Autumn Statement real boost for UK business broadband
November 23, 2016 | Oliver Johnson
Press release – 23rd November 2016
The Chancellor’s announcement of a public funding injection for broadband into the new Digital Investment Fund is a fantastic opportunity for local and combined authorities, as well as local enterprise partnerships, to take the initiative and encourage faster broadband for the UK’s small and medium-sized enterprises (SMEs), potentially benefiting the economy to the tune of £372 billion.
“The focus on the smaller players and gigabit supply is very welcome. The gaps in expected future coverage will still be a challenge to address but this initiative will be an important part of the toolkit,” says Oliver Johnson, CEO at Point Topic. “With broadband regarded more as safe infrastructure investment today, as opposed to riskier IT branded projects, we also expect the altnets to have an easier time drumming up the required match funding.”
Broadband infrastructure is the bedrock of economic growth and local enterprise partnerships/local authorities now have the opportunity to take the lead in developing more efficient and economical delivery of faster business broadband services. Currently, 71% of businesses are in areas that offer less than 100 Mbps consumer broadband. In particular, LEPs must target SMEs yet to adopt broadband, and focus on how to support business parks and other business clusters where superfast broadband speeds remain unavailable.
“Broadband is the best infrastructure investment you can make,” says Dr Steve Sheppard, Managing Director of Adroit Economics, a specialist in economic development and regeneration. “By providing the funding to upgrade businesses to superfast broadband, there will be a return on investment of over £100 in increased sales and productivity, cost and time savings achieved for every £1 spent.”
Faster broadband increases the GVA(1) of SMEs by up to 30%, and boosts SME innovation, providing business transformation and growth within a two to three year period. With ubiquitous superfast and increasingly ultrafast broadband provision, the UK economy could gain a GVA boost of up to £372 billion. These predications are based on findings from analysis of a comprehensive online survey of the economic effects of the Government’s Broadband Connection Voucher Scheme carried out for the Greater London Authority by Adroit Economics with support from Point Topic, The Fifth Sector and the University of Manchester (2 & 3).
Iain Bennett, Managing Director of The Fifth Sector, a digital transformation agency, says, “The opportunities this funding gives in terms of productivity and investment will be vital for the UK’s economic health. Without intervention a high proportion of SMEs across the country would continue to labour under the constraint of poor or overly expensive services; a proportion of office buildings and business parks in strategic employment locations would continue to offer very poor connectivity; and 4G mobile coverage would remain patchy, in turn resulting in even more patchy 5G coverage.”
Fibre-to-the-premises (FTTP) based on GPON and PtP technology must be central to local authority intervention in order to ensure the long term benefits of faster broadband. Forecasts from Point Topic show that demand from SMEs will continually outstrip bandwidth supply offered by other technologies including G.Fast and Docsis 3 (see diagram below). According to Johnson, “The data shows gigabit fibre has to be available for businesses at the very least. And while G.Fast will cope with quite a lot of residential demand, pressure will really start to mount after 2021.”
In addition to the newly announced Government investment, local authorities should consider other options to encourage faster business broadband. These include utilising their share of the estimated £400 million in cost savings and gain share from the Government’s Rural Broadband Fund and Superfast Extension Programme, leveraging the Government’s existing Growth Deals announced in July 2014, issuing concessions including for wireless and publicly owned ducting and fibre, joint ventures with private sector partners, social investment for cooperatives and voluntary and community sector enterprises (VSCSEs), as well as private equity and venture capital funding.
NOTES FOR EDITORS
- GVA = Gross Value Added, the Government’s preferred measure of economic wealth creation. GVA is similar to GDP minus taxes and subsidies. Total sales/turnover in a firm (or economy) comprises (i) purchases of goods and services (ii) wages (iii) profits. GVA is a measure of wages and profits, excluding purchases. The proportion of GVA to turnover reflects the overall wealth creation of the firm or industry sector. The proportion of GVA to turnover varies considerably, from less than 20% to 70-80% for high value financial and business service sectors.
- Approximately 480 firms took part in the survey carried out for the GLA and of the respondents that answered, 50% said that faster broadband had a transformational impact on their business. Benefits to SMEs include cost savings, staff time savings, increased sales, improved staff skills and proficiency, and increased productivity of home and mobile workers. The survey found that:
- Average cost savings of 4.8% are expected to be gained
- Average sales (turnover) increases of 10.5% will be enabled
- Staff time savings of 6.1% should be achieved
- Home working and mobile working productivity benefits of 11.1% are expected.
- The full report entitled Economic Impact of London’s superfast broadband connection voucher scheme is available from Point Topic for £495. An executive summary is available free of charge. Email Point Topic on firstname.lastname@example.org or tel: 44 (0)20 3301 3303.
Simona Pranulyte 020 3301 3303 email@example.com
ABOUT THE AUTHORS
Adroit Economics Ltd, established in 2005, has developed a number of models and tools to help government, local and regional authorities create policy and programmes to address broadband gaps, including provision of faster broadband.
Point Topic Ltd has gathered, analysed and published broadband information data sets since 1998, used across industry and beyond as the foundation for reporting, planning and strategy. It provides insight, context, sourcing and transparent reporting so customers can follow data inputs through to information outputs with confidence.
The Fifth Sector offers businesses, universities, cultural and public sector organisations expert advice and help on strategic business cases, investor development, project management, research and feasibility studies focused on the Creative Economy, the impact of digitisation and developing human capital.