Northern Ireland s Fibre Future

Transcription

1 SUPERFAST Broadband Northern Ireland Northern Ireland s Fibre Future Report on the economic impact of fibre broadband in Northern Ireland

2 SUPERFAST Broadband Northern Ireland Contents Page Introduction Fibre Broadband in Northern Ireland 1 4 Internet Enabled e-solutions 5 6 Creative & Digital 7 8 Financial Services 9 10 Advanced Manufacturing Retail Agri-food Overall Value of Fibre to Businesses in Northern Ireland Method of Calculating Business Impacts Contacts

3 SUPERFAST Broadband Northern Ireland Introduction: In January 2013, BT commissioned Regeneris*, to conduct a study into the potential economic benefits of fibre broadband. The BT economic impact of fibre broadband report studied specific sectors and sought to identify what benefits fibre could bring to the NI economy by Regeneris then compared these with a sample of similar sectors in the United States, using data from the Strategic Networks Group (SNG)*. *Regeneris: Regeneris Consulting is an independent economics firm that provides research-based advice to major corporates, developers, national government bodies and local government. They regularly assess the economic impact of broadband investments in a number of locations across the UK. This work has informed business planning and bid development, including for a number of the current crop of BDUK projects and projects to help secure investment from European funding sources. *SNG: Data relates to a survey of 16,000 US firms using the internet

4 FIBRE BROADBAND IN NORTHERN IRELAND Fibre broadband creates new market opportunities for NI s businesses Northern Ireland was the first region in Europe to have 100% broadband availability 90% of premises in Northern Ireland are connected to a fibre cabinet SMEs Start-ups 99% of businesses in NI are small or medium-sized enterprises which together generate 75% of NI s turnover SMEs tend to innovate and exploit new technologies the most NI has fewer business start-ups than the rest of the UK Successful start-ups contribute significantly to a growing economy Fibre can reduce start-up costs and improve access to wider markets, encouraging new business growth By making fast broadband widely available, NI has addressed one of the major barriers to economic growth, allowing businesses to now focus on exploiting the potential in place Major barriers to the adoption of online e-solutions : Poor internet speed A lack of skills and training Privacy and security concerns Uncertainty over the benefits of e-solutions Fibre is a truly enabling facility which puts businesses at the forefront of innovation and efficiency and can drive business growth 1

5 FIBRE BROADBAND IN NORTHERN IRELAND Fibre could enhance the productivity of SMEs... through the use of e-solutions Benefits of e-commerce Market, sell and deliver products to a wide geographical area Aid expansion into new markets Create media rich web content to advertise and promote products Benefits of e-processes Efficiently manage and coordinate suppliers in the production chain through real-time logistics and collaboration Train employees more flexibly, at lower cost Generate efficiency savings through cloud-based customer relationship management (CRM) and enterprise resource planning (ERP) Companies with fibre can make better use of higher value e-commerce solutions Rich media or service creation is 20% higher among fibre businesses* 21% more firms with a fibre connection practice teleworking compared to those with basic broadband* Businesses with fibre are more satisfied... % rating as good or excellent* Basic Fibre Reliability 70% 92% Speed 61% 88% Value 69% 90% Flexible working is becoming increasingly popular... It results in cost savings - remote working reduces office overheads It reduces the need for travel, reducing travel expenses and lowering firms carbon footprint It frees more time for productive activities and customer service It assists employees work/life balance which improves motivation and retention *data relates to a survey of 16,000 US firms using the internet supplied by Strategic Networks Group Inc, 2

