An Economic and Social Evaluation of the UK Subsea Cables Industry

This research report seeks to estimate the value of the UK subsea cables industry, considering its value to 1) the digital economy, and 2) the electricity industry. An initial estimate of the economic value of the UK telecommunications subsea cables industry to the digital economy values it at £62.8 billion per annum. The impact of the UK electricity subsea cables industry is smaller but still significant at £2.8 billion per annum. The economic value of the UK subsea cables industry both for the telecommunications and energy sectors is then measured in more detail using the Computable General Equilibrium (CGE) modelling approach that has increasingly overtaken the more traditional Cost Benefit Analysis approach to computing economic values. This analysis also provides estimates of the impact of changes in the industry on various sectors of the economy, as well as on the macro economy. Yet first a qualitative research methodology, namely a Comprehensive Impact Evaluation Framework is applied to identify benefits of the UK subsea cables industry to multiple stakeholders in the telecommunications and energy sectors. By identifying the relevant direct and indirect stakeholders, this ensures that the CGE models developed are as accurate as possible. The stakeholder analysis also allows us to going beyond a monetary analysis of the potential benefits of the subsea cables industry, by identifying the range of stakeholders positively impacted by the presence of the UK subsea cables industry. In the telecommunications sector there are benefits to businesses and households from better quality and speed of digital communication, as well as improved reliability of Internet connectivity. These benefits translate into improved business efficiency, improved ability to manage people and processes, as well as improved opportunities for the international communication of product and process innovations. In the electricity sector, the use of subsea cables is vital for the import and export of electricity, as well as to connect offshore electricity production to the mainland electricity grid system. Hence, subsea cables ensure improved reliability and security of electricity supplies, as well as access to international markets. Given that offshore electricity production is a vital part of renewables electricity production in the UK, this production has environmental benefits and contributes to reduced pollution and the UK’s better ability to meet pollution reduction targets. The qualitative and quantitative analyses combine to highlight the positive value of the UK subsea cables industry both on the telecommunications and electricity market sectors. The impact on the telecommunications sector is larger as was to be expected given the importance of this sector on the UK economy as a whole, while subsea cables are of importance in the electricity market predominantly in terms of electricity imports and exports, and the production of electricity from off-shore wind farms. Not only is the UK subsea cables market important in terms of its impact on the telecommunications and electricity sectors, but the quantitative analysis has highlighted the benefits of future growth in the UK subsea cables industry on UK macroeconomic variables including GDP; consumer income; capital formation; exports and imports and government revenues. Growth in the UK telecommunications subsea cables industry is likely positively to impact the UK financial and insurance sector the most, while growth in the UK electricity subsea cables industry is expected to have its greatest positive impact on the UK manufacturing industry.