This year’s Autumn Statement was always going to give an interesting indication of how the government proposes to weather the economic storm of Brexit. And on this issue, at least, we heard a clear answer: improving productivity. It was a welcome priority. The productivity gap between the UK and the rest of the G7 is now at its greatest since its modern records began in the early 1990s.
Past governments relied on traditional interventions to boost our lacklustre productivity; skills, transport, housing, and finance. The chancellor of the exchequer Philip Hammond, however, has focused on the power of technology to amplify our economic performance.
Technology – and the digital infrastructure supporting it – is crucial to ensuring that the UK remains a strong, attractive market for foreign investment and an exporter of products and services. With the £4.7bn investment in research and development and new R&D tax credits, the chancellor is hoping to enhance and solidify the country’s position as a world leader in innovation.
The chancellor also grasped the importance of digital connectivity as the main enabler of Britain’s growth. The £1bn investment to roll out full-fibre internet and 5G communications across the UK will provide much-needed benefits to both businesses and consumers.
Digital companies already contribute 10% of GDP to the UK economy – the greatest of any nation – surpassing the manufacturing and retail sectors. And with technology and digital services playing an increasingly important role in all industries, combined with the continued growth of the internet of things, it has never been more important to ensure that all businesses have access to fast, resilient connectivity to drive more productive operations.
The chancellor has acted in concert with his digital minister, Matt Hancock, in their pivot to full fibre. For several years now, the government’s policy has been support of BT Openreach’s FTTC service (fibre to the cabinet). This service, as the name suggests, only connects the fibre network to a cabinet in the street and then relies upon the existing copper phone lines to bring it into the premises. Using this old Victorian copper significantly reduces speed and is rarely adequate for business needs.
Full fibre, otherwise known as FTTP (fibre to the premises) ensures that the fibre optic cable is connected to a property directly from the exchange. This means that companies get fast, reliable speed. At present, only 2% of the country has access to full fibre, and yet it is undoubtedly the future. The chancellor’s £1bn investment is a good start, especially given that it is focused on the smaller fibre providers. In the long term, this will increase the number of providers, improve service and reduce cost to consumers. Expect to see the biggest improvements outside London.
Similarly important is the 100% business rates relief for new full fibre infrastructure. This will enable smaller providers which are already providing this service, such as Gigabit and Hyperoptic, to expand more rapidly. These providers need to work together to share ducts and poles, and work with landlords and developers to build and share universal communications chambers into buildings.
In his statement, the chancellor also outlined the UK’s ambitions to be a world leader in 5G. Despite 5G’s revolutionary potential, no country has yet established a clear path forward. Much of the regulatory investigation and innovation has come from the Continent, with the 5G for Europe Action Plan. If the UK is retiring from the EU table, it needs to ensure that it does not fall behind on 5G planning if it wants to meet its stated ambition of global leadership.
The new government’s recognition of the role of digital infrastructure shows that it has a practical and mature understanding of the needs of modern businesses. Of course, we must first see how these announcements are carried out before the celebrations can begin.
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