6 FIBRE BROADBAND IN NORTHERN IRELAND Challenges and Opportunities for Northern Ireland Productivity NI s productivity (output per hour worked) is the lowest in the UK Labour productivity has been 15-20% below the UK average since 2003 Fibre allows employees to complete their tasks faster and more efficiently NI has fewer registered patents per capita than any other region in the UK Innovation NI has the lowest % of innovation active firms in the UK - innovation active firms improve products, processes and ways of doing business Fibre can help businesses develop and utilise new, more efficient work processes and products NI is a predominantly rural economy with a low business density Geography Belfast generates 30% of NI s total GVA but contains only 15% of NI s population Within the Northern Ireland border region *, 21% of people haven t signed up for a broadband connection 1 Fibre helps put rural businesses on a level playing field, ensuring they remain competitive A recent survey of 400 businesses in NI s border region 1 found that: 92% of businesses require the internet for business purposes of which 91% say internet connectivity is critical to their business 75% said that the speed and reliability of their connection is most important to their business Fibre delivers the type of internet connection that successful businesses say they need Source: NI Executive Rebuilding and Rebalancing the Economy: An Evidence Base IBEC-CBI Joint Business Council, Review of telecoms in the border regions, February 2012 *(Armagh, Dungannon, Cookstown, Omagh and Fermanagh) 3

7 FIBRE BROADBAND IN NORTHERN IRELAND Economic Impact of BT s Planned Fibre Network Fibre Enabled Street Cabinets Covering 91% of residential and 83% of business lines Expected 15 Year GVA Impacts West 65m North East 88m 89m South 96m South East 84m Data provided by BT. Roll out excludes what will be covered by BDUK in 2013 and beyond Based on exploitation of fibre by existing businesses and 40% adoption 4

8 INTERNET ENABLED E-SOLUTIONS Internet Based Business Applications Through online sales and by creating a wide range of services and content, the internet has provided an entirely new business channel Many businesses are already exploiting the revenue generating opportunities presented by e-commerce Rich media and service creation Creating 3D views of products, multi-media presentations, and value-added tools, such as online calculators or map-based services can provide an interactive user experience, tailored products and services, and promote sales Sales of goods or services Taking orders via a website and processing payments and delivery can reduce cost and speed up customer experience Countrywide Business Impacts if 10% of Non-users Adopted e-solutions* Delivering services and content online Especially suitable for products such as software, ebooks and videos Some services may also be licensed or streamed rather than purchased by download, creating opportunities for recurring sales based on monthly subscriptions Traditional delivery of physical products can also be tracked through an online ordering process Average Annual Impact on Revenue per Business* Advanced Manufacturing Combined annual revenue generation and cost savings Creative & Digital Sales Delivering Services & Content 1,950,000 1,830,000 3,360,000 1,790,000 Rich Media & Service Creation 670, ,000 Rich media & service creation Delivering services & content Agri-food Retail Financial Services Creative & Digital Advanced Manufacturing Financial Services 4,910,000 3,360,000 1,190,000 Retail 30,210,000 32,590,000 11,390,000 Sales Agri-food 6,450,000 11,360,000 3,910, ,000 40,000 60,000 80, ,000 *data provided by Strategic Networks Group Inc, 5

9 Accessing collaborative tools e-document transfer Teleworking INTERNET ENABLED E-SOLUTIONS Emerging Fibre Enabled Applications Fibre allows businesses to improve processes and overall performance through e-process applications e-processes are allowing businesses to achieve substantial cost savings and generate additional revenue The additional benefits of these high value e-solutions may currently be small in comparison to those from established internet uses but will increase significantly with the introduction of ubiquitous fibre broadband Teleworking Enables people to work remotely from home as effectively as if they are working from an office Enable businesses to access skilled employees outside of their local area and reduce ongoing costs of office space Average Annual Impact on Revenue and Costs per Business* Accessing Collaborative Tools Allow for easy sharing of information from any location. Facilitate team collaboration and communication on shared activities e Document transfer Internally or between customers, partners, or suppliers offers greater ease of access and enhanced security Countrywide Business Impacts If 10% of Non-users Adopted e-solutions* Revenue Agri-food Retail Financial Services Creative & Digital Advanced Manufacturing Advanced Manufacturing Combined annual revenue generation and cost savings Accessing Collaborative Tools e-document Transfer 180,000 50,000 Teleworking 100,000 Revenue Creative & Digital 220,000 70,000 70,000 Financial Services 430, , ,000 Revenue 0 1,000 2,000 3,000 4,000 5,000 6,000 Retail Agri-food 1,060,000 *data provided by Strategic Networks Group Inc, 6 3,210,000 1,540, ,000 1,520, ,000

