Investment in Digital Infrastructure Can Revive Economy

The UK can create and retain 700,000 jobs with policies to spur ambitious and immediate investment in its digital networks, finds a study published today.

An additional £15 billion invested in broadband networks, intelligent transport systems and a smart power grid would not only create jobs, more than half in small businesses, but also boost UK productivity, concludes The UK’s Digital Road to Recovery – an independent study produced by the London School of Economics and Political Science (LSE) and Information Technology and Innovation Fund (ITIF) and made possible by support from IBM.

The investment would also improve general quality of life and the environment, for example by reducing traffic congestion and reducing household energy bills.

The report finds that investment in information and communication technology (ICT) would be even more effective at stimulating the economy than spending on roads, bridges and other forms of physical infrastructure.

This is partly because many types of digital infrastructure create additional jobs outside their immediate sector by giving rise to new kinds of consumer and business activity and enabling new technologies – an effect known as the ‘network multiplier’.

The report recommends that the Government should lead the investment of extra money through a mixture of direct spending, tax incentives and regulatory changes that spur increased private sector investment in these key parts of the digital infrastructure.

While the report does not advocate a specific level of investment it models the benefits of £15 billion spent across the three areas:

£5 billion on broadband networks (creating or retaining 280,000 jobs) with spending focused on getting broadband to unconnected areas, increasing network performance in low-speed areas (3 Mbps or less) and encouraging household take-up of broadband. Spurring more and higher speed broadband would boost business productivity.

£5 billion on intelligent transport systems (creating or retaining 188,000 jobs). ITS would also improve traffic flows through measures like adaptive traffic signals and electronic tolls and provide travellers with real-time traffic information, The report also finds that extra spending on ITS would deliver environmental benefits and make the country more productive.

£5 billion on developing a smart power grid (creating or retaining 235,000 jobs). By using two-way communication and sensors, the report argues, a smart grid will deliver power more efficiently and reliably. Houses could be fitted with smart meters which allow people to use electricity at cheaper times of day and which could work with smart fridges or washer-driers to perform high-energy cycles at times of low demand. One US study suggested this could cut 10 per cent from utility bills. The smart grid would also allow the deployment of new greener technologies including plug-in hybrid electric cars.

While the report’s authors applaud the Government’s support for innovation and green technology in last week’s Budget, they believe it should go further and faster.

Jonathan Liebenau, Reader in Technology Management at LSE, said: ‘Our report shows that in this severe economic climate the right investment in ICT infrastructure would have a significant effect in creating jobs now and in stimulating productivity and innovation for the future.’

Robert Atkinson, President of the Information Technology and Innovation Foundation, said: ‘Nations that invest in ICT to transform fields like transportation and energy reap substantial long-term economic and social benefits. This report shows that these investments also have a short-term impact by producing the jobs and economic growth the UK needs to get out of the current recession.’

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