The Bootstrap Recovery
Why making ourselves more productive is central to winning the global race for competitiveness and growth
 Published: February 2012
Type: Report
Area: Growth through technology
Intellect strongly believes that the effective exploitation of technology is critical to the UK achieving robust and sustainable economic growth in the future. If the UK is to compete in an increasingly competitive global economy, it must be at the forefront of exploiting technology to accelerate productivity growth and unleash innovation.
The global economy in the rest of this decade will be much less benign than it was in the long period of demand-led expansion that ended in 2007/8. As over indebted developed countries and emerging new economies struggle to grow in a demand constrained world the race for global competitiveness will become much more intense. Competitiveness is determined by a range of factors, but perhaps the most fundamental in the 21st century global digital economy is the ability to make efficient and effective use of technology to drive innovation and accelerate productivity growth - what we term in this report tech-excellence.
This is not to argue that technology is a panacea for growth, but there is overwhelming evidence that the smart use of tech, combined with complementary factors, such as good managerial practices and strong employee skills can lead to increased innovation, productivity growth and improved competitiveness. By focusing on the challenge of raising productivity, government can help to create a stronger demand pull for the innovative and effective use of technology right across the economy. The challenge is to turn what risks being a lost decade into a decade of renewal.
The aim of this report is to kick start a debate about how the UK can achieve a bootstrap recovery – a self sustaining process of renewal and structural change to raise its productivity and competitiveness.
Download: The Bootstrap Recovery (566KB)
Further recommendations
We will be developing some additional recommendations over the next few months alongside those we outline in the The Bootstrap Recovery. We would welcome your ideas and suggestions of other areas for us to consider, so please feel free to email through your comments to:
This e-mail address is being protected from spambots. You need JavaScript enabled to view it
1. World class exploitation of technology in the private sector
Whilst there are barriers to greater productivity which stretch across all sectors, there are also sector specific issues. Tackling these can be best achieved by government working closely with relevant industry bodies to develop sector specific productivity plans. This process would enable government and industry to identify opportunities for productivity growth across the whole sector and also explore the different challenges faced by small, medium and large firms within sectors. Better quality of information will provide the basis for more informed policy making and would enable us to understand more fully which sectors are currently lagging behind. The ONS should look to undertake more comprehensive annual sector- by- sector reviews of technological adoption and exploitation. These should look at all sectors, at firms of all size, across all regions, and at as broad a range of indicators as possible. We welcome the government’s commitment to have the best broadband network in Europe by 2015 and the steps being taken to extend superfast broadband into areas that the market would not otherwise serve. We also welcome the ambition to establish super connected cities. However, maximising the growth potential of superfast broadband is not just about getting the physical infrastructure in place. It is also about optimising the take-up and use of these services in order to deliver productivity gains across the public and private sector.
Optimising take-up and driving demand is best achieved through competition in service delivery. Government should continue to support competition in the broadband sector, across both fixed line services and mobile services, as competition drives cheaper prices, which in turn will drive take-up. Government must ensure that the UK has both investment in its communications infrastructure and competition in service delivery - addressing the supply side through investment is necessary but not sufficient for achieving take-up and enabling innovation and growth. The Race Online campaign has proved an innovative and effective route to getting people online for the first time. Government and the technology industry could replicate this approach in order to help get more SMEs online. A ‘Race Online’ campaign for business could set out clear and practical guidance for businesses looking to go online, champion examples of UK businesses across all sectors which have successfully exploited the web and highlight the business benefit that can come from a smart use of the internet.
In addition to this, government should embed the importance of technology adoption and exploitation more generally across its various campaigns and business initiatives such as Start up Britain. This should be done in an entirely technology neutral way and raise awareness of the importance of issues such as improving IT skills and digital security. At present 66% of UK employers are dissatisfied with the basic IT skills in their workforce. Deepening IT skills (at all levels and in all sectors) is absolutely critical for the full growth potential of technology to be realised and for the UK to gain a competitive advantage. There are an increasing number of tools for firms which are developing in the marketplace such as web publishing and social media which businesses can (and many already do) capitalise on. These require a whole set of new skills and capabilities.