10 CREATIVE & DIGITAL This sector includes firms involved in: film, software, games and print media publishing; broadcasting; computer programming and consultancy; architectural services; fashion, industrial and graphic design; photography There is a strong presence of Creative & Digital firms in NI......However NI s creative industries have been losing ground on the rest of the UK 2,400 Businesses Of which 37% are in Computer Programming & IT Consultancy Generating 42% of sector GVA (2008) 800m+ GVA pa 3% of businesses in NI 7% employment growth in media production in ,000 jobs 5,000 Self-employed Creative, arts & entertainment activities grew 13% between Over 750 software and electronic publishing businesses NI has seen a significant growth in the number of Architecture and Design firms US Television series Game of Thrones is estimated to have generated 43m of expenditure in the NI economy a 1% gap in business numbers in 2008 has widened to a 6% gap in 2010 Digital Animation, Mobile and Web Content and e-learning / Serious Gaming are key growth sectors targeted by Invest NI Fibre allows Digital and ICT firms to: NI s creative industries make a proportionally smaller contribution to total employment and GVA than in the UK R&D & innovation are a key contributor to sector growth: Fibre can help the digital content industry connect and network with educational and research centres helping generate new intellectual property through increased collaboration Utilise online delivery mechanisms for packaged software: software as a service (SaaS) where applications and data are hosted online to hugely reduce distribution costs for developers Improve the quality of service they provide engage in face-toface communication using VoIP services, deal with urgent client issues from home and service computers remotely 7

11 VALUE OF THE INTERNET TO CREATIVE & DIGITAL Use of the internet could offset employment reductions in other areas Even when overall job numbers are falling, the internet has a net positive impact in this sector 37% of all new jobs in Creative & Digital industries can be attributed to the use of the internet* 51% of firms engage in multimedia or teleconferencing * 56% of Creative & Digital sector firms use cloud-based applications for collaboration* more than in any other sector NI s Creative firms could reduce operating costs by 11% * Switching to fibre broadband could increase the proportion of sales generated through the internet from 39% to 50% * Greater download and upload speeds lead to greater utilisation of e-solutions by firms A greater use of e-solutions generates higher internet revenues Firms in this sector could generate 41% of their revenue from the internet* High resolution photos, videos and graphics can be uploaded & downloaded at high speeds Cloud computing makes it cheaper and easier for entrepreneurial artists and designers to create and distribute content easily and speedily Around 60% of creative firms make use of broadband for Teleworking* Over 2,000 creative businesses in NI have fewer than 10 employees Smaller firms tend to exploit internet benefits least As firms grow in size, they grow their internet based revenue *data relates to a survey of 16,000 US firms using the internet supplied by Strategic Networks Group Inc, Current Value of the Internet to Creative & Annual Returns All NI Current Digital Businesses in Northern Ireland Sales 560,700,000 Av per Firm 237,000 36,000,000 15,000 There is scope for strengthening NI s Creative & Digital sector through use of fibre Estimated Added Value of Fibre Broadband to Creative & Digital Businesses in NI by 2018 Annual Returns All NI Potential Sales 76,200,000 Av per Firm 32,000 5,000,000 2,100 Data from SNG; Calculations by Regeneris assessment assumes 40% adoption of fibre 8

12 FINANCIAL SERVICES This sector includes: banks, building societies, credit unions, investment funds, loans and mortgages; insurance services; pension funds; brokerages; administrative services; accountancy, auditing and tax advisors; financial services technology and infrastructure Northern Ireland has a strong presence of financial intermediaries and financial services technology 2,400 Businesses 50% based in Belfast 1.4bn GVA pa 3% of firms... Recognised high growth sector in NI businesses in NI 3% of total NI employment 4,000 net new jobs in financial intermediation ,000 jobs 50% employed in banking services Northern Ireland supplies financial technology and services to domestic and international clients providing infrastructure, applications support and software development Northern Ireland has developed a cluster of financial firms in banking, capital markets and insurance, serving global clients 24 hours a day As a location Northern Ireland offers us a strong pool of university educated people, an attractive cost base and a geographic location that allows us to service our global client base. Brian Conlon, CEO, First Derivatives plc However there is a significant opportunity to further develop NI s financial services industry compared to other regions of the UK....and there is scope for raising levels of efficiency within the sector outside of Belfast Overall productivity in financial services is 70% of the UK average 9

