Tech investment would boost jobs, says LSE

The London School of Economics released a report on Wednesday that outlines the potential benefits of a large-scale, technology-focused economic stimulus plan in the UK.

The report, The UK's digital road to recovery, presents an economic model for working out how many jobs could be created if the government put major investment into a high-speed broadband rollout, a smart power grid and intelligent transport systems.

The report's authors suggested that a £15bn investment in these three areas would result in the creation or retention of around 700,000 jobs — although they stressed that £15bn was not a recommendation to the government, but rather indicative of the effect of ICT investment on employment.

According to the report's authors, there has until now been no widely applied econometric technique for gauging the benefits of major digital infrastructure investments. They argue that this has put technology infrastructure projects at a disadvantage with economists and policymakers.

"Investing in certain types of ICT infrastructure offers superior job-creation benefits because it creates a 'network effect'," the report's authors wrote. "This network effect leads to [new jobs that arise] from the new consumer and business behaviours, functionalities and downstream industries enabled by the ICT infrastructure."

The authors also noted that investments in ICT infrastructure "should not be minimised out of concern that the projects will take too long to begin to have an immediate impact on the economy".

"If the investments are designed properly, they can quickly spur a large number of investments — from deploying more and faster broadband networks to implementing intelligent transportation systems, to rolling out advanced energy-metering technologies (smart meters) — that are currently ripe for development," the authors wrote.

The government has to be involved in all the three fields of investment due to their scale and co-ordination requirements, the authors said. They also noted that — particularly in the cases of broadband and the smart grid, where benefits may not always take the form of immediate financial returns — the investment required would not be sufficiently economical for the private sector.

"The UK should take a page from other nations like Japan, South Korea and Sweden, which have successfully used incentives, including tax incentives, to spur the private sector to invest more in digital infrastructures," the report's authors wrote.

According to the authors, investment in broadband would create immediate jobs and also lead to the development of new industries ranging from telemedicine to online education. Similarly, building an intelligent transport infrastructure — through which ICT would link up vehicles, roadside sensors and the users themselves — would not only create jobs but also increase road safety and reduce the negative economic impacts of congestion.

The smart grid, which would involve the creation of an intelligent power grid through the use of communications networks, sensors and advanced ICT, would promote the use of...

...clean energy and enable new technologies such as distributed generation. Both the smart grid and intelligent transport systems would have environmental benefits, the authors added.

"We also note that additional investment in the smart grid is in line with national objectives to increase the security and reliability of critical infrastructure such as the power grid," the authors wrote. "Modernising our power grid will not only create a more robust and resilient grid, it will also allow utilities to improve their grid-control systems and reduce their vulnerability to cyberthreats."

The LSE report was produced in conjunction with the Information Technology and Innovation Foundation (ITIF), a US think tank that is in turn partially sponsored by IBM — a company that has interests in the fields of smart-grid technology and intelligent transport systems. One of the report's authors, Patrik Kärrberg, told ZDNet UK on Wednesday that this situation did not lead to a conflict of interest.

"We are not working on a mission from IBM at the LSE," Kärrberg said. "We have written our report independently."

Asked whether he thought the government would take notice of the report's recommendations, Kärrberg said he would prefer not to comment. "As a researcher, I would rather say that, if these investments were done, we would definitely see a lot of well-paid jobs being created in the UK. The UK is already well ahead of many other countries in all these three areas."

Kärrberg added that the relationship between a £15bn investment and the creation of 700,000 jobs would broadly scale up or down depending on the level of investment. "With half the investment you'd end up with half the jobs, and if you double the investment you'd approximately double the number of jobs," he said.

A spokesperson for the Department for Business, Enterprise and Regulatory Reform (BERR), which would have responsibility for governmental investment in a broadband rollout, told ZDNet UK that the department welcomed the LSE/ITIF report and would be "considering its findings carefully".

"However, it's already clear that [the report] has much in common with the government's recently published strategic policy document — New Industry, New Jobs, which identifies information and communication technology as one of the key areas where government action can have most impact," the spokesperson said in an emailed statement.

BERR's spokesperson added that Lord Carter, the communications minister who is compiling the Digital Britain report, would be meeting one of the LSE/ITIF report's authors "to share strategic thinking on the role of ICT in aiding economic recovery in the UK".

In the budget that was announced a week ago, the Chancellor announced £750m in government funding for emerging technology, particularly in the manufacturing, digital and biotechnology sectors.