5G is big business but only if we hurry up

A report from Barclays Corporate Banking suggests 5G could add £15.7 billion to the UK economy by 2025 but only if network deployment is done faster.

While progress is being made, the Barclays team forecast the current rate of deployment would add £13 billion to UK businesses, though any hurdles could drop this figure to £8.3 billion. By 2030, the size of the UK economy could be increased by between 0.88% and 1.54% compared to a situation where no national 5G network. The middle-ground, development continuing at today’s pace, is an increase of 1.09%

For a country which is courting with controversy and potential regulatory hurdles, this does not necessarily paint the brightest of pictures. But of course, this is entirely dependent on whether UK businesses actually know what 5G is and what can be achieved with the upgraded infrastructure.

“The rollout of 5G offers a huge opportunity for the UK,” said Sean Duffy, Head of TMT at Barclays. “We’re seeing massive potential for business growth, which ultimately delivers a positive knock-on effect for the whole economy.

“While the Government and network providers are already working hard to introduce 5G in the UK, we found that businesses do not yet have enough clarity about how they will benefit in the long-run. What’s more, nearly four in ten business leaders still aren’t entirely sure what 5G is.”

The education issue is perhaps pinned to the telco industry itself. Not only have the telcos been slow to engage potential customers and develop specific usecases, the industry spent years plugging the main benefit of 5G as ‘bigger, faster, meaner’. Both of these points have led to the issue being raised by Barclays.

On the speed side of things, the industry has moved away from plugging faster networks as the primary benefit of 5G. The networks will of course be faster, but the latency and throughout benefits are seemingly becoming much more important. Perhaps this is also a realisation that selling 5G on speed alone will not recoup the vast financial outlay.

In terms of engaging specific industries to develop tailored usecases, this is also being corrected, though European telcos and customers are years behind counterparts in Asia. Whether this has any fundamental impact on digital economies moving forward remains to be seen, as there is still time to catch up while the deployment of 5G continues.

During Mobile World Congress Shanghai two years ago, this point was painfully obvious. At conferences in Europe, telcos were still bickering about the point of 5G, while in Shanghai, almost every operator had vertical specific usecases emblazoned across their stands. The difference is approaches was quite staggering.

That said, progress has been made. According to the Barclays research, 58% of businesses are already benefitting from fast communications technology like 4G and ultrafast broadband, quoting the gains being (1) operating across disparate locations (59%), (2) communicating with customers (49%), and (3) connecting multiple machines and devices (48%). At least the majority are already experiencing the benefits of improved connectivity and should, theoretically, be primed for 5G.

Worryingly however, the research also suggests that while awareness might be high, only 9% are allocating ‘significant’ funds to prepare themselves for the 5G era.

Another very upsetting sign for the UK is uncertainty. This might create obstacles to slow the deployment of the networks and ultimately the economic benefits to the UK. And what is creating this uncertainty; Brexit and Huawei.

Brexit is a tiresome topic, but the current political landscape is not encouraging any form of certainty. This will impact enterprise customers appetite to invest. And in terms of Huawei, the Government’s oversight board has not called for a ban, though it certainly hasn’t completely ruled it out either. Such is the importance of Huawei as a supplier to UK communications networks this uncertainty will make telcos nervous.

The UK is promising the world it will be a leader in the digital economy of tomorrow, but it is proving to be the architect of its own downfall. The Government, telcos and customers are all contributing to this gloomy scene. It’s all very British.

Work with Huawei, or us, but not both – US Government

US Secretary of State Mike Pompeo has upped the ante with the anti-China rhetoric, declaring the US will not partner with countries who work with Huawei.

According to Fox Business, Pompeo has dropped the inference and made a statement which many countries will be cringing to hear. You no-longer have to read between the lines; it them or us Pompeo is declaring.

“If a country adopts this and puts it in some of their critical information systems, we won’t be able to share information with them,” said Pompeo. “In some cases, there’s risk – we won’t even be able to co-locate American resources, an American embassy and American military outpost.”