13 VALUE OF THE INTERNET TO FINANCIAL SERVICES Faster download and upload speeds lead to greater utilisation e-solutions by firms A greater use of e-solutions generates higher internet revenue Internet revenue could account for 22% of total revenue in the Financial Services sector* Finance firms which use the internet could save 9% in operating costs* receive large amounts of data and information rapidly The 700 Accountancy** firms in Northern Ireland could use cloud computing to get employees to share data and information whilst out of the office, making day-to-day operations easier and reducing operating (IT) costs New fibre broadband services mean NI firms could more easily: engage with clients around the world and outside normal working hours 80% of financial firms rank the presence of broadband as essential or very important for remaining in their location* reduce transaction costs 64% of financial firms make use of cloud computing for running basic applications in order to reduce costs and increase efficiency* 28% of all new jobs can be attributed to the internet* *data relates to a survey of 16,000 US firms using the internet supplied by Strategic Networks Group Inc, **Source: ONS UK Business Activity Size & Location 2011 Switching to fibre broadband could increase the proportion of sales generated through the internet from 41% to 52% * 69% of these firms rate the ability to access their shared data from any location as very important* Current Current Value of the Internet to Financial Services Businesses in Northern Ireland Potential Estimated Added Value of Fibre Broadband to Financial Services in Northern Ireland by 2018 Annual Returns All NI Sales 287,200,000 Av per Firm 170,000 21,100,000 13,000 Fibre could be critical for attracting and retaining Financial Services firms in NI Annual Returns All NI Sales 35,800,000 Av per Firm 22,000 2,600,000 1,600 Data from SNG; Calculations by Regeneris assessment assumes 40% adoption of fibre 10

14 ADVANCED MANUFACTURING This sector includes manufacturers of: chemicals and chemical products; pharmaceuticals; computer, electronic and optical products; complex machinery; components for motor vehicles and other transport Many industries in this sector, such as machinery and equipment manufacturers, electronics, chemicals and aerospace, are leading industries for Northern Ireland......However the structure of NI s manufacturing sector is changing in the face of intense global competition.....and the sector is forecast to contract significantly in the near future 730 Businesses 26,500 jobs Of which 45% manufacture machinery & equipment 1.3bn GVA pa 8% employment growth in pharma for last 2 yrs 13% recent annual employment growth In order to compete effectively internationally, there is a recognised need for NI manufacturing to move up the value-added chain and embrace knowledge intensive, higher skilled markets - moving away from primarily competing on cost towards advanced processes based on innovation and technological strengths embedded within the supply chain Manufacturing needs to continue to be the major driver of innovation in the Northern Ireland economy through the introduction of new products and processes... At least 2,000 manufacturing jobs have been created each year since 1998 Advanced manufacturing is the largest of the 5 technology areas identified by MATRIX NI as making a significant contribution to the NI economy and manufacturers should build upon their close links with academic institutions - Queen's University Belfast is rated as one of the top British universities for engineering courses Fibre can aid in the switch from centralised production and business control to more flexible, distributed production based on specialisation, customisation and collaboration through integrated supply chain networks 11

