5G roll-out delay could see £18.2bn hit to UK economy

The decision by the UK government to divest the nation’s 5G networks of technology from Huawei may seem to have happened a long time ago and not be at the forefront of public consciousness, but research commissioned by the Chinese telecoms equipment giant has reignited the issue, warning of the substantial financial hits to the UK economy in removing its technology from the next generation comms infrastructure.

In what was a huge U-turn to the decision it took only in January 2020, the UK government made its long-expected decision to remove Huawei technology from the country’s growing 5G communications infrastructure in July 2020, announcing a timetable for the removal of Huawei equipment from the 5G network by 2027.

In a House of Commons statement, UK culture secretary Oliver Dowden said the decision was taken after the UK’s National Cyber Security Centre (NCSC) reviewed the consequences of the decision by the US government on 15 May to extend its restrictions on the sale of hardware and software to so-called “high-risk” suppliers such as Huawei, leading to the Chinese comms tech giant not being able to purchase equipment from long-standing suppliers.

Dowden said the NCSC believed the move created uncertainly around the Huawei supply chain, and that the UK was no longer confident it would be able to guarantee the security of future Huawei 5G equipment. To that end, it was making it illegal for UK telcos to purchase Huawei 5G network equipment from the end of this year.

Yet the company has always fought its case against the judgment, and at the time warned of the major downsides in doing so. And an independent research report from Assembly, titled Macroeconomic impact of a delayed 5G roll-out in the UK, commissioned by Huawei, has now showed that banning and removing Huawei from the UK’s 5G networks by 2027 risks severely delaying operators’ 5G roll-out plans, calculating that the move could adversely affect the UK economy by £18.2bn, and losing the UK’s current competitive advantage in 5G leadership.

The calculation is based on the premise that the removal of Huawei builds upon the government’s own expectation of a three-year delay to 5G roll-out, and that removing equipment sooner than 2027 would lead to a further delay to roll-out at a higher cost to the UK economy.

Of the £18.2bn economic impact, Assembly said that about £10bn of productivity benefits would be lost entirely. Constructing a scenario where the UK is a global 5G leader, Assembly forecast the mobile sector would miss out on the opportunity to generate about £4.7bn, and that related industries would lose about £2bn. The economy at large was set to miss benefits estimated at around £1.5bn, it added.

Moreover, the report noted that over the past 12 months, the UK mobile operators have made significant progress in deploying 5G infrastructure, putting the country in a strong position to reap the future economic benefits.

However, Assembly warned that as a result of what it called continued US pressure and latest sanctions, this deployment will slow down in future, impacting industrial efficiency, global competitiveness and the associated economic benefits of the UK being a global leader in 5G.

The report also focuses on the DCMS’ conclusion that should the UK not maintain global leadership in 5G, it will miss the opportunity to fully realise £173bn of incremental GDP over 10 years between 2020 and 2030.

Assembly said that such global leadership is important so that UK can take early advantage of the potential for 5G to create new opportunities for UK businesses at home and encourage inward investment – both of which contribute to the creation of a world-leading digital economy.

“As a result of further restrictions on Huawei in the US, the UK mobile operators are set to incur billions of pounds worth of cost stripping out equipment form their networks,” said Matthew Howett, principal analyst and founder of Assembly, commenting on Macroeconomic impact of a delayed 5G roll-out in the UK.

“This report reaffirms there is also an untold cost in terms of the economy and impact on productivity a delayed 5G roll-out will have, the scale of which the UK can ill afford given the current economic circumstances.”

Huawei vice-president Victor Zhang added: “This new research shows how the US administration has directly impacted Britain’s economy, ending the UK’s leadership in 5G, holding the country back from realising its full potential for years to come. Our priority at Huawei remains to support our customers in delivering and helping to build a better-connected UK. This independent research shows why we would urge the government to reconsider its decision.”