Budget is good start, but don’t get too excited – National Infrastructure Commission

The National Infrastructure Commission has given the UK’s Autumn Budget the thumbs up, but will the shiny new roads take much needed funding away from the country’s quest towards the digital economy?

While it might be a boring topic, roads and railways received a lot of attention during the budget announcement. But this is one of the bigger concerns for the NIC, which is wondering whether the a lack of private investment in such schemes would detract from government investment in other areas, most notably, next generation technologies for communications and energy.

“Today’s Budget includes a number of welcome measures for infrastructure – but the real test will be next year’s Spending Review and, crucially, the National Infrastructure Strategy that the Chancellor has promised,” said Sir John Armitt Chairman of the National Infrastructure Commission.

“This strategy should bring together the roads funding from this Budget with longer-term funding for cities and projects like Northern Powerhouse Rail and Crossrail.  And it should include access to full fibre broadband and greater use of renewable sources for our energy.”

The budget, which was unveiled on Monday, featured plans to hold the internet giants accountable to pay more tax in the UK, as well as a £1.6 billion commitment to support the Industrial Strategy and R&D funding, including technologies from AI, future manufacturing, nuclear fusion and quantum computing. An additional £200 million from the National Productivity Investment Fund will also be pointed towards various schemes to encourage the rollout of fibre infrastructure throughout the UK, most notably in rural regions with primary schools to be the first to get special attention.

Looking specifically at the National Productivity Investment Fund, investments in fibre and 5G will increase to £715 million between 2019 and 2021, though whether this is enough to keep the UK on track in the global digital economy remains to be seen. The ambition set out in July in The Future Telecoms Infrastructure Review targets a nationwide full fibre network by 2033. Alongside the Budget, the government is publishing consultations to mandate gigabit‑capable connections to new build homes.

The consultation, which is being led by the Department of Digital, Culture, Media and Sport, will aim to amend the Electronic Communications Code (EEC) to place an obligation on landlords to facilitate the deployment of digital infrastructure when they receive a request from their tenants, while also enabling telcos to use magistrates courts to gain entry to properties where a landlord fails to respond to requests for improved or new digital infrastructure. The EEC is starting to look like a very large stick for the telcos to swing around and force people to do anything they want.

What is slightly concerning is a lack of attention for 5G. In the budget document on the HM Treasury website, 5G is actually only mentioned once.

What is worth noting is this budget might actually mean nothing in a couple of months. Hammond has given himself adequate breathing room with a no-deal Brexit scenario looking increasingly likely, stating it would be back to the drawing board should the worst-case scenario become a reality.

What does the UK Autumn Budget mean to the telco industry?

5G, artificial intelligence and autonomous vehicles; the UK government hasn’t missed a single buzzword in its mission to re-establish its position as a heavyweight in the global economy.

Earlier this week we were given a preview to the budgets impact on the tech and telco space, as Chancellor of the Exchequer Philip Hammond spoke proudly over UK ambitions, and now it has been confirmed. The message here is clear from the government, spend money in the emerging tech spaces to reignite interest in a post-Brexit Britain and improve productivity as a result. Whether this action will help achieve these goals we’ll leave up to you.

“Over the long term, improving productivity is vital to building an economy fit for the future,” the statement reads. “This is the best way to boost wages, improve living standards and enhance prosperity. The UK’s productivity lags behind other advanced nations: this is both a challenge and an opportunity. Closing the gap between the UK’s productivity and Germany’s would increase the size of the UK economy by a third.”

So what does this actually mean? We’ll try to break down each area for you, starting with 5G.

As part of the budget, Hammond has made £160 million available for 5G mobile networks. While this might sound very promising, you have to question how far £160 million will actually get you. It also sounds very familiar to previous budget announcements.

During previous budget announcements, the government has stood tall and proud declaring millions will be invested into the development of 5G, though we have seen little to date. Back in September, the government said it was throwing £10 million at six pilot schemes, to be taken out of the Spring budget, which promised £200 million to the development of full-fibre networks. Considering so little of the money which has been previously promised has actually been spent, we wonder whether this is new investment, or just a shuffling of the cards.

That said, Mark Evans, CEO of Telefonica UK is relatively positive:

“The Government’s investment in technology is welcomed and reflects the UK’s intent to become a world-leading digital economy,” said Evans. “Mobile connectivity is one of the UK’s most powerful opportunities to strengthen and grow our economy while also improving the lives of the British public. Our own research tells us that 5G will contribute an additional £7 billion to the UK economy each year by 2026.

“However, to truly realise this ambition we need greater and urgent collaboration between operators, national and local government, enterprise and communities. We need a framework that facilitates the efficient and effective deployment of improved mobile networks which will deliver a better connected experience for everyone. Only then we will be able to become a world-leading digital economy.”

On the artificial intelligence front, Hammond and his cronies feel this is an area which could contribute significantly to the UK economy, 10% to GDP by 2030 was a figure quoted, and there does seem to be some useful work going on here.

The creation of the Centre for Data Ethics and Innovation will set standards for the use and ethics of AI and data, as well as plans to invest at least £75 million into the field of AI, build ‘data trusts’ to help advance AI algorithms, fund 450 PhDs and also create various AI fellowships to mentor talent in the UK. An additional £30 million will also be used to retrain individuals in roles which will utilise AI.

As mentioned earlier this week, autonomous vehicles will also play a notable role. The government believes the driverless car industry will be worth £28 billion to the UK economy and employ 27,000 people, and it thinks it can get a jump start on the industry.

The ambition of having driverless vehicles on the road by 2021 without a safety attendant have been confirmed, though we still have our reservations about this. The technology might be progressing, but all the rules and processes that underpin a successful industry are not. Parallel verticals such as Insurance still haven’t been addressed, and until they are, progress in the real world will be almost non-existent.

That said, there has been a nod to the rules. Although details are relatively thin on the ground,  Hammond and his buddies have stated intentions to rewrite rules to set out how driverless cars can be tested without a human safety operator. We’ll keep an eye out for progress here, but at least there is already precedent with more relaxed regulations in places like Milton Keynes. The National Infrastructure Commission (NIC) will also launch a new innovation prize to determine how future roadbuilding should adapt to support self-driving cars.

“This presents an exciting challenge for those investing in the transportation sector,” said Russell Goodenough, Client Managing Director, Transport Sector at Fujitsu.

“Driverless cars throw up serious questions, including how we ensure a safe environment for their operation, does road infrastructure need to be updated to accommodate increasingly sophisticated vehicles, who is liable for insurance claims, and how can we ensure autonomous cars are not vulnerable to hacking or cyber-attack.”

Overall, it does seem to be a step in the right direction, albeit a very tentative one. Perhaps another indicator which should be considered is government spend on its own departments. To date, digital has been the ugly step-sister of UK politics, though at least it is getting a little bit of love, as you can see below with budget increases over the next couple of years.

 

Department of Digital, Culture, Media and Sport
Resource budget (billions)
2017-2018 1.4
2018-2019 1.5
2019-2020 1.5
Capital budget (billions)
2017-2018 0.4
2018-2019 0.5
2019-2020 0.6