15 VALUE OF THE INTERNET TO ADVANCED MANUFACTURING 58% of manufacturers use cloud computing for Customer Relationship Management (CRM) software or other sales platforms* Switching to fibre broadband could increase the proportion of sales generated through the internet from 24% to 30% * New fibre broadband services mean NI Advanced Manufacturing firms could more easily: share test information virtually meaning fewer prototypes are needed 17% of Advanced Manufacturing start-ups can be attributed to broadband* exploit network speed and reliability to upload and download large three dimensional renderings essential for 3D printing Firms which use the internet reduce operating costs by 4% * communicate and coordinate with suppliers to manage inventories and execute orders in real time 25% of advanced manufacturing revenue is driven by internet use* 71% of firms use collaborative tools made easier with superfast broadband* 80% of advanced manufacturers with broadband say it is an essential or very important factor for remaining in their location* *data relates to a survey of 16,000 US firms using the internet supplied by Strategic Networks Group Inc, Current Current Value of the Internet to Advanced Manufacturing Businesses in Northern Ireland Potential Estimated Added Value of fibre to Advanced Manufacturing in Northern Ireland by 2018 Annual Returns All NI Av per Firm Sales 412,400, ,000 14,300,000 20,000 Fibre is a vital enabling technology which could underpin the diversification and sustainability of manufacturing businesses in NI Annual Returns All NI Av per Firm Sales 56,000,000 80,000 1,900,000 2,700 Data from SNG; Calculations by Regeneris assessment assumes 40% adoption of fibre 12

16 RETAIL This sector includes wholesalers and retailers across the entire range of consumer goods markets There is a large retail sector in Northern Ireland contributing significantly to the economy......however there are significant challenges and opportunities for the retail sector in NI... The retail sector in NI is over 10% less productive than the UK sector as a whole 13,000 retailers employ <10 people 16,000 Businesses over 100 companies employ more than a hundred staff 19% of businesses in NI 3.4bn GVA pa A weakened Euro has made Northern Ireland retailers less attractive to Republic of Ireland consumers Maximising their online presence is critical for retailers facing significant international competition Small businesses must market their products as widely and as effectively as possible if they are to attract customers to their stores NI retailers could benefit from e-commerce by: marketing, selling and delivering products to a wider geographical area running online businesses from home Over 20,000 self-employed (2008) 130,000 jobs 33,000 GVA/job expanding outside of local customer bases and cost pressures advertising and promoting products through media rich web delivery increased reliability of connection and reduced downtime minimising the order time for customers e-processes allow NI retailers to: coordinate suppliers efficiently through real-time inventory management train employees remotely, saving money and travel time utilise cloud-based customer relationship management (CRM) and enterprise resource planning (ERP) software make quick changes in product pricing for electronic point of sale (EPOS) 13

17 VALUE OF THE INTERNET TO RETAIL The internet presents an enormous opportunity for retailers to grow their businesses - internet sales currently account for less than 10% of all retail sales in the UK (by volume) With fibre, businesses could more easily acquire suppliers, staff and customers from a wide geographical area Small retailers could use the internet to market their unique selling points such as welcoming staff, a personalised service, local knowledge and family tradition or heritage Switching to fibre broadband could increase the proportion of sales generated through the internet from 31% to 40% * 29% of all new jobs in retail can be attributed to internet use* Retailers use the internet for purchasing goods and services and communicating with suppliers Fibre facilitates innovation which is becoming vital for ensuring the prosperity of retailers in NI Fast internet is very important in deciding where to locate for 75% of retailers* For firms online, 31% of retail revenue is driven by internet use* Firms which use the internet reduce operating costs by 7% * 5.1% of instore sales are influenced by mobile** *data relates to a survey of 16,000 US firms using the internet supplied by Strategic Networks Group Inc, **Source: The Dawn of Mobile Influence, Deloitte Digital 2012 Current Current Value of the Internet to Retail Businesses in Northern Ireland Potential Estimated Added Value of Fibre Broadband to Retail in Northern Ireland by 2018 Annual Returns All NI Sales 4,103,200,000 Av per Firm 255, ,400,000 15,000 Fibre supports the use of numerous e-solutions which could enrich and improve the way in which products are marketed and sold by retailers in NI Annual Returns All NI Sales 526,000,000 Av per Firm 33,000 28,900,000 1,800 Data from SNG; Calculations by Regeneris assessment assumes 40% adoption of fibre 14

