The economic opportunity to build inclusive digital services

Digital technology has been a prominent, and rapidly developing feature in our lives far before Covid-19 hit the world. 

But with the appearance and ongoing disruption of Covid-19, even more of our lives have become digitally enabled. From remote working (where possible) and Zoom conference calls, to online pub sessions with friends, we’re embracing the digital world as a lifeline in these challenging times.  

However, many aspects of our lives have been forcefully put on pause or disrupted due to lockdown.  

This pause for many highlights just how much of our lives is still not (yet) as digital as it could be. There is room for improvement. And recovering from Covid-19 and the resulting economic downturn will likely involve accelerating the digitalisation of our society, creating opportunities and challenges along the way.  

The UK digital sector, which leads in Europe by amount of investment, will play a fundamental role in the recovery.1 

 

Where do opportunities lie? 

A rough indicator for industry specific digitalisation is how much of its inputs are purchased from the digital sector.  

The chart below shows this proportion across UK industries.  

Figure 1Digital intensity of UK industries 

 

Source:Frontier calculations based on Office for National Statistics Input-Output tables, 2014 

 

 

Even in retail, which most of us think as an increasingly digital sector, the proportion of digital inputs is just over 5%. Manufacturing, Health and Education, which account for around 23% of the UK economy in terms of Gross Value Added, are the largest industries where the proportion of digital inputs is below 10%.  

The potential for further digitalisation of the economy creates opportunities as well as challenges. We know from with robust evidence that adoption of digital tools can boost productivity at the enterprise and country level.2 And modelling we have done at Frontier suggests that greater adoption of Artificial Intelligence and of Internet of Things solutions, among other digital technologies, could substantially raise UK productivity and standards of living. 

Achieving these benefits will typically require adapting existing business models and processes. In Higher Education, for example, the immediate reaction to Covid-19 has involved transferring lectures from physical classrooms to Zoom. In the medium term, an increase in remote learning could allow innovation in business models, with institutions opting for greater scale and at lower cost.  

 

What is the role of policy? 

The scale of the challenges we are faced with means Government intervention will be crucial, particularly to help businesses ensure that digital transformations are inclusive. 

At the crux of it all, internet access and basic digital capabilities are necessities in a world of greater social distancing, particularly for vulnerable individuals. However, recent evidence suggests that around 4 million people in the UK are digitally excluded, as they have minimal digital skills.3  

This is a complex problem that requires a combination of targeted solutions. For some people, training could be an effective route, but for others, digital exclusion may reflect broader issues such as poor health or complex deprivation. 

This means as services are redesigned to be more digital, inclusivity needs to be at the heart of the discussion. This could involve: 

  • Taking advantage of the potential for greater targeting, personalisation and tailoring at scale of digital public services.  

  • Reinvesting some of the efficiency gains that can be achieved by providing digital services. GP consultations moving online, or chatbots directing users to relevant services, for example.  

 

To conclude, increased digitalisation is going to play a big role in the “new normal”. This creates big opportunities for the UK digital sector, for productivity growth and ultimately increase in our living standards. Through this further digital transformation, inclusivity should be factored in as a key concern by businesses and policymakers.  

 

Federico Cilauro is a manager in Frontier’s public policy practice, specialising on issues related to digital technology, labour markets, and education. He works with public and private sector clients, providing expert advice to inform public policy decisions. His work includes using statistical analysis and modelling techniques to understand the economic impact of digital technology and of a range of public policies from minimum wages and digital skills programmes to grants and subsidies for business Research & Development.

 

 

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