23 November 2017

Speaking yesterday, chancellor Philip Hammond said: “Today we invest over £500m in a range of initiatives from artificial intelligence, to 5G and full fibre broadband.

Yesterday’s budget prompted a flurry of comments from the industry, with many broadly applauding the chancellor’s announcement of spending £500m on technology programmes.

The investment will back a range of initiatives, including full fibre broadband, artificial intelligence and driverless cars.

It also includes £160m on 5G development.

While this was particularly welcomed by a number of operators and service providers, many also expressed concerns.

For example, Telefónica – which owns O2 – reckons the investment reflects the UK’s intent to become a world-leading digital economy.

“Our own research tells us that 5G will contribute an additional £7 billion to the UK economy each year by 2026,” said CEO Mark Evans. “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.”

Robin Kent, director of European operations at network infrastructure supplier Adax, says he fully supports the government’s announcement but also points out that the industry still needs to establish a business case for 5G. 

“It’s all well and good promising faster download speeds to end-users and having this funding upfront to kickstart infrastructure projects. 

“But we must ask ourselves whether operators can ensure 5G works sufficiently to provide a good consumer experience whilst making money? With 5G theoretically 40 times faster than the hypothetical limit of 4G, it will take a great deal of expensive upgrading of the current infrastructure to fulfil its claims.”

Kent also questions whether end-users be willing to pay for a premium 5G service, and adds that it must be established who is going to foot the bill in the long run.

Alastair Macpherson, telecoms partner in PwC's strategy consulting business Strategy&, believes much more funding will be needed to accelerate the digital networks of the future. 

“While [the] announcement expands on previous digital infrastructure investments unveiled by the government, industry will need to commit orders of magnitude more capital in future to fully roll out a 5G network across the nation. We can expect to see the bulk of 5G investment to come in the 2020s after the standards are defined.

“To unlock 5G’s maximum potential for both consumers and organisations, we need to see enough devices in production to drive prices down, enough spectrum made available to enable cost effective network deployment, and a significant increase in the number of base stations near to customers – perhaps 10 to 15 times as many as we have supporting 2, 3 and 4G today – with a high speed fibre network to connect them.”

Global telecoms infrastructure provider CommScope adds to this by saying continuous investment will be needed and that there is still work to do to tackle coverage ‘black spots’. 

Phil Sorsky, the company’s international VP of service providers, says: “These won’t be addressed by 5G for several years after its launch, therefore these needs are likely to be met by LTE-A and LTE-Pro coverage for the foreseeable future.”

Digital skills

Among some of the other plans announced by the chancellor yesterday, there was also general support for initiatives aimed at plugging the digital skills gap.

Andrew Joint, commercial technology partner at specialist digital law firm Kemp Little, said: “It is also good to see investment announced to fund both 450 PhD researchers via AI fellowships and £84m committed to up-skilling 8,000 computer science teachers to ensure every secondary school has a fully qualified computer science GCSE teacher.  

“Whilst the technology is already here, the developments of AI technology made by the next generation of coders and computer scientists are likely to be the more impactful, and working to get the UK best skilled to lead that development is sensible longer-term planning.” 

Guy Tweedale, regional VP at Rocket Software, believes that the investments into creating a more digitally skilled workforce for the future is the big budget point that will resonate with the tech industry. 

“The move to put in foundations at secondary school level to teach children how to work with computers is the really interesting part,” he says. “This will be the key to supporting the IT sector for years to come, particularly as the baby boomer generation retires.”

But Matthew Adam, CEO of training company We Are Digital, warns that in in order to bridge the need for the 1.2m new technical and digitally skilled people that are needed by 2022, it is vital to create and support retraining opportunities across society.

He says that with the UK’s growth forecast in 2017 now downgraded to 1.5 per cent from two per cent in the March budget, coupled with the challenges of Brexit, the need for the UK to sit at the forefront of digital skills and inclusion is more pressing than ever. 

“We need to be able to grasp, with both hands, the digital opportunities that present themselves to us in order to make us a true global digital force. The reality is that we simply cannot afford not to. Independent analysis shows that getting the UK online and understanding how to use digital tools could add between £63bn to £92bn to annual GDP.”

Chancellor Philip Hammond said yesterday that a new high-tech business is founded in the UK every hour, which he wants to increase to every half hour.

Adam said that the £500m investment was “imperative” to support this growth. But he added that to bridge the need for the 1.2 million new technical and digitally skilled people which are required by 2022, we must create and support retraining opportunities across society to make the UK truly digital.

While commitments to emerging technologies such as 5G, AI and data science is to be applauded, KPMG says it is important that core technology businesses are not forgotten in the “chase for the next shiny toy”. 

Tudor Aw, UK head of tech sector at the consultancy firm, says the UK is particularly strong in ‘old-school’ technology sub-sectors such as software, IT services and semiconductors.

“Tech investment should therefore be made in education, regulation, tax and other incentives to ensure our strength in the tech sector is broad based and not just those areas that sit at the top of the latest hype curve.”