The Cost of Digital Exclusion

In a world that is currently full of division, the digital divide seems bigger than ever and ever-expanding.

Whilst there is no universally accepted definition of digital exclusion, the UK Government note that it ‘typically refers to sections of the population not being able to use the internet in ways that are needed to participate fully in modern society’.[1] People may find themselves digitally excluded for a number of reasons, including the inability to access:

‘affordable internet connection,
a suitable device,
or the skills needed to complete tasks confidently and safely online’[2]

This exclusion ultimately comes at a cost and inevitably makes life harder in a multitude of ways. But not only does the cost of digital exclusion affect the individuals who face it, the cost also impacts society as a whole. And the cost is too big to ignore.

In this article we will explore the multifaceted cost of digital exclusion from three angles: financial cost, social cost, and economic cost.

Financial Cost

Those who are digitally excluded typically have to pay more money for essential goods and services. This is because they are unable to benefit from online discounts – having no choice but to pay for higher-priced items in store – and are unable to use price comparison websites to browse for better deals. In this way, being digitally excluded equates to paying a poverty premium for a number of goods and services, ‘costing people on average £478 more a year’.[3]

To make matters worse, data shows that ‘the elderly and those on low incomes are most likely to experience digital exclusion’, making the financial cost of digital exclusion especially problematic as those with the least are paying the most.[4]

But not only are digitally excluded people forced to spend money, they are also less likely to save money. This statement is inevitable, in that spending more of your money subsequently means there’s less to save. However, the problem is compounded because those who are digitally excluded don’t have the ability to manage their money effectively via online banking which impacts their ability to save. A recent study showed that ‘mobile banking enhances financial awareness and discipline by providing tools such as real-time transaction monitoring, automated savings mechanisms, and budgeting features’ – all things which digitally excluded people are locked out of.[5]

In the same vein, being digitally excluded becomes a barrier to accessing digital banks. Digital banks ‘don’t usually have physical branches’ which means they have ‘fewer overheads’ so they can ‘offer higher [interest] rates’.[6] Therefore those who are digitally excluded are unable to reap the rewarding rates of banking digitally.

In this way, digital exclusion is one of the main causes of financial exclusion. And as the government’s Financial Inclusion Strategy highlights, ‘unlocking digital inclusion will support people’s economic participation, financial wellbeing, and independence.’[7]

The Consumer Digital Index 2025 found that when people have a high digital capability, and therefore higher financial capability, they are positively impacted financially and save more money per year – £815 more on average![8]

Social Cost

Having established the financial cost of digital exclusion, it’s vital to acknowledge that digital exclusion also comes at a huge cost in relation to other social factors. By definition, digital exclusion prevents people from participating fully in society, and recent research has shown that it becomes a significant barrier to participating in:

education,
employment,
and the healthcare system.

Education

Due to the advancement in technology and the efficiencies it offers, “digital by default” has permeated into all aspects of life. And it especially took off during the COVID-19 pandemic, which increased the use and mobilisation of digital services and platforms, as a way to bring people and processes together that were physically apart.

This rings true for the education system which now requires people to have access to the internet and a suitable digital device – and an ability to use them. But as we know, not everyone has the access and ability, and so digital exclusion costs them their education.

The Nominet Digital Youth Index found that in the UK ‘6 million (42%) of young people do not have home broadband or a laptop/desktop’.[9] This impacts those young people as they can’t complete tasks essential to their education, including:

accessing online education portals for important information and homework,
joining virtual learning sessions,
using the internet to conduct research support with homework,

inevitably affecting their academic performance and attainment.

In this way, a lack of ‘digital capital’[10] diminishes the opportunity to attain ‘cultural capital’ which encompasses education, knowledge and skills ‘that help people succeed in society’.[11]

Employment

In today’s job market, digital exclusion costs people work and a wage.

Digital skills, along with access to a device and broadband, have become essential for employment since most jobs are advertised exclusively online, and virtual interviews – conducted through platforms like Zoom and Microsoft Teams – have become the new norm.

This reliance on digital tools creates a vicious cycle, as those who are digitally excluded face barriers to employment and ‘people experiencing unemployment are more likely to struggle with affording broadband, data, and devices’.[12]

The shift towards hybrid and home working has also widened the digital divide. While hybrid/home working arrangements offer benefits such as reduced commute times and improved work-life balance, they demand reliable internet access and the ability to troubleshoot technical issues independently. This becomes especially critical for those who rely on working from home due to circumstances beyond their control, for example those with disabilities. Without access to digital tools and the necessary skills, these individuals face significant barriers to employment.

Even for those who overcome these challenges and secure jobs, a lack of essential digital skills remains a widespread issue. Around 1 in 10 workers (7.1 million people, or 18% of the workforce) lack some or all of the Essential Digital Skills required in the workplace.[13] This skills gap not only limits professional development but also impacts overall business productivity – further discussed in the Economic Cost section of this article.

But the link between digital skills and workplace success extends beyond job performance. Research highlights a clear financial benefit too, with people possessing digital skills earning 5.8% higher wages.[14]

Healthcare

As a public institution that is witnessing its own reform, the National Health Service (NHS) is moving on with the times and, in doing so, threatening to leave people behind.

In line with their 10 Year Health Plan, the NHS will change from analogue to digital. As part of this digital transformation, by 2028, the NHS App ‘will be a full front door to the entire NHS’ enabling people to:

get instant advice,
book directly,
choose preferred providers,
manage their medicines,
manage long-term conditions, and so much more.[15]

But whilst the NHS is becoming more digitally accessible, this doesn’t mean the NHS is accessible to everyone. The NHS’s ‘digitally by default’ approach bars those who are digitally excluded from accessing the healthcare they need – which is ultimately harmful.

