably higher than in any of the other EU Member States, as the next highest proportions were recorded in Finland (42.7 %; 2015 data for ICT manufacturing), Bulgaria (31.2 %; ICT services only) and Romania (22.4 %).
In approximately one third of the EU Member States for which data are available (see Figure 12 for more information on the coverage), the ICT sector accounted for between 10 % and 20 % of business enterprise expenditure on R & D, while in the remainder this share was below 10 %; note that with the exception of Slovenia, these lower shares may be explained, at least in part, by missing information, as was the case for Hungary (no data for ICT manufacturing) or Ireland, Austria, Germany, Portugal and Poland (no data for ICT services).
A similar analysis is presented in Figure 13, which shows the share of the ICT sector in total R & D personnel. In 2016, this proportion peaked at 53.0 % in Malta, while high shares were also recorded in Finland and Cyprus (44.1 % and 42.9 %; 2015 data in both cases for ICT manufacturing) and the share of the ICT sector in R & D personnel was within the range of 20 % to 30 % in Bulgaria (also 2015 data for ICT manufacturing), Croatia and Romania. Note that relatively low shares may reflect missing information, as was the case for Hungary (no data for ICT manufacturing) and Germany, Ireland, Austria, Portugal, the Netherlands and Poland (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 the data for the ICT sector are derived from these sources, the statistical concepts and definitions that are 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 data releases. For the most detailed methodological information and metadata users should refer to the information 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 are provided in accordance with Regulation (EC) No 295/2008 concerning structural business statistics (recast).
SBS cover the business economy, which includes industry, construction 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, as 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 that are 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 generally accounts for the largest share of R & D expenditure and personnel in most industrialised economies. Intramural expenditures cover expenditure on R & D within a statistical unit or economic sector, whatever the source of funds; also included is money spent outside the unit or sector but in support of intramural R & D.
Definitions employed to monitor indicators for the ICT sector
The 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 as the gross operating surplus (a measure of profit) plus personnel costs; alternatively it can be calculated from turnover, plus capitalised production, plus other operating income (including operating subsidies), 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: 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.
Apparent labour productivity: value added per person 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. In turn, total personnel costs are defined as the 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. An employee is a person who works 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.
R & D personnel: includes all persons employed directly in the field of R & D, including persons providing direct services such as managers, administrators and clerical staff; those providing an indirect service, such as canteen or security staff, should be excluded.
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 European policy initiatives, in particular, the Digital agenda for Europe and the Digital single market strategy.
The Digital single market strategy emphasises ensuring the free movement of persons, services and capital, whereby businesses and individuals can seamlessly exercise and access online activities under conditions of free competition, with a high level of consumer and personal data protection. The Digital single market strategy is built on three pillars:
- 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)
- 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)
- ICT sector (isoc_se) (ESMS metadata file — isoc_se_esms)
- Structural business statistics (sbs) (ESMS metadata file — sbs_esms)