18 AGRI-FOOD This sector includes both crop and animal production, plus food processors and manufacturers NI has a significant presence of large, successful, international food manufacturers and distributers......however there are significant opportunities to improve the agri-food sector in NI... 16,500 Businesses 20% of businesses in NI 52,000 jobs 500 businesses employing around 18,000 people are involved in the manufacture of food products 1.2bn GVA pa 4% of NI s GVA (2011) Total income from farming has increased by 50% since m GVA from agriculture Agricultural productivity is less than 60% of the UK average MATRIX NI believes that the future of agri-food is dependent on the capabilities of life sciences, ICT, advanced materials and engineering. The internet is an essential means of distributing knowledge and learning Fibre can aid the creation and efficient management of a complete supply chain Agricultural producers need to be aware of the ways in which technology can help their businesses operate effectively Produce could potentially be better marketed and sold abroad Expenditure on marketing has only increased by 1% since

19 VALUE OF THE INTERNET TO AGRI-FOOD MATRIX NI is promoting increased collaboration between food companies and research institutes, and with other regions and countries in order to maximise the impact and benefit of knowledge transfer Fibre can help organisations communicate and collaborate using tools such as cloud storage and video conferencing Fibre can strengthen the links between industries, allowing companies to benefit from innovation and knowledge transfer Agri-food firms could generate 31% of their revenue from the internet* Firms using the internet reduce operating costs by 7% * 4% more jobs are directly attributable to use of the internet in rural areas than in urban areas* The new fibre services mean NI firms could more easily: market, sell and distribute produce to a wider geographical area access government information interact and coordinate with firms in their supply chain Advancing agri-food depends on developing: knowledge based toolsets that enhance and communicate the safety, security and purity aspects of products and provide assurance of quality to the consumer (MATRIX NI) Fibre makes it easier to develop websites, interactive tools, videos or animations in order to fulfil this ambition *data relates to a survey of 16,000 US firms using the internet supplied by Strategic Networks Group Inc, Current Current Value of the Internet to Agri-Food Annual Returns All NI Businesses in Northern Ireland Sales 615,000,000 Av per Firm 37,000 61,400,000 3,700 Fibre allows food manufacturers in NI to efficiently organise their production processes and build demand by marketing and selling their produce online Potential Estimated Added Value of Fibre Broadband to Annual Returns All NI Agri-Food in Northern Ireland by 2018 Sales 82,200,000 Av per Firm 5,000 6,400, Data from SNG; Calculations by Regeneris assessment assumes 40% adoption of fibre 16

20 OVERALL VALUE OF FIBRE TO BUSINESSES IN NORTHERN IRELAND Business Challenges Priority Focus Opportunities Potential Results Creative & Digital Lower business density than in other parts of UK Contributes comparatively less GVA and fewer jobs to the UK economy Maintaining nascent growth Focus on R&D and innovation Broaden client base Strengthen emerging specialisms Networking Cloud-based collaboration Internet hosting Increasing internet sales Multimedia and teleconferencing High speed uploading and downloading of graphics and multimedia Generate new Intellectual Property Stimulate new start-ups Revenue generation of c. 76m by 2018 Cost savings of c. 5m by 2018 Financial Services Raising levels of productivity and prosperity outside of Belfast Retaining and attracting international clients and companies Ensuring small firms remain sustainable and competitive Undertake measures to raise efficiency levels and reduce costs Secure optimal infrastructure Reduce transaction costs Host business applications online Broaden client base Revenue generation of c. 36m Cost savings of c. 2.6m by 2018 Consolidate sector strengths Advanced Manufacturing Rising to the threat of international competition Supplying knowledge-intensive, highly-skilled products Maintain status as major driver of innovation in NI Sustain recent employment growth Reinforce strengths in skills and technology Provide resources and support for strong and emerging sub-sectors Diversification into high value-added markets Better integrated supply chain Using cloud computing for CRM Stronger links with knowledge sector New products and processes Exploit networks to share large 3D renderings and designs Cost savings of c. 2m by 2018 Revenue generation of c. 56m by 2018 Consolidate sector strengths 17

