Ireland’s lost ‘€12bn internet economy’ opportunity

4 Jul 2012

UPC Ireland CEO Dana Strong

In value terms, if 8pc of GDP in Ireland came from the internet economy as it does in the UK, more than €12bn a year would be generated in the economy. Instead, at only 3pc, only €4.6bn of Ireland’s GDP comes from the internet economy, UPC Ireland CEO Dana Strong said today at the Thought Leadership Symposium at the Volvo Ocean Race 2012.

The reasons for Ireland’s failure to achieve the same level of success with the internet economy are manifold. But principally they range from an economy and political leadership focused exclusively on property bubbles rather than real growth, and a related failure to ensure the country invested in the right internet infrastructure when there was more money in the economy.

But according to Strong, efforts are being made to correct this imbalance and the country is not only in a race for survival, it is in a race for time.

On UPC’s part, she said the company has invested €1bn in the Irish economy, including €500m on upgrading its network to fibre. As a result, more than 500,000 households are now capable of 100Mbps broadband, and of these 700,000 have services in excess of 30Mbps.

The internet economy is the economy, stupid

Pointing to a study last year among 13 leading countries by McKinsey – including G8 countries, as well as Brazil, China, India, South Korea and Sweden – Strong said the internet was found to be a critical driver of economic progress in those countries.

“What they found was that the internet is a critical driver of economic progress in those countries. On average, it contributes about three and half per cent of everything that those countries earn, that’s 3.5pc of GDP.

“However, over a recent five-year period studied, the internet contributed to 21pc of the actual rate of economic growth in those countries. This was from 2004-2009.

“Now, looking closer to home, it’s estimated that 3pc or more than €4.6bn euro of Ireland’s GDP comes from the internet economy. This is behind the EU27 average where there is a 3.8pc contribution by the internet to their economies.

“But if you look at our nearest neighbour, the UK, up to 8pc of their total GDP is now coming from the internet economy, compared to Ireland at 3pc, so there is much room for improvement here at home.

“In value terms, if Ireland was at the UK level, this would equate to more than €12bn being generated from the internet economy.”

The threatened decline of the Irish SME in the 21st century

Strong said Ireland needs to wake up to the fact that the internet economy is not just the preserve of the technology sector.

“The fact is that the majority of economic value that the internet is creating falls outside of the technology sector.

“It is companies in more traditional industries who are capturing the majority of the benefits that arise from using the internet.

“So bearing in mind that SMEs are responsible for more than 90pc of all jobs in Ireland, we must all look at the employment opportunities that can be created by encouraging SMEs to engage meaningfully in the digital economy.

“International evidence shows that SMEs with a strong web presence grow more quickly, export more and create more jobs than those who have a minimal web presence.

“And for Ireland to reach or exceed even the European average, small and medium businesses need to accelerate their use of the online marketplace.

“As a case in point, we know that more than a million people in Ireland are shopping on the internet. CSO figures show that four out of every 10 Irish adults shopped online in 2011. About six out of 10 people are using online discount sites,” Strong said.

But here’s the rub. She pointed out that a large portion of Irish internet spending is going overseas as UK, European and US websites target Irish consumers. In fact, let’s paint a little picture: the Irish high street furniture store or hardware shop is being crucified by UK or US counterparts who have broadband and who learned how to sell and market online years ago.

“This has an impact on Irish-based business revenues, on jobs and on taxes. And, if we as business people allow this to continue unchallenged, then we risk very real damage to our economy.

“Currently, it is the case that as many as 30,000 Irish businesses do not have a website. Even if you take it that very many buyers of goods and services research online then purchase offline, there are 30,000 businesses who do not provide that capacity,” Strong said.

Crucial infrastructure for economic survival

She called for more to be done to get more Irish SMEs online and stem the flow of business out of Ireland to overseas websites.

One solution could be grants or tax breaks for SMEs to help them build their online presence and provide jobs to tech-savvy graduates out of work.

At all levels there needs to be recognition that broadband infrastructure is as crucial as modern motorway infrastructure and as such is essential to economic progress.

“We must drive forward our digital economy to create jobs growth, economic growth and to improve competitiveness. 

“This will benefit everyone in Ireland as we seek to grow our indigenous firms and to attract even more foreign direct investment.

“I believe Ireland is well capable of grasping the opportunity presented by new media, digital developments, broadband and the internet, and this will contribute to restoring the health of our economy,” Strong said.

Join Ireland’s digital leaders who will gather at The Digital Ireland Forum to discuss the opportunity for Ireland to become a global centre for the creation and management of the digital content and services today’s connected consumer demands.

John Kennedy is a journalist who served as editor of Silicon Republic for 17 years