For countries like the UK and Germany, this is worst case scenario. These are countries which have vested interests from an economic perspective in both countries, and such is the state of affairs in the telco world, few can afford to strip Huawei out of the vendor mix. Pompeo is referring to administrative and military functions right now, but it would be fair to assume this could be extended to US commerce.

It’s a very tricky position to be in.

On one hand, there simply aren’t enough vendors in certain segments of the telco industry to generate suitable levels of competition to create the most viable economic position to fuel future infrastructure ambitions. Secondly, taking a vendor such as Huawei, arguably the leader in radio equipment, out of the mix would-be worst-case scenario for a technologist. Why would you want to ignore the best kit available?

However, on the other side of the coin, the security concerns are persistent, and do have some credibility. Evidence is circumstantial, some of the claims are hearsay, however you cannot ignore the risk. China does have a law which would force nationals to comply with its ambitions.

Should Pompeo’s statement evolve into more than chest-beating, numerous countries will find themselves in a painful tug-of-war. It does look like European nations are resisting the US’ Governments call to stonewall China, but this could come at a cost.

The US and China are two major trade partners of almost every economy in the world. To work with the US, you’ll have to ban Huawei, but if you ban Huawei you can almost guarantee there will be some form of reciprocal action from the Chinese Government.

The UK is an excellent example. Huawei has recently released a statement reiterating the investments the company has made in the UK, as well as the number of people who are employed as a direct and indirect result of its investments. Should the UK Government want to seize the post-Brexit trade carrot which has been dangled by the White House, some sort of action against China will be required. There is going to be a loss somewhere.

Poland is in a similar position. Pompeo is quoted as seeing “real progress” in the country after meeting Ministers in Warsaw, though if Poland was to ban Huawei it would certainly have an economic and societal impact; Huawei currently uses the country as its Eastern European HQ, employing roughly 900 people and investing substantial funds.

Over in Germany, China is a significant market for its automotive and heavy industrial exports, though if it was to submit to the US Government demands, you can guarantee there will be some sort of kickback.

All of these countries are now stuck between a rock and a hard place. Europe is proving to be a critical battleground in the US/Chinese war for technological supremacy, and while some narcissists might crave the attention, this is starting to turn into an impossible decision.

UK growth is slowing, but so is Europe’s

The numbers for 2018 GDP growth are in and, while they’re not great, they’re a lot better than some doom-mongers have expected.

UK annual GDP growth slowed to 1.4% in 2018, the lowest since 2012. Having said that growth was below 2% for the previous two years and historically we seem to have paid the price for few recessions by having smaller peaks too. This ONS chart shows around 2.5% is the long-term historical norm so we’re below par but not by a lot.

Further context can be provided by looking at the rest of Europe. A recently published European Commission report says German GDP grew by 1.5% last year, with the French managing exactly the same. In both cases, however, this was down from 2.2% last year and the UK is actually forecast to slightly out-perform Germany this year, with growth of 1.3%. The whole of the EU27 is only forecast to grow by 1.5% this year.

“GDP slowed in the last three months of the year with the manufacturing of cars and steel products seeing steep falls and construction also declining,” said Rob Kent-Smith, Head of GDP at the ONS. “However, services continued to grow with the health sector, management consultants and IT all doing well.

“Declines were seen across the economy in December, but single month data can be volatile meaning quarterly figures often give a better indication of the health of the economy. The UK’s trade deficit widened slightly in the last three months of the year, while business investment again declined, now for the fourth quarter in a row.”

The EC report defaulted to tried and tested ‘uncertainty’ to explain the slowdown. The main thing flagged up was the current aggro between the US and China, but also “…social tensions and fiscal policy uncertainty in some Member States,” which seems to be a reference to France and Italy, respectively. The uncertainty around Brexit was briefly mentioned at the end of the commentary.

That hasn’t stopped opponents of Brexit jumping on these figures as the next piece of news to support their apocalyptic narrative, with loads of supposed experts jumping on the bandwagon and claiming special insight into the minds of the country’s business people. Many such experts also predicted a recession in the event of a leave vote that never materialised, so we should probably take their latest blurts with a pinch of salt.