Measuring the Flat White Economy

The ‘Flat White Economy’ defined in the eponymous book is the combination of tech and creative economies that developed initially in the east of London and have since evolved into becoming a significant component of the UK’s GDP and that of other economies. Research undertaken by the Centre for Economics and Business Research (Cebr) estimated that the sector had grown to 12% of the UK’s GDP in 2022, compared to around 9.2% for manufacturing. Measuring the value of services is difficult but measuring the output of creative and tech services, especially since the birth and expansion of the internet, creates additional problems which imply that current estimates of the size of the sector could be too low. There are four main measurement issues: the size, growth and lifecycle of the companies to be surveyed; the accounting treatment of investment in software; a flawed, out-of-date definition of R&D expenditure; and producing relevant price deflators while hindered by the difficulty in measuring quality.