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December 21, 2020

How digitisation will underpin the post-pandemic recovery

Policymakers around the world are supporting digital skills, SMEs and infrastructure to future-proof their economies.

By Laurie Clarke

Covid-19 has upended business and work. Trends that were already underway – digitisation, remote working, and our increasing reliance on digital infrastructure – have been expedited. At the same time, many have lost their jobs, and businesses have gone bust. Having provided short-term relief, through furlough schemes and support packages, governments are now taking action to build more resilient, post-pandemic economies – and digital technology will play a starring role. 

digitisation covid recovery

Covid-19 has seen many workers lose jobs and businesses forced to shut down. (Photo by Tolga Akmen / AFP)

Economic forecasts paint a gloomy picture of the post-Covid-19 world. The OECD has predicted a 6% drop in global GDP in 2020, with a double-digit drop in the worst-hit countries, followed by a modest recovery of 2.8% in 2021.

But governments are planning a path to recovery. The EU, for example, recently announced a €1.8tn stimulus package designed to build “a greener, more digital and more resilient Europe”. The plan places a strong emphasis on Europe’s digital transformation: 20% of the planned investment is earmarked for digital initiatives. 

This has been welcomed by Digital Europe, an organisation that represents the bloc’s digital technology industry. In addition to the digitisation of the health and energy sectors, the group identifies three areas where investment in digitisation would boost the post-pandemic economy: digital skills and education; digitising SMEs; and building fast and secure infrastructure. 

Closing the digital skills divide

The onset of the Covid-19 pandemic and the unprecedented shift to remote working have exacerbated the digital divide for both workers and businesses. In 2019, 42% of European citizens did not have basic digital skills and 52% of European workers need reskilling, according to the World Economic Forum. 

Policy interventions that can help workers benefit from digital technology include ensuring universal access to digital infrastructure, digital tools and learning technologies, and helping people to upskill.

The days of having one job for forty years are over.
Casper Klynge, VP of European government affairs, Microsoft

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In 2020, the UK government launched an intervention called The Skills Toolkit, intended to provide digital and numeracy training to those staying at home during the pandemic, thereby boosting their job prospects. 

The Next Generation EU recovery plan and the updated European Skills Agenda and Youth Employment Support package all focus on increasing digital skills. Microsoft’s VP of European government affairs Casper Klynge welcomed the initiatives.

“The days of having one job for 40 years are over, but many countries have not yet adjusted to this reality. This creates a worrying disconnect between education and work,” he wrote. “To bridge this gap, all governments must take a close look at their training systems to ensure they meet evolving labour market needs.”

Accelerating SME digitisation

But the digital divide doesn’t just apply to workers: companies, too, are unequal in their ability to put digital technology to productive use. In particular, the divide between small and large companies has become apparent during the pandemic. 

Surveys tend to indicate that bigger companies have more easily adapted to remote working. In Japan, 48% of large corporations had adopted remote working practices, compared to 10-20% by the SMEs, due to reasons such as lack of infrastructure and employees’ skills.

Similarly, a European survey suggested that only 56% of all companies with 50 or fewer employees provided remote access to email, applications, and documents for their employees, compared with 93% of all companies with more than 250 employees.

Around the world, there has been a push by governments to help businesses expedite digital transformation. Many initiatives focused on supporting remote work: Argentina delivered €7.2m to SMEs exclusively for boosting teleworking, for example, while France Num, a government initiative to help SMEs digitise, developed a teleworking toolkit.

Other policy programmes fostered links between SMEs and the digital sector. The “Digital Team Austria” initiative compelled digital providers in the country to offer their services to SMEs for free for at least three months. Italy’s “Digital Solidarity” initiative includes a portal allowing companies free access to digital services from bigger businesses. 

Building digital infrastructure

The vital role that digital infrastructure, most importantly internet connectivity, plays in the economy become unavoidably clear in 2020. Some governments took radical steps during the pandemic to meet surging demand for connectivity.

In the United States, for example, the Federal Communications Commission (FCC) let operators temporarily access spectrum in the 5.9 GHz band to cater to increased demand for rural broadband. EU regulators urged streaming services and operators to help prevent network congestion.  

This is an area which the UK lags. A recent National Audit Office report found the UK ranks eighth in Europe on access to superfast broadband, with 1.6 million homes and businesses missing out on superfast internet speeds. This is disproportionately concentrated in certain areas – more than half of the UK’s 650 constituencies have full-fibre network coverage below 5%.

And while Covid-19 has made the need for digital infrastructure abundantly clear, it has also robbed many governments of the funds required to invest in it. “Most countries faced a gap between infrastructure needs and financial resources before the pandemic hit; that gap is now larger as a result of it,” a report from global accounting firm PwC concludes.

Still, global competition may nevertheless force governments to act. An economic stimulus package unveiled by the Chinese government in May included plans to invest $1.4trn in high-tech infrastructure over the next five years.

“We think [digital infrastructure] has an essential role to play in promoting future economic growth, with cities that under-invest likely to lose global competitiveness,” wrote Ben Foster, equity analyst at investment bank Schroders, earlier this year.

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