It is therefore absolutely vital for IT skills to be embedded throughout the education system, employers to put in place relevant training programmes and for organisations such as e- Skills UK to continue to play a vital role in promoting the benefits of IT and supporting IT professionals. 2. World class exploitation of technology in the public sector
Instilling different attitudes to risk in government is central to accelerating change. ‘Agile’ delivery is about rapid cycles of delivery and aiming to deliver the right solution in collaboration with the end user (the current work on Gov.UK Beta is a good example of this). Doing business with new suppliers requires different approaches to how government evaluates a company’s capacity to deliver and their viability as a business.
Running procurements in shorter timescales will depend on standardised processes and perhaps a less rigid application of the EU directives. These ways of working are not necessarily how the government has traditionally operated, but with the right incentives the transition to new ways of working will be much smoother. Suppliers should be regarded as delivery partners, e.g. through gain-share models that incentivise both suppliers and government to work together to solve problems and innovate throughout the life of a contract. Procurement specifications should focus on business and performance outcomes, not the underlying technology. These outcomes should be formed following engagement with the market, e.g. through the Concept Viability process. When sourcing technology products and services government should seek to accommodate ‘variant bids’ (i.e. bids that suggest alternative ways of delivering the desired outcome to that which is originally envisaged by the government customer) to reward companies for their creativity and innovation. However, this focus requires more technical knowledge and commercial skills in the public sector to be able to evaluate these different bids. It is accepted that better skills are needed to improve government's ability to exploit technology. The capabilities needed include knowledge of how services can be delivered in new ways thanks to advances in technology and commercial skills to effectively implement changes. Much like in the private sector there are an increasing number of tools such as social media that public sector bodies can (and already do) use which require a whole set of new skills and capabilities. The government’s Major Projects Leadership Academy, Technology in Business Fast Stream, and other initiatives will help grow this capability. In addition, as part of Intellect’s market access and skills initiatives we will be doing our bit to support skills development in the public sector, as well as for the UK economy as a whole. The UK is now one of the world leaders in publishing government information. To facilitate new ways of delivering public services, we need to ensure that the right information is published. Quality management information can allow government to make better informed decisions and businesses to create value-adding services. Open government data can be harnessed by the market to deliver public services independently and the government’s work to make the data it publishes more usable (e.g. linked open data) is a welcome step. Providing a pipeline of government’s future purchasing requirements also gives the supplier market the right information to target their investments. 3. Keep UK consumers at the forefront of technology adoption and innovation To maintain the UK’s prominence as a leading global e-commerce market, it is important that the development of the UK’s payments systems is undertaken with technology innovation at the core, in order to deliver benefits to both consumers and businesses alike. To that end, government has a key role to play in complementing the work that the Payments Council is already undertaking with the technology industry to facilitate innovative and consumer-focused payments systems, by encouraging the banks to review and update their own core systems to allow such innovation to be more effectively and timely implemented. Doing this will also address barriers that these outdated systems pose to the delivery of a more stable and transparent financial system. In spite of UK consumers being at the forefront of technology adoption, there are still more than 8 million people in the UK who say they have never been online. Tackling digital exclusion will be achieved by a combination of government, industry and third sector action. Race Online 2012 and Go ON Give an Hour are examples of campaigns which can have a significant impact and are strongly supported by Intellect. These initiatives should be maintained. Consumers now access a wide range of services and content across a growing number of digital channels and markets (e.g. fixed and mobile services, digital terrestrial TV, satellite communications and broadcasting). Any future regulation must be made with this trend in mind and not stifle innovation which will impact upon consumers and suppliers. The Communications Review will provide an opportunity to design a regulatory framework fit for the future and we look forward to engaging with government as the review proceeds. (To read the Intellect response to the Communications Review consultation, please click here). Creating a safe environment where our young people can derive maximum benefit from the internet is fundamental. Parents, government, educators, internet safety organisations, law enforcement agencies and industry all have an important part to play. Government has a crucial leadership and co-ordination role in the following areas:
- ensuring that the positive role of the internet is highlighted alongside the importance of a safe online environment
- ensuring that online safety is covered in the school curriculum with teachers given the necessary training and support
- engaging proactively in international (especially European) initiatives on internet child safety
Industry also has a crucial role in raising awareness of internet safety issues and in providing parental control tools. It is vital that such tools are simple to use and are given continued priority in corporate strategies. 4. Ensure the UK maintains a strong technology sector that can support and underpin innovation
It is essential the UK has a strong pipeline of IT and STEM skills and graduates to support the needs of the tech sector and those it supports. It is also vital for the level of general skills to increase. In spite of the downturn, employers in the technology sector still often have difficulty in finding people with the sufficient skills to fill vacancies. Addressing skills gaps is not something which will happen overnight and requires concerted effort from government, the business community and from other key stakeholders.
