The UK government has confirmed it will be borrowing to try to encourage investment in high speed fiber broadband networks and 5G technology — with a plan to spend over £1BN by 2020-2021 to bolster the country’s digital infrastructure.
Giving his Autumn Statement today, Chancellor Philip Hammond said: “Our future transport, business and lifestyle needs will require world class digital infrastructure to underpin them. My ambition is for the UK to be a world leader in 5G — that means a full fiber network, a step change in speed, security and reliability. So we will invest over £1BN in our digital infrastructure to catalyze private investment in fiber networks and to support 5G trials.”
The UK continues to rank well outside the top 10 countries for average broadband speeds, according to Akamai’s 2016 report. While the gap between urban and rural broadband speeds remains problematic.
Incumbent telco BT, whose Openreach subsidiary owns and manages access to the UK’s primary broadband infrastructure, has focused its efforts on squeezing higher speeds out of existing copper based infrastructure — with only very limited full fiber to the home rollouts. While rival broadband network providers, such as Virgin Media, typically focus on urban areas where the volume of paying customers makes the infrastructure expenditure worth their while. The result: Just two per cent of UK premises have access to full-fibre connections.
The government’s plan to improve that figure is to encourage smaller, alternative players to push in with full fiber offerings. There will be £400M for what it dubs “gold standard” fiber broadband, with funds needing to be matched by broadband providers — so a potential £800M to fund rollouts.
Today Hammond also said that from next April there will be 100 per cent business rates relief for a five year period on new fiber infrastructure — “supporting further rollout of fiber to homes and businesses”.
A further £750M will be made available to fund 5G trials.
The chancellor added that the government will be asking the National Infrastructure Commission (NIC) for recommendations on the UK’s future economic infrastructure needs — and signaled an intention to increase the proportion of GDP spent here, to between 1% and 1.2% of GDP every year from 2020, up from around 0.8% this year.
£400M to try to help UK startups scale before being bought out
The Autumn Statement also contained a measure specifically aimed at supporting UK startups to scale up, with the Chancellor announcing plans to put £400M into venture capital firms via the British Business Bank — “unlocking £1BN of new finance for growing firms” as, in his words, “a first step to tackle the long-standing problem of our fastest growing startup tech firms being snapped up by bigger companies, rather than growing to scale”.
Eileen Burbidge a parter at VC firm Passion Capital, which has received investment money via the British Business Bank, welcomed the move.
“I think it’s an excellent decision,” she told TechCrunch. “Passion isn’t more likely to be a future beneficiary than anyone else (our existing/prior BBB commitments have been done/in the past, 2011 and 2015) but as a previous beneficiary we can attest to how valuable the BBB support was to attracting other investors in support of our fund and activities.
“The BBB was absolutely crucial for us in launching our first fund since we were first time fund managers. Their commitment helped to secure funding from across European and South East Asian family offices and high net worths. So I think it’s brilliant the BBB will be given more funding to support even more fund managers or to greater degrees.”
Asked about the government’s overarching aim of prevent promising homegrown startups from being bought by overseas acquirers before they have a chance to get really big she described it as a “noble aim”, but added: “I see it all as good activity (acquisitions, mergers) and that it’s a good thing the world recognises Britain as a place to scout for great talent, innovation and technology.
“I’ve no doubt as our digital/tech ecosystem continues to mature that we’ll have more and more British ‘tech giants’ as well.”
Also announced: £500,000 per year for fintech startups, coming from the Department of International Trade — although the specter of what Brexit will mean for UK financial services firms looms rather larger. An annual ‘State of UK fintech’ report is also planned, along with a network of regional fintech envoys. Government will also modernise its guidance on electronic ID verification with the aim of supporting tech for accessing financial services.
Another measure mentioned in the Statement is a commitment to spent £390M to build on what Hammond dubbed the UK’s “competitive advantage in low emission vehicles and the development of connected autonomous vehicles”. He also said there will be 100% first year capital allowance for the installation of electric vehicle charging infrastructure.
Also mentioned: support for plans to boost transport links between Oxford and Cambridge, with a view to capitalizing on knowledge sharing between the two universities.
“This project can be more than just a transport link — it can become a transformational tech corridor drawing on the world class research strengths of our two best known universities,” he said, backing the NIC’s interim recommendations on creating an Oxford, Cambridge “growth corridor” — including £110M in funding for East-West rail, and a commitment to deliver an Oxford to Cambridge.
In the speech the chancellor also reiterated the Prime Minister’s announcement earlier this week of a £2BN per year funding boost for R&D by 2020. And confirmed the corporate tax rate will drop to 17 per cent next April — although Theresa May has also said the government will be reviewing the rate to see if a further cut is possible.
He flagged up, in passing, what he described as “the raft of investments in the UK” since the Brexit referendum — name-checking Softbank, Nissan, Google and Apple, “among others”.