‘Groups that commonly experience poorer care through lack of digital services include older people, people with disabilities, ethnic minorities, people who are homeless, sex workers, people from Gypsy, Roma and Traveller communities, people living in rural areas, people from low socio-economic background.’[16] The NHS’s digital revolution will potentially exacerbate health inequalities that already exist.

In addition to this, it’s important we consider digital exclusion’s place in relation to mental health.

Digital exclusion has a profound impact on people with mental health conditions as a digital-first healthcare system plus a person’s digital exclusion equals them not getting the ‘specialised health services’ they need.[17]

Whilst digital exclusion can worsen mental health conditions, the inverse is also true in that those without a mental health condition may develop one due to digital exclusion.

There exists a wealth of research that investigates the effects of digital exclusion on mental health, and they concur, in one way or another, that digital exclusion ‘can result in negative mental health outcomes’ for both younger and older people.[18] The onset of depression and anxiety can develop as a result of the loneliness and isolation that people may feel if they don’t have access to digital channels of communication with friends and family.

Numerous research highlights that this phenomenon accelerated during the COVID-19 pandemic, when digital means of communication became essential for mental health and wellbeing, and therefore ‘worsened social isolation’ of digitally excluded people.[19]

Economic Cost

We know that the cost of being digitally excluded places a significant financial strain on the consumer, but what is the impact of this issue on the state?

The Office for National Statistics (ONS) is the primary body that measures the UK’s Economic output, indicated by Gross Domestic Product (GDP), or sometimes Real GDP. To examine the cost of digital exclusion on the state, we must consider the potential effect of this problem on the three sub-measures of GDP:

output
expenditure
and income.

Output, the value of goods and services produced, is closely tied to the capabilities of the workforce. A digitally skilled workforce is essential for productivity and efficiency across every sector. Research by Microsoft suggests that digital skills contribute a minimum of 2.4% to a company’s bottom line, a considerable figure when scaled across the economy.[20] With ongoing digital skills shortages costing the UK billions in lost productivity each year, digital exclusion becomes more than a personal disadvantage; it becomes an economic drag. Failing to equip people with essential digital skills means fewer people can access higher-skilled work, and businesses are forced to invest more in inefficient workaround processes. Research conducted by PwC found that if the UK achieved full digital inclusion, £21.1–£30.8 billion could be generated in annual Gross Value Added from increased productivity and employment.[21]

Digital exclusion also affects expenditure, which considers the total spending in the economy. When people face a “poverty premium” because they cannot access online deals or digital-only products, their disposable income decreases. Lower disposable income suppresses overall consumer spending, which is a key driver of economic growth. Digitally excluded households are also less able to manage their finances or access cheaper financial products, which reduces consumer mobility and limits competitive pressure in the market.

Finally, digital exclusion impacts GDP through income. Lower digital skills correlate with lower earnings across the workforce, with digitally skilled workers earning nearly 6% more on average.[22] At scale, this wage differential shapes tax revenues, productivity levels, and the sustainability of public services. When people earn less, the state collects less, while simultaneously providing more welfare support for those pushed into unemployment or low-paid work due to digital barriers, often beyond their control. This is corroborated by PwC’s research which found that £4.9–£9.4 billion could be generated in net gains to the Exchequer through higher tax revenues and reduced welfare spending if society achieved full digital inclusion.[23]

For businesses, the cost is twofold: the expense of servicing customers who cannot self-serve digitally, and the loss of potential revenue from customers who are effectively excluded from digital-first markets. For society, the cost is slower productivity growth and higher public spending.

Summary

Digital exclusion carries profound financial, social, and economic costs that impact individuals, businesses, and society. Financially, it places a poverty premium on excluded individuals who pay more for goods and services and miss out on savings opportunities, while also limiting access to better financial tools and higher interest rates. Socially, it hinders access to education, employment, and healthcare, exacerbating inequalities and creating barriers to full participation in modern life. Economically, it reduces GDP through lower workforce productivity, suppressed consumer spending, and diminished tax revenues, while increasing public spending on welfare and support services.

The evidence is clear: digital exclusion is not just a personal inconvenience but a systemic issue with far-reaching consequences.

For this reason, we believe that more needs to be done to address digital exclusion. Whilst the government has entered phase one of their robust Digital Inclusion Action Plan, we believe that businesses should also play a pivotal part. That’s why we make it our mission to partner with organisations to empower their customers with digital skills and literacy for life and for work. Our partnerships not only ameliorate financial and social costs for customers, but also mitigate economic costs for businesses.

For more information about how we can achieve digital inclusion together, contact us today at info@wearegroup.com.

[1] Digital exclusion in the UK: Communications and Digital Committee report

[2] Digital Inclusion Action Plan

[3] Left Out: How to tackle digital exclusion and reduce the poverty premium

[4] Left Out: How to tackle digital exclusion and reduce the poverty premium

[5] (PDF) Exploring The Impact of Mobile Banking Usage on Spending Habits: A Qualitative Study on Financial Overspending

[6] Which?

[7] Financial Inclusion Strategy

[8] Consumer Digital Index 2025

[9] State of the Nation Report

[10] DIGITAL CAPITALA: Bourdieusian Perspective on the Digital Divide

[11] Cultural Capital Theory of Pierre Bourdieu