A Digital Plug-in to maximise the gains of new tech infrastructure
In his first few months in office the Prime Minister has set the development of a world class digital infrastructure as one of his top priorities, with pledges to complete the roll out of full fibre broadband eight years ahead of schedule in 2025 and £30 million to run innovative trials of 5G applications in rural communities being some of the first announcements of the new Government.
techUK strongly supports investment in digital infrastructure, we believe this is vital for the UK to remain a leading economy for new digital technologies and products.
Evidence shows that existing businesses could expect to see an average increase in productivity of between 0.3% and 3.8% in turnover per worker per annum from increased full-fibre and 5G connectivity, and an expected 0.4% and 3.2% increase in the number of businesses operating in highly connected areas.
If implemented the plug-in will help the UK receive the maximum benefits that increased connectivity will bring, turbocharging the delivery of the Government’s ambition to ensure that investment in leading technologies translates into the development of a world beating digital economy.
The plug-in is designed to allow the Government to augment its exiting City Deals and other regional development strategies to think digital and create a vital add on that will boost digitisation and productivity across the UK.
The three prongs making up the digital plug-in are:
- Digital Clusters
- Digital Business Links
- Digital Adoption Fund
The adoption of the plugin by Government would ensure that the benefits of infrastructure spending are maximised by taking proactive steps to translate investment in world leading infrastructure into the development of world beating economies across the UK.
Digital clusters: The benefits of clusters are well known, more than 500 cluster initiatives implemented over the last 10 years in twenty countries have shown that these clusters have a direct impact on increasing competitiveness with the strong positions of individual clusters raising the countries overall competitiveness.
In the UK, clusters identified by the Centre for Cities in 2014 contained 8% of the UK’s businesses, but generated 20% of UK output (gross value added). Workers in these clusters typically had higher wages than those in the surrounding regions and attracted higher levels of foreign investment.
Both financial support and initiatives to further increases their attractiveness to international talent will be important, however increasingly regulatory flexibility is prized as a significant competitive advantage. The UK should therefore seek to building on and expanding the FCA and ICO’s regulatory sandboxes to limit regulatory burdens on businesses operating within a set area to encourage them to innovate and test ideas in a safe and secure environment.
Successful digital clusters will not just support the UK to level up its existing centres of excellence, but attract foreign investment, the leading businesses and new bright minds to locate in the UK as the best place to turn their ideas into the next tech success stories.
Digital Business link: Full fibre not only enables new investment but should allow existing businesses to digitise – becoming more productive. The ‘Digital Business Link’ prong of the plug-in would ensure that businesses are prepared to maximise on the benefits of full fibre by ensuring they have access to expert advice and guidance.
The Digital Business Link would establish a range of high-quality ICT programme managers across the area tasked with supporting businesses to adopt new technologies and help them make adjustments to their business to best utilise this new technology.
In 2015, 79% of SMEs had never received advice on improving their digital, while 53% of medium sized business had also not received any advice.
However, SME’s who undertook digital improvements saw clear benefits with 54% seeing increased sales, 53% reaching new customers and 30% achieving overall cost savings.
The Digital Business link would therefore seek to refine the Government’s Old business Link to target efforts on digital to ensure that SME’s around the country and taking advantage and seeing the benefits of new tech.
Digital adoption fund: to support the Digital Business Link and accelerate digitisation techUK proposes the Government creates a targeted, time limited measure to support small businesses to adopt basic OpEx based productivity services.
Digitisation means that more and more of our economy is based on operational activity rather than capital expenditure. This is particularly true for small businesses who are increasingly served by subscription to digital and services as opposed to physical hardware.
As a result, the UK tax system has become increasingly outdated in the incentives it offers to businesses, prioritising relief on capital expenditure (CapEX) whereas relief on operational expenditure (OpEx) is severely limited despite having a shorter-term effect that capital projects.
Upgrades in cloud computing, can have huge benefits, for example the making tax digital reforms are predicted to increase business profits by £1.6bn in London and £6.9bn across the UK, and Lloyds bank has estimated that SMEs with low digital capability could unlock up to an additional £84.5 billion turnover if they were to develop a high digital capability.
Under these plans small businesses or first-time adopters would be able to receive strictly time limited relief on the first adoption of specified digital services that are seen as the most significant in boosting productivity. This would include Cloud services, ERP, CRMs and accountancy platforms. The relief would cover the initial adoption of the technologies, as well as staff training costs, and the first three years of the subscription to such a service.
techUK's full proposals for a Digital Plug-in to maximise the benefits of new digital infrastructure and turbocharge the UK economy can be read here