Intellect strongly supports the work of organisations such as The Computing at School Working Group and NAACE who do vital work with teachers, parents and students. We are also playing an active role in the Next Generation Skills initiative which we believe will make a significant contribution to inspiring young people about the value of a career in our sector.
We welcome the government’s intention to replace the current ICT GCSE curriculum with a more flexible and innovative curriculum in computer science. The outcome must be that more students are inspired to study programming and computer science throughout their education. Many detailed technical policy and regulatory issues that have a profound impact on technology providers are determined at European level. It is therefore absolutely vital for the UK to play a leading role in shaping the European digital agenda and specific policy and regulatory issues. This includes important issues such as discussions around the harmonisation of data protection laws across Europe. According to a recent study, the EU could gain 4% of GDP by stimulating the fast development of the digital single market by 2020. The completion of a fully functioning digital single market is vital to the future growth of our sector and in attracting investment from outside of Europe. We therefore urge the government to continue to push for a digital single market and to play a leading role in European negotiations. The UK needs to ensure that the development of a smart grid remains at the top of its list of priorities. Smart grid will help provide the UK with secure, sustainable and affordable energy infrastructure for decades to come: something which is absolutely crucial to our wider economic growth. In addition to this, as witnessed from examples around the world particularly in Japan and Korea, the development of smart grid promises to bring about a fundamental change in the way our Utility market operates and with this comes the possibility of significant job creation and growth.
The implementation of smart grid raises many complex technical, regulatory and policy challenges and won’t happen unless there is a clear vision and strategy in place. Government needs to work closely with industry stakeholders to develop that vision and identify the steps that need to be put in place to make smart grid a reality in the UK.
Data centres are rapidly becoming the key physical entities that can anchor the digital economy to a geographical location. The growth in data centres is due to the global demand for data. This demand is growing exponentially and will continue to do so, almost regardless of what happens in the wider economy. In fact the UK data centre sector is the only sector with growth rates that can match those in China.
However, data is now quite literally the most mobile commodity on earth and this means that operators tend to make these decisions dispassionately, based on factors like energy costs, connectivity, regulatory regime and available skills. The next generation of energy efficient data centres offer a significant opportunity for growth and over the next few years many companies will be considering where to locate them. Current policy measures such as the Carbon Reduction Commitment are creating uncertainty and cost for operators and the result is that inward investors are finding the UK less attractive as a location and UK operators are becoming less competitive compared to their counterparts overseas. This can be achieved through a Climate Change Agreement - an existing policy tool used by energy intensive sectors in the UK which encourages energy efficiency without penalising growth. 5. Ensure a coherent policy framework to underpin technology enabled productivity growth
We welcome the government’s recognition of the importance of R&D tax credits to the competiveness of the UK and therefore support recent changes such as a commitment to raise the SME R&D tax credit to 225% from April 2012. We also welcome the additional funding which has been awarded to the Technology Strategy Board and investment in Catapult centres. These commitments send a strong signal to the rest of the world that the UK is putting innovation at the centre of its plan for growth.
R&D intensity in the UK, overall and in business, remains below many major developed economies. To keep pace and to keep the UK internationally competitive, it is important for existing incentive schemes to be strengthened where possible and for the number of companies taking advantage of R&D tax credits to increase. The Hargreaves Review was a timely opportunity to explore the current IP regime and the final report contained a number of clear ideas on how to make the IP environment fit for the digital age. (To read the Intellect response to the Hargreaves Review. We welcome the government’s response and believe that it is absolutely right to take forward the recommendations in the consultative manner proposed; as any abrupt or sudden changes to IP law would create uncertainly which we know slows down investment. Intellect has been playing an active role throughout and we will continue to work with all stakeholders to develop new legislation and practice. It is important also to stress that IP is a global issue, and we therefore urge the UK government to take a leading role in shaping the IP framework both on the European stage and in the international arena. At present the UK’s three main pillars of carbon taxation actually price carbon differently and require different reporting timescales. This policy incoherence has damaging consequences and there is increasing reluctance among global players to invest in the UK as a result. There is considerable scope to streamline existing legislation which will not only help to boost growth, but more significantly enable the UK to be at the forefront of harnessing technology to combat climate change. Get in touch
|
Publications 
