Greater London Businesses Give £3bn Boost via Broadband Vouchers

A new study has claimed that the Government’s defunct Connection Voucher scheme, which gifted grants worth up to £3,000 to help smaller UK businesses get a superfast broadband (30Mbps+) service installed, has boosted the economy in Greater London by £3bn and will help to create 32,824 new jobs.

The findings are based on a “comprehensive” online survey of 450 voucher scheme recipients, which was recently carried out for the GLA by Adroit Economics with support from Point Topic, The Fifth Sector and the University of Manchester. Some 50% of respondents agreed that faster broadband had a transformational impact on their business.

The voucher scheme, which was supported by well over £100 million of public funding, ran out of money at the end of last year and was used by 55,000 SMEs across the United Kingdom (here). Around 15,000 of those businesses were situated in Greater London, which was more than in any other part of the country (e.g. Greater Manchester came a distant 2nd on c.6,000).

Oliver Johnson, CEO of Point Topic, said:

“The survey and associated data change our understanding of the benefits of broadband. We finally have some well researched, concrete and frankly very impressive inputs for business models around the country. Long to medium term it appears that there is at least an order of magnitude more to be gained than many projections had forecast and even short term there is a much stronger case for more bandwidth in business. As far as policy goes again broadband moves up the ranks and cements its place as a vital instrument in future growth.”

The survey found that businesses experienced average cost savings of 4.8% after the new connectivity was installed, as well as an estimated average sales (turnover) increase of 10.5%, a 6.1% improvement in staff time savings and remote working productivity benefits of 11.1%.

Key Highlights – Benefits of the Vouchers (Greater London)

* SMEs predicted to generate £2 billion additional sales within the first two years and just under £1 billion in cost savings.

* In terms of job creation, the London voucher scheme is predicted to result in an additional 23,350 gross jobs over the first 12 months and 32,824 jobs over the first 24 months following connection of faster broadband service. This translates into 5,775 and 8,118 net additional jobs in the Greater London area and represents a cost per job of between £3,130 and £2,226

* The combined sales increases and cost savings represent £1.7bn Gross Value Added (GVA), which is just over a 20% increase in GVA of London’s voucher firms.

* The London voucher scheme achieved an economic return on investment (ERoI) of £23.70 for every £1 invested in the project by Government (the ERoI is calculated by dividing the net additional GVA to the London economy by the local cost of the project (£18m)).

At this point it’s worth remembering that the voucher scheme only came into existence because of concerns over EU state aid rules (here). The related funding had originally been earmarked to help deploy “ultrafast” (80-100Mbps+) broadband infrastructure across a smaller number of major UK cities, but fears of network overbuilding triggered concerns by BT, Virgin Media and even the EU had a few bones to pick. Eventually vouchers were adopted as the Government’s “Plan B” approach.

Sadly the voucher scheme was not renewed, although Wales and a few of local authorities (e.g. Devon and Somerset) have continued to run their own similar programmes.