Connecting the future: what is 5G?

By Scott Faulds

Over the years, as technology has evolved, the way in which we all use and access the internet has changed dramatically. The devices that can access the internet have shrunk and become portable, from laptops that allow us to work anywhere to smartwatches that we can use to play music from our wrists.

At the same time, as more devices have gained the ability to easily connect to the internet, our usage has changed massively; we now consume a great deal of audio and video online. This has become even more apparent during the Covid-19 pandemic, with many of us turning to video conferencing tools to work from home and keep in contact with our friends and family.

Additionally, in recent years, we have begun to see our homes, cars and cities become ‘smart’ via the power of the internet, enabling a whole new generation of devices that can connect and exchange data.

In response to changes in the way we all use and access the internet, the mobile network infrastructure has evolved to allow for greater bandwidths, lower latency and ultimately faster connection speeds. The next generation of mobile network technology – known as 5G – will facilitate new data-driven technologies, such as, automation, self-driving cars and artificial intelligence.

What is 5G?

5G is the next generation of mobile internet technology, which operates across a broad spectrum of radio waves that will allow for faster, always-on access to the internet. It’s estimated that 5G will enable internet speeds up to 600 times faster than those experienced on 4G networks today. This would allow you, for example, to download an ultra-high-definition movie in 25 seconds. The ability to transfer data at these speeds allows for technologies, such as artificial intelligence and autonomous vehicles, to operate effectively. Some experts claim 5G could lead to a new era of productivity and growth.

However, the physical infrastructure required to build a 5G network can be difficult to deploy. The fast speeds achieved by 5G networks rely upon what is known as millimetre waves, which operate at a higher frequency than our current mobile networks. These waves have a shorter range and can be easily disrupted by obstacles, such as buildings, people and even rainfall. Therefore, to ensure network reliability, a 5G network will have to operate across low, medium and high frequencies. Each of these frequencies will require separate network infrastructure and will have various trade-offs, in terms of speed and service area.

As a result of the distance and obstacle limitations of 5G, there will be a need for a dramatic increase in the amount of physical infrastructure required to ensure reliable service, particularly in built-up urban environments. According to a recent report by McKinsey, a 5G network will require 15 to 20 network access points per square kilometre in densely populated areas, compared with 2 to 5 network access points required for existing mobile networks. Subsequently, the cost involved with establishing this new infrastructure ensures that in the short-term, we are unlikely to see the launch of nationwide 5G coverage anytime soon.  

The power of data

The ability to exchange large amounts of data at speed can have a significant positive effect on our economy. Research from Barclays, indicates that the deployment of 5G has the potential to increase annual UK business revenues by up to £15.7 billion by 2025. Additionally, the ability to exchange data at speed opens up new opportunities for us to improve the efficiency of the operation of our cities.

The advent of the smart city, where everything from streetlights to trains can communicate with each other, can only truly come to fruition when combined with the data speeds facilitated by 5G networks. The main benefit of establishing a fully-fledged smart city is the ability for cities to become sustainably more efficient, through the extrapolation and analysis of data. For a smart city to be at its most efficient, the collection and analysis of this data will have to occur in almost real-time and will rely heavily on artificial intelligence and automation. 

A study conducted by Massachusetts Institute of Technology (MIT) found that in New York City congestion could be reduced by up to 75% through the deployment of a ride-sharing algorithm built using real-time data generated by taxis and incoming requests. The system would allow drivers to work shorter shifts, create less traffic, reduce air pollution and shorten commutes (with an average wait time of 2.7 minutes).

The creation of smart cities, underpinned by 5G, could potentially allow us all to live in cities which are more efficient and responsive to changes in our behaviour. Analysis conducted by Cisco, has revealed that the efficiencies generated by smart city technology could result in cost savings of up to $2.3 trillion globally.

Therefore, it could be said that 5G technology has the potential to allow businesses and governments to make costs savings and generate new forms of revenue.

Final thoughts

The deployment of 5G networks will provide the base for the technology of the future to operate and enable innovation to thrive. It is likely that the speeds and reliability offered by a fully-fledged 5G network could generate economic benefits and allow governments to make cost savings by leveraging big data to make our cities operate in a more efficient manner.

However, the deployment of 5G will be a complex and potentially costly undertaking, and it will be a long time before we see the establishment of nationwide 5G coverage. Therefore, although there is a wide range of benefits associated with the establishment of a 5G network, it should not be seen as a silver bullet that will generate instantaneous economic benefits.

Ironically, the future of high-speed internet, will take time and will require a great deal of investment before the benefits are realised.


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Read some of our other blogs on smart cities and 5G:

Shining a spotlight on Evaluations Online: Scotland’s essential economic development resource

Image: Marcus Winkler (via Unsplash CC)

The UK is currently at the beginning of what is expected to be the deepest recession in living memory. From a policy point of view, governments around the world are facing the daunting task of navigating a route through uncharted territory. As the recently launched cross-institutional Economics Observatory noted last month, “sound and non-partisan advice is needed to inform decision-makers across all parts of society, about the choices they face in dealing with the crisis and the recovery”.

Key role of economic development and sustainability in the Covid-19 recovery

As statistical analysis suggests that Scotland’s GDP fell 18.9% during the month of April, and that in May output remains 22.1% below the level in February, the need for a recovery approach that is based on empowering regions, cities and local communities is clear.

The independent Advisory Group established by the Scottish Government to advise on Scotland’s economic recovery in the wake of the COVID-19 pandemic, published its report at the end of June. This identified interventions to support Scotland’s economic recovery within the context of the strategic goal of shifting to a greener, fairer and more inclusive economy with wellbeing at its heart.

New economic development initiatives and programmes in response to the pandemic have already been launched in Scotland. Some are focusing on helping specific sectors such as tourism and the creative industries. There is also a recognition that it is important during the recovery to build on current strengths, such as inward investment and low-carbon technologies.

What works in economic development

Here at the Knowledge Exchange, we’re committed to supporting the use of evidence to inform policy development and practice. So in the light of the current importance of economic development, we thought we’d highlight a useful resource which makes available the results of evaluation work and research in order to enhance decision-making and investment in the future.

Evaluations Online is a public portal providing access to a collection of evaluation and economic development research reports commissioned by Scottish Enterprise, Scotland’s main economic development agency.

Ensuring that public investment generates economic and social benefits, and long-term inclusive growth for Scotland is core to Scottish Enterprise’s remit. Making evaluation and research reports publicly available supports this aim, as well as ensuring transparency.

Established for over a decade, the site now contains over 750 research and evaluation reports dealing with different aspects of economic development activity, such as business support, investment, sector growth and improving skills. All of the reports are publicly accessible and free to access.

Learning lessons from previous programmes

Developing the economic response to Covid-19 is happening at a much faster pace than usual policy-making cycles. It is important, though, that spending and investment is focused on areas that will have most impact, and will also contribute to the overall goals of supporting jobs, protecting and progressing education and skills, and tackling inequality. Considering lessons from previous interventions when commissioning new projects or allocating funding, is one way to address effectiveness.

It’s worth repeating that repositories of evidence can help bring about better policy in a number of ways:

  • improving accountability by making it easier for people to scrutinise the activities and spending of public sector organisations;
  • improving the visibility and therefore the impact of evidence;
  • helping identify gaps in evidence by making it easier to compare research findings; and
  • increasing our understanding of what works (‘good practice’), not only in the activities covered, but also in evaluation and research methods.

Evaluations Online offers resources in key areas such as entrepreneurship, regeneration, social enterprise, economic inclusion, skills development, financing, inward investment and commercialisation, as well as by sector. In recent years, questions about inclusive growth and generating social value have also become more important policy issues.

Some of the most popular recent reports added to the site have focused on:

It’s clear that there are huge sectoral and regional challenges within the economy which will need faced immediately and in the longer term, as a result of Covid-19. Business practices have changed, as have all our lives. But we believe that the use of evidence and research will be fundamental in successful recovery and the transition towards a greener, net-zero and wellbeing economy.


The Knowledge Exchange work with Scottish Enterprise to manage the Evaluations Online portal.

Evaluations Online is a publicly accessible collection of evaluation and research reports from Scottish Enterprise. The reports cover all aspects of Scottish Enterprise’s economic development activities and are available for download at no cost.

Getting back to business: creating and managing a COVID-secure workplace

 COVID-19 has changed the world and how we live our lives. As well as being a public health emergency, it has had huge economic implications. At the start of the pandemic, millions of people around the world were instructed to stay at home, either to work or to remain on the payroll with support from the state.

While the lockdown has successfully reduced the number of COVID-19 cases, business cannot remain on hold forever. Gradually, carefully, workplaces are reopening, and workers are preparing to return to their jobs in offices, shops, schools and construction sites.

A new White Paper produced by The Knowledge Exchange looks at how the workplace has to change in response to the COVID-19 pandemic.

A redefined workplace

Before the pandemic, the workplace landscape was already changing. But now it is being totally redefined. Organisations of all shapes and sizes, in all sectors, are facing hard decisions. And how to reopen their workplaces, in a way that protects the health and wellbeing of their employees, is a key challenge.

The White Paper focuses on what employers have to consider when thinking about how to reduce the spread of the coronavirus. The most important challenges concern:

  • social distancing, including areas where this is more difficult, or not possible;
  • organising the workplace, including the location of desks and the installation of additional features, such as screens and hand-drying facilities;
  • cleaning and sanitising, including what needs cleaning, who will do it and when.

As well as complying with guidance, employers have to make sure their staff are confident in the plans for reopening workplaces. A survey for the Chartered Institute of Personnel and Development in May showed that almost half (44%) of respondents were concerned about catching COVID-19 at work.

How businesses can prepare for reopening

Every organisation needs to introduce sensible measures to control risks. Therefore, before reopening a workplace, it is vital to conduct a COVID-19 risk assessment, in line with guidance from the Health and Safety Executive.

A risk assessment should:

  • identify what work activity or situations might cause transmission of the virus;
  • think about who could be at risk – paying attention to whether the people doing the work, or those they live with, are especially vulnerable to COVID-19;
  • decide how likely it is that someone could be exposed;
  • act to remove the activity or situation, or if this isn’t possible, control the risk.

During the risk assessment, it’s essential  to consult with workers and afterwards to share the results. Different industries and sectors may require specific measures. On construction sites, for example, access between different areas may need to be restricted, and high traffic areas may have to be regulated to maintain social distancing. The UK government has published guidance covering a range of different types of work in places such as offices, factories, shops and outdoor working environments.

Actions to make the workplace COVID-secure

The UK government and the Scottish, Welsh and Northern Ireland devolved administrations have provided guidance on how to work safely. This gives practical advice on how the guidance can be applied in the workplace.

In planning to reopen their workplaces, every organisation should translate this guidance into the specific actions it needs to take, depending on the nature of their business. At the same time, employers must also ensure that everyone in the workplace continues to be treated equally. Discrimination against anyone because of a protected characteristic, such as age, sex or disability is against the law, and employers also have particular responsibilities concerning disabled workers and new or expectant mothers.

The White Paper contains a checklist of actions which all organisations need to take. These include

  • developing cleaning, handwashing and hygiene procedures;
  • helping people to work from home;
  • maintaining social distancing;
  • managing transmission risk where social distancing is not possible.

CAFM Explorer: an invaluable support tool for getting back to work

Much of the workload involved in ensuring a safe and effective return to work will be taken on by facilities managers. Keeping workplaces clean, managing shift patterns, ensuring availability of personal protective equipment and creating procedures for inbound and outbound goods are just some of the many considerations to be made.

The White Paper highlights the value of the CAFM Explorer software solution to help organisations manage and consolidate information on the vital elements of a COVID-secure workplace, such as one-way systems, desk spacing, cleaning, staggered hours and hand sanitising stations.

Developed by Idox, a trusted supplier of digital software and services, CAFM Explorer can also trigger work orders as a result of an action – for example, ensuring a desk is cleaned once it has been booked – as well as providing processes to support working at home.

Final thoughts

It is too early to say what lasting effects the coronavirus will have on UK society and business, but it’s likely we will all be living in the shadow of COVID-19 for the foreseeable future. It’s essential, therefore, that organisations make themselves aware of the steps necessary for preparing, implementing and managing the Covid-secure workplace.

To receive your free download of the Getting Back to Business White Paper, please visit the CAFM Explorer page or email marketing@idoxgroup.com.


Further reading: articles on employment and the workplace from
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The dash from cash: can public transport providers balance the needs of staff and customers?

One of the unexpected repercussions of the coronavirus outbreak has been an increased use of card, mobile and contactless payments instead of cash. Concerns about handling money during the pandemic have prompted shops and public transport services to encourage customers to use contactless payment methods. However, many people relying on public transport to access work and health services have no alternative but to use cash.

A brief history of contactless payments

Contactless payments include credit and debit cards, key fobs, closed loop smart cards and other devices, including smartphones. These applications use radio-frequency identification (RFID) or near field communication (NFC) for making secure payments. An embedded circuit chip and antenna enable consumers to make a payment by holding their card or device over a reader at a point of sale terminal.

The first contactless payment was made available in the United States at the end of the 1990s. In the UK the first contactless cards were issued in 2007.

The UK’s public transport contactless revolution began in 2014, when it became possible to access London’s Tube network, Docklands Light Railway (DLR), London Overground and most National Rail services using only a bank card. By 2019, payments with contactless bank cards or mobiles made up 60% of all Tube and rail pay-as-you go journeys in London. Public transport authorities elsewhere in the UK have followed London’s lead.

The move towards cashless payments

Even before the current public health emergency, cash payments in the UK were in decline. In the past few years, there has been a shift towards the use of debit cards, while contactless payments have soared:

  • in the ten years up to 2019, cash payments dropped from 63% of all payments to 34%;
  • in 2017, contactless payments increased by 99% to 4.3 billion;
  • in the same year, 3.4 million UK consumers managed their spending almost entirely without using cash.
  • by 2028, forecasts suggest that fewer than one in 10 UK consumer payments will be made using cash.

The emergence of chip and pin, contactless cards, digital wallets and mobile apps has made many aspects of our lives much more convenient, notably when paying bills, purchasing goods and using public transport.

But although more and more people are moving away from cash payments, 2.2 million people rely almost wholly on cash – up from just 1.6 million in 2014. A Bank of England review in 2019 found that around eight million people  would find life “near impossible” without cash.

How Covid-19 is changing public transport

With high numbers of people in confined spaces and a large number of common touch points such as handrails and ticket machines, buses and trains are potentially high risk environments for Covid-19 transmission. At the same time, public transport is critical for sustaining the economy, and ensuring that people have access to shops, services, work and health care.

Public transport authorities around the world have been responding to the emergency in a number of ways, including increased disinfection and sanitisation, and encouraging physical distancing between passengers. Another key measure adopted by public transport bodies has been an acceleration away from cash payments and towards contactless and mobile ticketing.

While some bus operators have announced that they will no longer accept cash payments, others have warned that drivers could face disciplinary action if they refuse cash. Earlier this year, the trade union representing bus workers called for the abolition of cash payments on all UK buses to reduce infection rates among drivers.

Serving the ‘unbanked’

A recent webinar organised by Intelligent Transport explored the implications of the coronavirus public health emergency for public transport. One of the key points was that public transport operators now need to maintain a balance between protecting their staff while meeting the needs of passengers who may have no alternative but to make cash payments.

The webinar heard that there is a growing sense among public transport operators of a shift in perception concerning cash payments as a result of the global pandemic. However, cash payments remain vital for the 1.3 million UK adults who do not have a bank account (the ‘unbanked’), many of whom are on low incomes. Contactless cards may be unaffordable for lower-income passengers, while many unbanked passengers worry that contactless credit cards could lead to accidental overdraft.

As the webinar noted, public transport providers have been trying to overcome these obstacles. Some have continued to accept cash payments, while others have offered passengers their own prepaid cards that can be topped up with cash in shops or transport stations.

Final thoughts

It’s likely that public transport authorities will continue the drive towards cashless and contactless payment. Lower maintenance costs, speed and flexibility are some of the advantages provided by contactless applications, and transport companies can also benefit from the data on transport usage generated by electronic payment systems.

However, the migration from payments using physical money risks leaving over a million UK citizens behind. In the ‘new normal’ for a world living with the coronavirus, transport organisations will have to find innovative ways to balance the safety of their staff with the needs of their passengers.


Further reading
Articles on public transport on The Knowledge Exchange blog

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The Knowledge Exchange remains open for business and continues to provide current awareness and enquiries services to our clients. If you have any questions, please get in touch.

Can the arts recover from coronavirus? (part 2)

The first part of this blog series looked at the impact the coronavirus has had on the arts sector so far, and at the help being offered to alleviate it.

In social isolation, many people turn to art for entertainment and comfort and as a means for connecting with others, and the importance of the arts for wellbeing becomes increasingly apparent. Despite the huge strain the sector is under, its organisations and professionals are finding innovative ways of overcoming the challenges they face, to continue creating and engaging with the public.

How is the sector responding?

With venues closed and in-person events cancelled, the arts have moved online, and the sector is essentially undergoing an imposed digital shift.

Galleries and museums across the world have digitised and moved online, allowing the public to explore their collections virtually, and often for free. Several galleries have been experimenting with virtual reality platforms, allowing them to arrange and display their collections as they would onsite. The Getty Museum in California has even made its collections available via “Animal Crossing”, allowing gamers to view and display artworks from the Getty on their own virtual islands.

Theatres and performing arts companies have responded to the crisis by making performances available for free via streaming platforms. London’s Royal Opera House have been streaming free opera and ballet performances, Shakespeare’s Globe theatre has made a large collection of its recorded stage productions available for free, the English National Ballet have been offering remote ballet lessons, and the National Theatre have made a collection of its productions available through YouTube.

Artists, like many people, are working from home. Well-known artists including Anthony Gormley, Grayson Perry, David Hockney and Tracey Emin have been sharing their work during lockdown using social media.

Musicians have also been using social media and streaming platforms to share performances and collaborate with one another. New music has been created in response to the pandemic, and many artists have participated in live stream events to raise money for music venues which are at risk because of the crisis. Major global broadcast events such as ‘Together at Home’ have included performances from well-known artists like Lady Gaga and Elton John, to raise funds for frontline workers and the World Health Organisation.

By going digital, the arts sector is successfully keeping the public engaged, but concerns have been raised about the sustainability of this new model where most content is being offered for free, and there is uncertainty about how the public will choose to consume arts and culture in a post-coronavirus world.

What is needed going forward?

Despite the funding efforts and the hard work of the arts sector, as social distancing continues, concerns are growing about how the sector will withstand the financial pressures as the crisis moves into its next phase. As the emergency funds offered by Arts Council England (ACE) are quickly running out, their CEO Darren Henley has emphasised that ACE simply do not have “the resources needed to secure the income of individuals or the future of shuttered organisations through an extended lockdown, nor the ability to support the costs of reopening”. He argues that finding a solution going forward will require close engagement between government and arts organisations.

A recent letter, written by the Creative Industries Federation (CEF) and signed by 400 of the UK’s leading artists, has warned that the UK is in serious danger of becoming a “cultural wasteland” despite the funding that has been offered so far, and called for urgent funding from the government to support creative industries.

The Culture 2030 Goal Campaign have argued that the arts and culture sectors are “too often compromised in budget allocations”, and have called on governments to take immediate action to protect the sector which will play a fundamental role in helping communities to recover from the crisis. This argument has been echoed by United Cities and Local Governments (UCLG), who have also emphasised the vital role of arts and culture in making sense of the world post-crisis.

Hans Ulrich Obrist, the artistic director of London’s Serpentine gallery, has argued that a multimillion-pound public arts fund is needed, similar to the programmes offered by Franklin D Roosevelt to support the arts during the Great Depression.

Final thoughts

The arts are finding ways to adapt, create, and innovate during the coronavirus crisis, despite serious financial strain. Arts professionals recognise that the sector has recovered from crises before and will find a way of doing so again. It has also been argued that the crisis has given the sector a chance to slow down, reset, and develop a more sustainable way of working together in the future. ACE have pointed out that, while the hardest part may be yet to come, they now have “an emerging sense of what the months ahead may look like and a chance to prepare”. Like most other sectors and areas of society, the arts will move into its own “new normal”, but just what that will look like remains to be seen.

Part one of this blog post was published on Monday 11 May.

Further posts on our blog concerning the arts and culture include:

Can the arts recover from coronavirus? (part 1)

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No part of society or the economy has been untouched by the coronavirus outbreak, but as the situation develops globally, it has emerged that the arts, culture, and heritage sectors may be among the hardest hit. Organisations and individuals are working hard to adapt and deliver art in more creative ways than ever, but there is real concern about the lasting effects the pandemic could have on the cultural and creative industries, and the extent to which they will manage to recover.

The impact of coronavirus on the arts, culture and heritage sectors

Back in March, the UK government’s implementation of lockdown and strict social distancing measures led to the sudden and indefinite closure of cultural spaces such as theatres, museums, galleries and cinemas, and the cancellation or postponement of pretty much all events, performances, and festivals across the country. This suspended the usual operations of most cultural institutions, leading to uncertainty and potentially devastating financial losses for those working in the sector, particularly freelancers.

Many involved in the creative industries have expressed concern about financial sustainability, and about how a crisis like this may deepen the sector’s existing inequalities. In the UK, the creative industries employ around two million people, and approximately a third of these are freelancers – the group likely to be the hardest hit by the cancellation of events and projects.

The cancellation of summer festivals and gigs has particularly affected freelance musicians, comedians and performers who often rely on the festival circuit for a substantial proportion of their income.

On top of the immediate financial concerns, artists have expressed worries about the effect of the coronavirus on their visibility, as long-planned projects grind to a halt.

A recent report published by the Arts Council of Northern Ireland estimated that the average loss of earnings for individuals in Northern Ireland’s arts sector was £3,756 between March and May 2020, and the total income loss for organisations was approximately £3.97 million during the same period. Arts Council England have been conducting similar research to gauge the impact of the crisis on the arts sector in England, and are expected to publish their findings soon.

A series of recent webinars delivered by OECD addressed the impact of the coronavirus crisis on museums, and the wider cultural and creative sectors. Museums are at immediate risk due to the dramatic reduction in revenue and charitable donations, and the livelihoods of their staff and freelance professionals are in jeopardy as a result. The loss of income across the wider arts sector has the potential to wipe out a significant proportion of its creative framework. In the longer term, museum ecosystems may be seriously damaged by the loss of smaller creative companies and professionals, on whom museums rely for creative outputs. OECD also warned that the sudden withdrawal of museums from local development projects could have a lasting negative impact on their local communities.

Similar concerns are raised in the Arts Council of Northern Ireland report, which emphasises that the suspension of public classes, workshops, community outreach initiatives and work within schools, usually provided by arts organisations, is likely to have a profound impact on Northern Ireland’s local communities and place vulnerable people at risk.

What is being done to help?

Across the UK, emergency funding programmes have been launched to support organisations and individuals at risk.

Arts Council England has offered £160 million of emergency funding (almost all of its reserves), to protect England’s arts, museums and libraries. The funding package aims to support individual creative practitioners, as well as organisations at risk. As part of this programme, they are continuing to fund their existing National Portfolio Organisations, even where agreed projects cannot go ahead.

Arts Council Wales has allocated an initial £7 million to an urgent response fund, with the hope that  funding will increase through collaboration with other trusts, foundations, and charities who are able to contribute. Arts Council for Northern Ireland has combined £500,000 of their own funds with £1 million from the Department of Communities to create an emergency fund for artists and creative organisations.

Creative Scotland have launched three new emergency funding programmes, as well as guaranteeing that all previously committed funding awards will be honoured regardless of event cancellation. They have also encouraged recipients of their funding to honour their pre-existing agreements with artists and freelance professionals.

Businesses and employees in the sector are receiving support from the government’s furlough scheme, and freelancers can apply for government grants as part of the Self-Employed Income Support Scheme.

A variety of independent funding schemes have also been set up by charities and non-profit organisations across the UK to support organisations and individuals.

What next?

The arts sector is in serious danger as a result of the coronavirus crisis. The assistance on offer has the potential to help individuals and organisations to stay afloat for the time being, but as lockdown persists and social distancing measures seem set to continue for the foreseeable future, there are already concerns that the funding on offer at this stage is not going to be enough. The second part of this blog series will consider how the arts sector is responding to the crisis, and what is needed to help its recovery going forward.


Part two of this blog post will appear on Wednesday 13 May.

Further posts on our blog concerning the arts and culture include:

The economic impacts of the coronavirus outbreak: what the experts are saying

While the coronavirus outbreak is first and foremost a public health emergency, the economic damage caused by the pandemic is also a huge concern. In recent weeks, think tanks and economists have been offering their thoughts on just how badly they believe the economy will be affected by Covid-19, and how long it might take to recover.

With each passing week it’s emerging that the economic impact of the coronavirus could be more severe than first thought. The International Monetary Fund (IMF) has warned that the shutdown of economic activity in the world’s major economies is likely to trigger a far more painful recession than the one following the financial crisis of 2008. The IMF now believes that the world is facing the worst economic downturn since the Great Depression of the 1930s.

In the UK, an equally gloomy prognosis has come from the Office for Budget Responsibility (OBR), the government’s fiscal watchdog. Its stark assessment of the possible economic impact of Covid-19 indicates that the UK economy could shrink by 35% and unemployment could rise to more than two million.

The regional picture

The economic impact of coronavirus is varying significantly across the country. Research by the Centre for Progressive Policy (CPP) has revealed that the decline in economic output is estimated to reach almost 50% in parts of the Midlands and the North West in the second quarter of this year. In terms of decline in Gross Value Added (GVA), Pendle in the North West is estimated to be the hardest hit local authority in the UK, followed closely by South Derbyshire and Corby in the East Midlands.

In Scotland, since the coronavirus outbreak began, the University of Strathclyde’s Fraser of Allander Institute (FAI) has been publishing regular updates about how business is being affected.

The FAI’s most recent survey of Scottish businesses  finds that, while all sectors of the Scottish economy have been severely affected by the crisis in terms of staffing levels, the accommodation and food services sector (which includes hotels, bars and restaurants) has experienced the harshest impacts, with 77% of businesses reducing staff numbers. In addition, 85% of businesses expect growth in the Scottish economy to be weak or very weak over the next 12 months.

On a more positive note, the FAI survey found that more than 95% of businesses which are planning to use the UK government’s  Coronavirus Job Retention Scheme believe it will be ‘very effective/effective’ in supporting their survival during the pandemic.

Business and employment support

The Job Retention Scheme is one of a series of measures introduced by the UK government aiming to limit the impact of the coronavirus, and ensure much of the economy is able to recover when the health crisis is over. While these actions have been widely welcomed, there have been calls for the UK to learn from more innovative measures adopted by other governments.

A report by the Policy Exchange think tank has highlighted Denmark’s wage subsidy, which is differently calibrated to the Job Retention scheme in the UK. While the Danish government is covering 75% of the salaries of employees paid on a monthly basis who would otherwise have been fired, for hourly workers the government will cover 90% of their wages, up to £3,162 per month. The Policy Exchange report notes that this assumes that workers paid by the hour won’t have the savings and support networks that generally better off salaried workers are likely to have.

Household challenges

The bigger economic picture is bad enough. But the real pain of an economic recession will be felt much closer to home. For individual households, social distancing measures aiming to contain the spread of coronavirus are already having significant impacts on spending habits. Research by the Institute of Fiscal Studies (IFS) has highlighted how these changes may be affecting people on different incomes.

The IFS suggests that richer households will be more resilient to falls in income since a considerable proportion of their spending goes on things that are currently not possible, such as eating out and holidays. But because lower-income households spend a higher share of their income on necessities, such as rent and food, the IFS suggests that they will be less resilient to any fall in income.

Exiting lockdown

In recent days, governments in France and Germany have set out plans for easing their lockdown restrictions, while Austria and Italy have already allowed some shops to open.  But the UK government has extended its lockdown to the beginning of May, and has not announced a clear exit strategy.

The uncertainty surrounding the trajectory of the coronavirus makes it exceptionally difficult to see when things might return to normal. But some analysts are becoming concerned about the harm that a prolonged lockdown might do.  A discussion paper published at the beginning of April highlighted some of these dangers:

“A long lockdown will wipe out large swathes of the economy. There will be a negative impact both financially and mentally on too many people. Already the lockdown has seen a surge in domestic violence. How to end the lockdown is key to helping restart the economy.”

The authors of the paper have put forward a strategy for ending the lockdown, suggesting that a phased traffic light approach (red, amber, green) would give everyone a clear sense of direction and address the economic, social and quality of life challenges posed by the lockdown.

After the virus

There is no clear agreement among economists on how the economy might fare once the health emergency has passed. Some economists forecast a sharp recovery, others suggest it will take two or more quarters, while still others forecast an initial boost in activity followed by another dip when the effects of unemployment and corporate bankruptcies start to filter through.

But there is a growing sense that the pandemic will have a fundamental impact on the economic and financial order. And in the UK, Paul Johnson, director of the IFS,  has suggested there will be an economic reckoning:

 “We will need a complete reappraisal of economic policy once the current economic dislocation is behind us. Tough decisions will have to be made which are likely to involve tax rises and higher debt for some time to come. The only other alternative would be another period of austerity on the spending side. That looks unlikely.”


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Guest post: Economic effects of coronavirus lockdowns are staggering – but health recovery must be prioritised

By Pushan Dutt, INSEAD

In all my years as an economist, I have never seen a graph like the one below. It shows unemployment claims in the US – observe the spike for the week ending March 21. The global financial crisis, the dot-com crash, Black Monday, oil price shocks, 9/11, none of these historic shocks are even visible in the graph.

Figures: US Department of Labor

 

The spike in unemployment claims is the proverbial canary in the goldmine. We should expect a swathe of bad economic numbers coming down the pipeline. The head of the St. Louis Fed expects a 30% unemployment rate and a 50% drop in US GDP by summer. More importantly, as the health crisis rises and crests at different times in different parts of the world, the horrifying numbers on GDP growth, unemployment, business closures are not likely to let up in the near term. Multiple countries are in a recession, and eventually, the whole world will fall into a deep recession.

The plunge from prosperity to peril will be as swift as the switch to lockdown protocols in most countries. We cannot even rely on the data we have to reveal the speed and depth of the crisis since this is collected and updated with lags. For instance, the US monthly jobs report for March collects data in the second week of March, failing to capture the massive spike in unemployment claims that appears after March 12.

In the meantime, sources such as restaurant booking website OpenTable can offer some insights into the magnitude of things. The figures below show the recent plummet in diners eating at restaurants in four countries. Observe a sudden stop in the entire restaurant industry by the third week of March.


Annual % change in restaurant diners from end of February to end of March.

Data: OpenTable

 

Combine a black swan event with missing data, and it is not surprising that markets are swinging violently.

Deep freeze

The question is not one of whether we are in a recession – we are. The more pertinent questions are: how long it will last? How deep it will be? Who will be impacted the most? And how swift will the recovery be?

These questions are complicated and even top economists must admit a lack of confidence in their answers. We are not experiencing a standard downturn. Nor is it simply a financial crisis, a currency crisis, a debt crisis, a balance of payment crisis or a supply shock.

We have not seen anything like this since the flu pandemic of 1918. Even there, identifying the effects of the flu is confounded by the first world war that took place at the same time. What we have here is something different. At its heart, we are experiencing a healthcare crisis with various parts of the world succumbing in a staggered fashion.

To slow down this global health crisis (the “flatten the curve” mantra), we have chosen to put the economy into deep freeze temporarily. Production, spending, and incomes will inevitably decline. Decisions to reduce the severity of the epidemic exacerbate the size of the contraction. While the initial decision to reduce labour supply and consumption are voluntary, this will likely be followed by involuntary reductions in both, as businesses are forced to lay off workers or go bankrupt.

Of course, government policies will attempt to mitigate these effects. Some are using traditional monetary and fiscal policies (cutting interest rates, quantitative easing, increasing unemployment insurance, bailouts). Others are trying out non-traditional methods (direct cash transfers, loans to businesses conditional on maintaining unemployment, wage subsidies).

Public health priority

How long the economic impact lasts depends entirely on how long the pandemic lasts. This, in turn, depends on epidemiological variables and health policy choices. But even when the pandemic ends, the resumption of normalcy is likely to be gradual. Countries will persist with a strict containment regime like in China today, and continue to impose travel restrictions to various parts of the world where the disease continues to spread.

The many factors at play in this complex, interlinked crisis that affects both people’s health and the global economy introduces massive uncertainty into anyone hazarding the pace, the depth and the length of the impact. As a result, we should treat any precise estimates (such as “GDP will decline by X%” or “markets have reached their bottom”) with scepticism.

Especially frustrating is the idea that there is a conflict between academic disease modellers and hard-edged economists saying that steps to slow the spread of coronavirus has trade offs. This could not be further from the truth. Among economists there is near unanimity that countries should focus on the healthcare crisis and that tolerating a sharp slowdown in economic activity to arrest the spread of infections is the preferred policy path. In a recent survey carried out by the University of Chicago, respondents universally agreed that you cannot have a healthy economy without healthy people.

The health crisis has naturally created a crisis of confidence. This, in turn, can have damaging long-term effects with continuing uncertainty leading firms and households to postpone investment, production and spending. Restoring confidence requires a singular focus on containing and reversing the spread of COVID-19.

Slowing the rate that people fall ill with COVID-19 is not the end in itself. It is a means to temporarily reduce the pressure on hospitals and give time to identify treatments and a vaccine. In the interim, we must build testing capacity, perform contact tracing, setup the infrastructure for extended quarantines, rapidly expand the production of masks, ventilators and other protection equipment, build and repurpose facilities into hospitals, add intensive care capacity and train, recall and redeploy medical personnel.

All of this is also the way to restore the economy’s health and economic policy must complement it. In the short run, economic policies should mitigate the impact of lockdowns and ensure that the current crisis does not trigger financial, debt or currency crises. It should focus on flattening the recession curve, ensure that the temporary shutdown has only transient effects, and facilitate a quick recovery once the economy is taken out of the deep freeze.

In the meantime, it’s important to also recognise that this is an unprecedented crisis. Everybody has their role to play, but nobody is infallible and uncertainty is inevitable.

Pushan Dutt, Professor of Economics, INSEAD

This article is republished from The Conversation under a Creative Commons license. Read the original article.


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Spinout success: commercialising academic research

Research and teaching in UK universities is widely recognised to be among the best in the world.  In fact, the University of Oxford has topped the Times Higher Education World University Rankings 2020 for the fourth year in a row.

However, in November last year, venture capital firm Octopus Ventures published a new measure of UK universities’ success – the Entrepreneurial Impact Ranking.

Instead of focusing on traditional measures of success, such as research, teaching and citation impact, Octopus Ventures’ new index measures UK universities’ effectiveness at translating this research into commercial success via the creation of “quality, investor-ready spinout companies”.

The results are a little surprising – with Queen’s University Belfast reaching the top spot, ahead of big players such as the University of Cambridge and the University of Oxford.

In this blog post, we consider these findings in more detail, and discuss the potential to further capitalise on the potential of spinouts in the UK, and the key factors that underpin their success.

A brief history of spinouts

A university spinout has been defined by Octopus Ventures asa registered company set up to exploit intellectual property (IP) that has originated from within a university”.

In other words, it is a company that has been established based on ideas derived from a university’s research.  Often, former or current researchers are directly involved in the management team, and start-up funding is provided by the university (or one of its connected venture funds).

UK universities have been allowed to commercialise the results of their research since the mid-1980s. Between 2003 and 2018, approximately 3000 IP-based spinouts were created by UK universities.

Since 2010, there has been a notable increase in investment into university spinouts – both in terms of the number of deals achieved and the amount of money invested in university spinouts, from both private and public investment sources.

High rates of success

There is good reason for this increased investment – the survival rates of spinouts are high compared to other types of start up enterprise.  Research published in 2018 by law firm Anderson Law found that nine out of ten spinouts survive beyond five years.  By way of comparison, only two out of ten new enterprises survive beyond five years in the wider start-up environment.

Indeed, many spinouts not only survive, but thrive.  The UK has produced a large number of very successful spinouts – for example, Oxford Nanopore Technologies, a University of Oxford spin-out company that has gone on to reach a £1.5 billion valuation.  ARM Holdings is another example – a designer of smartphone chips, established by the University of Cambridge, and acquired by Japanese firm Softbank for £24 billion in 2018.

Unrealised opportunities

However, while the UK has seen a number of high profile spinout success stories, Octopus Ventures, argue that there is yet more untapped potential to be realised:

The UK has produced a host of successful university spinouts, but there are many unrealised opportunities that have been left in labs or got lost on their funding journey. These could be worth trillions of pounds to the UK economy.”

This potential is perhaps best illustrated by looking at the unrivalled success of many universities in the United States.  Take, for example, Massachusetts Institute of Technology (MIT).  MIT has been the genesis for around 26,000 spinout companies, with a combined annual company turnover of US$2 trillion.  This is a huge amount from one university – and is equivalent to around 65% of the UK’s entire annual GDP!  The resultant spinouts have also created in the region of 3.3 million jobs. MIT clearly illustrates the huge potential that exists to capitalise on universities’ research.

Index results

Back in the UK, this massive potential has yet to be realised.  Indeed, one of the key aims of the new Entrepreneurial Impact Ranking is to identify where this potential exists, and which universities are making notable progress towards capitalising on it.

The key data points included are:

  • total funding per university;
  • total spinouts created per university;
  • total disclosures per university;
  • total patents per university;
  • total sales from spinouts per university.

An interesting element of the index is that it is also adjusted to account for the total funding that a university receives.  This means that it is not dominated by Russell Group universities simply on the basis of them receiving the most funding.

Indeed, Queen’s University Belfast was ranked first – putting it ahead of both the University of Cambridge (2nd place) and the University of Oxford (9th place) in terms of its production of spinout companies and successful exits, relative to the total funding received.

Queen’s University Belfast, through QUBIS Ltd, the university’s commercialisation arm, has had a number of spinout successes, including KainosAndor Technology, and Fusion Antibodies, all of which have been listed on the London Stock Exchange.

In Scotland, the highest ranking university was the University of Dundee (6th), which has had a number of successful spinouts, including Platinum Informatics, which specialises in the provision of software to analyse ‘big data’.

What makes a successful spinout company?

As well as identifying the most effective universities in terms of spinouts, the Octopus Ventures report also looks at the shared success factors that have contributed to their effectiveness.

There are three key factors:

  • Funding – Access to early funding is essential to success. Universities that ranked highly in the index were ones that raised funds to help get ideas off the drawing board. As Simon King, a partner in Octopus Ventures states: “Universities that enable early-stage proof of concepts and prototyping by making early-stage funds available, either internally through their own funds or through collaborative schemes with other funds are more successful at creating spinouts.  That’s a key takeaway.”
  • Talent – the issue of talent is considered a ‘consistently challenging’ issue for spinouts.  There is a huge demand for the right skills, and spinouts are often viewed as being high-risk propositions compared to more established enterprises.  Other challenges include a lack of academics’ understanding of the business world, and limited incentives for them to engage in the commercial world in light of the pressure to ‘publish or perish’.
  • Collaboration – As well as university-industry collaboration, collaboration between different universities was a key factor in the creation of successful spinouts. Collaboration helps to increase both scale and capacity, whilst also helping to attract and retain top talent.

Future support for spinouts

Measuring the relative effectiveness of UK universities’ ability to commercialise their research provides a number of signposts for the future in regards to how best to support and further develop this potential.

This is increasingly important given the economic uncertainties surrounding Brexit and the availability of a number of European funding streams once the UK leaves the European Union.

The UK’s Industrial Strategy places a clear emphasis on academic entrepreneurialism as a driver of economic growth.  And in 2018, the UK Government launched the £100m Connecting Capability Fund to support university collaboration in research commercialisation.

Commercialising academic research is far more complex, risky and expensive than establishing a typical start-up.  But their potential contribution to the economy, and wider society, is huge.


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Shared Prosperity Fund – greater productivity and inclusivity for Scottish cities?

new bridge glasgow

There are many questions surrounding the UK’s departure from the European Union, not least on the future of funding.

In Scotland’s regions and cities, EU Structural Funds have provided significant additional funding to support economic development for many years. The current structural funds programme is worth about €10.7 billion to the United Kingdom and up to €872 million to Scotland across the seven-year budget period which ends in 2020. The Funds were originally created to help rebalance regional social and economic disparities. With regional inequality a dominant feature of the current economic landscape, and the potential of Brexit to further exacerbate this inequality, continued investment to address this is vital.

The UK Government has made no commitment to continue with the EU Structural Fund approach following exit from the EU and has instead proposed to introduce a domestic successor arrangement – the Shared Prosperity Fund (SPF). The objective of the SPF is to “tackle inequalities between communities by raising productivity, especially in those parts of our country whose economies are furthest behind.” This objective is widely welcomed. However, as yet there has been no formal consultation on the new Fund and no detail on how it will operate.

Nevertheless, it had been suggested in recent research from the Core Cities Group on Scottish cities that despite the significant contribution from Structural Funds over the years, the proposed SPF could be an opportunity for greater productivity and inclusivity.

Success of EU Structural Funding

The two major EU Structural Funds utilised in Scotland are the European Social Fund (ESF), focusing on skills and jobs, and the European Regional Development Fund (ERDF), which focuses on correcting regional imbalances.

Over £134m per annum is being invested in economic development in Scotland through these funds over the current programming period, which is supported by a significant amount of match funding, largely from the public sector. According to the Scottish Government, the total funding will be around €1.9 billion.

The Scottish Cities – the collaboration of Scotland’s seven cities (Aberdeen, Dundee, Edinburgh, Glasgow, Inverness Perth, and Stirling) – and city regions have already successfully invested in each of the four Scottish Economic Strategy priorities (innovation, investment, inclusive growth and internationalisation) and the UK Industrial Strategy’s five foundations of productivity (ideas, people, infrastructure, business environment and place).

Some examples of projects include:

Research suggests that the ending of such funding poses a risk to organisations and the positive economic impact gained, as illustrated by reductions in funding in other areas of the UK.

Limitations

Despite the successes that have been achieved through the use of Structural Funds, the approach is not without its limitations. As argued by the Core Cities report, the approach to managing, overseeing and using the funding has become more bureaucratic and cumbersome. Particular issues highlighted include:

  • increasing centralisation of funding and decision-making;
  • the requirement to provide match-funding at an individual project level becoming increasingly problematic due to public sector budget cuts;
  • monitoring, compliance and audit requirements have become increasingly onerous;
  • in the current programme period, the role of the Managing Authority has become more transactional, with little engagement at the project development stage;
  • eligibility rules restrict what can be funded, with some important elements of economic development no longer able to be supported e.g. new commercial premises, transport infrastructure, which can limit the benefits from other Structural Fund investment (such as business growth and employment creation on strategic sites);
  • the system does not encourage innovation, with high levels of risk aversion amongst programme managers, and a high degree of risk for project sponsors if project delivery does not proceed as planned – a particular issue for projects working with the most disadvantaged groups and those with complex needs.

The report argues that these factors have had the effect of limiting the achievements of the Funds, such as preventing some organisations from applying for funding, which in turn has made others wary about applying. This has led to projects being designed to meet the funding criteria rather than maximising benefits, resulting in too much time and effort on administrative activities rather than those which will have an impact on the economy.

As such, it is suggested that the introduction of the SPF affords an opportunity to change this.

Opportunity for change

According to the report, there is an opportunity to move away from the limitations of the Structural Fund programme approach to more effective arrangements that will increase productivity and contribute to a more inclusive economy. There is scope to increase the funding available through the SPF, reduce bureaucracy and become more responsive to local need.

It is suggested that there is potential for SPF investment in the Scottish Cities to deliver an economic dividend of up to £9bn as productivity increases, producing higher wages at all levels in the workforce, and contributing to a more inclusive economy overall.

Given that Scotland’s performance on some of the key economic indicators is likely to be taken into account when allocating SPF – GVA per job and per hour worked, employment rate, deprivation levels – the report also contends that there is a case for a greater share of the SPF for Scottish Cities. It argues that significant SPF investment in these areas “…will increase competitiveness and tackle inequality, as set out in Scotland’s Economic Strategy, as well as contributing towards the objectives of the UK’s Industrial Strategy, raising productivity and reducing inequalities between communities”.

The report warns that “Scotland will not make significant progress towards a more inclusive economy and society without addressing the deprivation challenges in the Scottish Cities.”

It is recommended that:

  • the SPF should use a transparent, needs-based allocation system;
  • the SPF budget should not be determined by previous levels of Structural Funds, and should be significantly increased; and
  • the Scottish Cities must be closely involved in the design of the SPF.

Final thoughts

There appears to be wide consensus for providing a replacement for EU Structural funding. Most organisations that have commented on the proposed SPF also agree that the level of funding should at least be maintained at its current level.

The concerns in Scotland, and indeed the other devolved legislatures, is the impact the SPF might have in devolved decision making powers currently exercised under EU Structural Funding.

The Scottish Cities have made clear their views on the proposed SPF and the Scottish Government has also launched its own consultation on how the Fund might work for Scotland.

Only time will tell whether the UK Government will take these comments on board, and indeed whether the opportunity for change will be realised at all.


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