21 OVERALL VALUE OF FIBRE TO BUSINESSES IN NORTHERN IRELAND Business Challenges Priority Focus Opportunities Potential Results Retail Raising levels of productivity Accommodating adverse currency fluctuations Harnessing the sales potential of the internet Ensuring the sustainability of small retailers Fully engage with internet retail Use the internet for marketing and promotional purposes Undertake measures to raise efficiency levels and reduce costs Quicker and more efficient communication with suppliers Increasing the proportion of internet sales Train employees remotely Utilise cloud-based CRM and ERP software Market and sell products to a wider geographical area Cost savings of c. 30m by 2018 Revenue generation of c. 526m by 2018 Sustainable small retailers Internationally competitive large retailers Minimise order time Efficient management of supply chain Agri-food Increasing collaboration with other sectors Maintaining the sustainability of small farms and retailers Strengthening position of large food processors Market and sell produce abroad Strengthen supply chain Maximise productivity Market, sell and distribute produce to a wider geographical area Improve connectivity for firms in rural areas Build links between industries to stimulate innovation and knowledge transfer Cost savings of c. 6.4m by 2018 Revenue generation of c. 82m by 2018 All Sectors Maintaining the sustainability and prosperity of businesses Being at the forefront of innovation and efficiency Maximising the benefits of new technologies Embrace potential efficiency enhancing measures Diversify into new products and markets Solidify competitive advantages Invest in infrastructure, skills and training to exploit productivity advantages of new technologies Market and sell specialisations effectively Significant opportunities for cost savings and revenue generation Strong business growth 18

22 Sector Analysis METHOD OF CALCULATING BUSINESS IMPACTS Following an initial analysis of the Northern Ireland business base and a provisional assessment of the likely productivity benefits to particular industries, the following five priority sectors were formed: Priority Sectors Advanced Manufacturing Retail Creative & Digital Financial Services SIC 2007 UK SIC Description 20 Manufacture of chemicals and chemical products 21 Manufacture of basic pharmaceutical products & pharmaceutical preparations 26 Manufacture of computer, electronic and optical products 27 Manufacture of electrical equipment 28 Manufacture of machinery and equipment n.e.c. 29 Manufacture of motor vehicles, trailers and semi-trailers 30 Manufacture of other transport equipment 45 Wholesale and retail trade and repair of motor vehicles and motorcycles 46 Wholesale trade, except of motor vehicles and motorcycles 47 Retail trade, except of motor vehicles and motorcycles 58 Publishing activities 59 Motion picture, video and television programme production etc 60 Programming and broadcasting activities 62 Computer programming, consultancy and related activities 7111 Architectural activities 7410 Specialised design activities 7420 Photographic activities 64 Financial service activities, except insurance and pension funding 65 Insurance, reinsurance and pension funding, except compulsory social security 66 Activities auxiliary to financial services and insurance activities 6920 Accounting, bookkeeping and auditing activities; tax consultancy The most recent GVA and employment data available was aggregated using the relevant SIC codes to give a description of the size of each sector. Statistics used in the sector profiles to describe the current and recent historical performance of Northern Ireland s businesses were obtained from a range of publicly available economic datasets: ONS UK Business: Activity, Size and Location, 2011 Northern Ireland Quarterly Employment Survey (QES), December 2012 ONS Business Enterprise Research and Development, 2011 Dataset BIS UK Innovation Survey, 2011 Statistical Review of Northern Ireland Agriculture, DARD, 2011 Matching NI Data to SNG Internet Usage Data Northern Ireland s business base was matched to the SNG dataset based on a variety of parameters such as business sector, size and location (rural/ urban) to generate impact estimates. Estimating the Value of the Internet Economy in Northern Ireland Data provided by SNG shows average % cost and revenue uplifts attributed by businesses to the internet across our priority sectors and employee size categories. Regeneris has applied these uplifts to average cost and revenue data for Northern Ireland in order to generate an estimate of the current countrywide value of the internet. Data on average revenue per firm in Northern Ireland is based on average turnover per worker from the 2010 Annual Business Inquiry and scaled up by average firm size. Base figures for average operational costs are taken from SNG data and scaled to fit the sector and size mix of the Northern Ireland business base. 19

