Technology expansion belies economic uncertainty

The report, which assessed the impact of technology on the UK economy, was released by the ITEM Club - Ernst & Young's economic forecasting group.

Professor Peter Spencer, the author of the report, warned against equating any growth in IT spend with an expanding UK economy because businesses are still not reaping productivity benefits.

The growth rate for the UK economy has stood at 2.25 per cent for several years. However, the US Federal Reserve recently raised its growth level from 2.25 per cent to four per cent to reflect the impact IT expenditure is having on the economy, prompting some economists to urge the UK to follow suit.

To do so may well have serious consequences for UK business, as the Bank of England's Monetary Policy Committee uses this growth rate index when making routine interest rate decisions.

Spencer said: "IT has had a dramatic impact on the economy but one or two pieces of the jigsaw are still missing. Technology should have made us more efficient and productive, but what happens when you get a new technology is that it takes a long time for people to learn how to use it properly."

According to Spencer, technology still only accounts for three per cent of the UK economy and two per cent of employment.

Ian Fletcher, principal economic advisor with the British Chamber of Commerce, agreed that UK companies still had some catching up to do on their US counterparts.

"It is clear that we are not benefiting from technology expenditure in the same way as the States. We don't seem to have mastered the knack of getting the best of our investment in the same way as they do," he said.

He added: "Levels of IT investment are still low, and there is the danger that the bad press technology investment has got will dissuade some traditional companies from getting involved in ecommerce."