Britain's economy could be bigger than thought because officials may not have been counting the telecoms industry properly, a report has found.

The strides made in broadband and digital technology have not been properly measured by the UK's official statistical body, researchers said.

The Office for National Statistics failed to spot that the sector has become up to 90 per cent more efficient over the past five years.

It means the UK's productivity may have been underestimated and that the UK's economy could be bigger than previously thought.

Theresa May and her Chancellor Philip Hammond will welcome news Britain's economic performance could be better than previously thought.

The strides made in broadband and digital technology have not been properly measures by the UK's official statistical body, researchers said (file photo)

While Britain's official inflation figures may have been too high and prices overestimated.

Richard Heys, the deputy chief economist of the Office for National Statistics, said the body will change the way it counts the numbers in the future.

He told a seminar at the new Economics Statistics Centre of Excellence that there has been a 'disconnect between the technical performance and the economic measurement of the [telecoms] industry'.

Mr Heys said officials have historically measured the revenues and output of mobile companies like EE, Vodafone and O2 separately.

But issues arose when statisticians tried to adjust for inflation in order to generate the real output of telecoms companies.

Chancellor Philip Hammond (pictured in Downing Street earlier this week) will welcome news the UK's economy could be bigger than previously thought

Official data show the prices of the telecoms sector was flat between 2010 and 2015 and turnover declined slightly - meaning it was a drag on official productivity figures.

But researchers now believe the way prices are measured does not reflect the improved bundles of calls, texts and data offered on both fixed and mobile networks.

If these were included, prices would be recorded as having fallen by 35 per cent, the research paper found.

Diane Coyle, a professor at Manchester University and one of the paper's authors, said: 'My hunch is that the digital effects will make a difference but not enough to explain away the productivity slowdown.'