A business case for broadband – impact and forecasts for bandwidth in Westminster

Economic appraisal of Westminster City council's superfast broadband connection voucher scheme

Economic impacts of bandwidth

Objective and cost of the scheme

Westminster’s connection voucher scheme will aim to deliver one of the following types of service to a minimum of 1,000 eligible SMEs:

  • Access to a ‘consumer’ service delivered over next generation networks capable of providing at least 30Mbps download speeds
  • A ‘business grade’ solution with a defined service level agreement

The total project budget will be almost £3 million and offer vouchers up to £5,000 for suitable applications.

Building on the success of the recent national voucher scheme

The proposed scheme builds on and continues the success of the DCMS-sponsored Connection Voucher Scheme which ran in a number of UK cities from December 2013 until October 2015.

The economic impact calculations draw on a recent evaluation of the Greater London element of the national voucher scheme.

Adroit Economics, Point Topic and The Fifth Sector recently evaluated the scheme delivered across London by the Greater London Authority. For more information on the business broadband voucher scheme please see our free analysis or press release.

Contact us for an executive summary or the full report is available for £495 (+VAT).

Need of the programme

Half of the Westminster’s Gross Value Add and jobs are created by firms in areas currently offering less than 30 Mbps fixed line broadband average download speeds. The situation is forecast to improve only marginally by 2020 if left entirely to the market. This represents potential significant lost economic growth opportunities for the local economy.

The London voucher scheme survey shows that firms achieve cost savings and sales increases as a result of use of faster broadband. These translate into GVA and employment growth. Firms that cannot access faster/higher grade consumer broadband will miss out on this growth. Applying the findings from the London voucher scheme survey to the number of firms in Westminster in sub 30 Mbps areas, suggests the following lost growth opportunities:

  • A lost net additional increase of £831m GVA pa. If reversed this would represent a 2.1% increase of GVA currently generated pa by the commercial business sectors in the borough and a 1.6% increase of total borough GVA (commercial and public sector GVA)
  • A lost 15,772 net additional jobs. If reversed, this would represent a 2.7% increase of employment associated with the commercial business sectors in the borough and a 2.3% increase of total borough employment (commercial and public sector)

Some parts of the study area are more affected than others. The following maps, produced by Point Topic, draw this out.

Westminster heat maps

bandwidths-mbps-2016-westminster

Much of the dark blue area still doesn’t have an FTTC deployment or has exchange only lines. While much of the area fares well against London and the UK overall, this problem of low bandwidths in the centre of urban areas is common in the UK.

bandwidths-mbps-2020-westminster

Without intervention we expect 2020 to show little change in the stubbornly low bandwidth areas. Note however there is some increase in FTTP/B availability and this is where we see 5,000Mbps and above being made available. DOCSIS3.1 will also be in some areas of the project.

Estimated financial and innovation benefits

Referring to the London voucher scheme survey findings, we have calculated the potential economic impact of the proposed Westminster 1,000 voucher scheme on the local economy (in terms of net additional GVA and jobs)

We estimate that the proposed Westminster 1,000 voucher scheme will generate:

  • £192m to £280m net additional GVA in the local economy within a 10-year period representing an ERoI of between £68 and £100, per £1 project cost)
  • 2,000 to 2,750 gross jobs, of which 484 to 680 will benefit the local economy, at a cost per job figure of £5,787 to £4,116.

In addition to the financial benefits to, we expect more innovation and enterprise benefits to derive. Benefits to SMEs include cost savings, staff time savings, increased sales, improved staff skills and proficiency, and increased productivity of home and mobile workers. 50% of firms reported that they expected that use of faster broadband would transform their businesses within the next 2 to 3 years.

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.

Please follow and like us: