Economies not of scale

Phil McCabe says government's failure to invest in high-speed broadband infrastructure that will support all UK businesses is a false economy

The economic uncertainty of the past few years has created challenging situations for small businesses. From insidious late-payment practices, with large companies creating credit lines at the expense of their smaller suppliers, to excessive red tape, the burdens on SMBs have rarely been heavier.

One area key to growth is infrastructure but this means more than roads and railways. Efficient telecommunication - high-speed broadband - tops the infrastructure needs of business owners.

In our recent Infrastructure for Growth survey, 80 per cent of respondents indicated that telecommunications, along with energy costs, were among the major infrastructure issues for SMBs. Most of the businesses surveyed felt broadband access is more of a concern for them than the reliability of energy supply.

Unfortunately, not all SMBs in the UK have access to broadband. This could put them at a competitive disadvantage both nationally and internationally.

High-speed broadband is essential for cutting costs and increasing efficiency for SMBs. Unfortunately, many rural areas in particular do not have access to adequate telecommunications connectivity.

Small businesses therefore have to think seriously about where to locate their operations. Rural locations are often seen as attractive because they can be much cheaper in some ways, but the physical access may be poor and compounded by inadequate communications links.

The International Telecommunication Union (ITU) claimed in one of its recent publications that broadband should be regarded as part of a country’s critical infrastructure, because it can prove a vital tool for growing an economy struggling out of recession.

Some people view broadband in terms of speed and download capacity. However, the ITU agrees that simply being able to access broadband can profoundly affect businesses’ profitability and success.

Internet connectivity can have a huge impact on the efficiency of logistics management and procurement, for example. It can maximise R&D opportunities, increase access to new technologies and market information, or reduce operational costs.

Broadband minimises geographical barriers and makes it easier for companies to find new international customers, perhaps at the click of a button, without having to travel abroad frequently to develop such relationships.

In short, having a reliable connection can help small businesses in the UK reduce costs, increase business opportunities and access new markets. This is important because these things are traditionally very difficult to achieve in economically tough times.

Yet a decision to roll out super-fast internet access has been delayed in many counties.

Cumbria was chosen as one of the initial areas for a pilot scheme for high-speed broadband, tipped to benefit from a multimillion-pound subsidy in October 2010. However, decisions over which company might be the best service provider were delayed repeatedly, until June this year. And despite interest from BT and Fujitsu, the final tender process is still ongoing.

Fujitsu claimed that it was still in negotiations with BDUK, the government’s broadband delivery agency, because the funding provided was not sufficient to cover its costs.

There is also a lack of appetite for high-speed broadband in certain regions, due to what seems to be indifference among the local population. Shropshire’s recent local campaign for faster broadband reportedly attracted support from fewer than 10 people per parish in most of its communities.

Many private sector firms are dragging their heels in infrastructure investment, potentially further affecting the competitiveness of local businesses.

So government support is essential if we are to improve broadband access across the UK. Economic realities alone dictate that the private sector needs as much incentive as possible to take a central role in fast-broadband provision.

The government needs to be more proactive about introducing a framework that will allow information superhighways to be as high priority as physical roads and railways. It is time for it to implement a seamless and holistic infrastructure for modern Britain - not least to help small businesses realise their full potential and play their part in the long-awaited economic recovery.

Phil McCabe is PR and communications officer at the Forum for Private Business (FPB)