23 METHOD OF CALCULATING BUSINESS IMPACTS and Revenue Impacts: The Benefit of Internet Enabled e-solutions Economic Impact of BT s Planned Fibre Network Estimating the Potential of Fibre Broadband to Boost the Internet Economy by 2018 Based on initial observations by SNG on the difference in effects between those with faster connection speed versus those with first generation broadband, an assessment has also been undertaken as to the likely impact on our key sectors of the widespread availability of fibre. Current Annual Impact of Internet Enabled Business Solutions SNG data also shows the annual cost savings and revenue impacts attributed by businesses to a range of specific business solutions. (The specific solutions tested are described on pages 5-6). Countrywide Business Impacts Associated with 10% of non-users Adopting e-solutions Using this data, SNG has looked at the effect on costs and revenue if 10% of non users were to take up these business solutions (e.g. if 70% of firms were currently utilising e-document Transfer, this would mean 10% of the 30% of non-users, i.e. a rise to 73%). Again, Regeneris has applied these findings across the business base in Northern Ireland using UK Business Activity data for 2012 in order to estimate the impact investments in business support and/ or demand stimulation, aimed at increased use of internet enabled business solutions, might generate. The assessment of impact centres on the improved performance of existing firms and the associated employment and wealth (GVA) creation for Northern Ireland. Network enablement: The assessment is based on BT s expected business coverage. In practice, the pace of roll out will vary according to local demand and conditions, but these simplifying assumptions provide a reasonable estimate of the expected schedule, based on Regeneris experience and knowledge. Adoption: An overall adoption rate of 40% is applied. Based on the latest rates of fibre take-up Regeneris believes that this is a conservative central estimate and that adoption could easily rise to levels seen under first generation ADSL broadband (c.70% over the longer term). Adoption is assumed to be higher in knowledge based sectors, lower in manufacturing and construction sectors and lower still in other service sub sectors. It is assumed to be higher amongst larger firms. Exploitation and the Value of Services: There are potential productivity gains for businesses from fibre. A 2008 report commissioned for the EC * estimated the following productivity impacts generated under first generation ADSL broadband: Manufacturing and Construction: 0.14% increase in GVA per firm per annum Knowledge Intensive: 0.58% per annum Other Services: 0.32% per annum These are applied to average GVA per firm figures derived from the 2010 Annual Business Inquiry. An equivalent increase is added to account for the benefits derived from accessing new markets or developing new products and * Micus Management (2008). The Impact of Broadband on Growth and Productivity. 20

24 METHOD OF CALCULATING BUSINESS IMPACTS Economic Impact of BT s Planned Fibre Network services (Manufacturing & Construction and Knowledge Intensive Industries only). Time Dependency: Regeneris has assumed the following build-up periods: Service provided after 1 year (from announcement) Assumed business adoption levels reached after 3 years Full productivity improvements reached after 1 year Full innovation benefits reached after 4 years Technological Change: We have assumed a 5% uplift in annual impact in the short-term (5 years), a 10% uplift on impact in the medium-term (10 years) and 20% in the long-term (15 years). Multiplier Effects: A combined induced and indirect economic multiplier effect of 1.25 has been applied as this is appropriate for the size of the impact area (NI). Displacement & Substitution: These are assumed to be zero since the effects are expected to be limited. Discounting Impacts: Impacts are discounted at a rate of 3.5% per annum. An increasing uplift in business performance due to expected developments in broadband enabled applications has been applied over time. However, no allowance has been made for any uplift in worker productivity additional to this. Statistics and calculations correct as of February

25 SUPERFAST Broadband Northern Ireland Contact: Frank McManus, Head of Wholesale Sales & Services T: E: Tara Whaley, Head of Public Affairs T: E: Media Enquiries: Gina Kelly, PR & Corp Relations Manager T: E: gina.kelly@bt.com