The Economic Impact on the UK of a Disruption to GNSS Full Report Public June 2017
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FINAL The economic impact on the UK of a disruption to GNSS Full Report Public June 2017 Commissioned by About London Economics London Economics (LE) is a leading independent European economic consultancy, with a dedicated team of professional economists specialised in the analysis of the space sector. From our headquarters in London, and associate offices in five other European capitals, we advise an international client base (both public and private) on economic and financial analysis, litigation support, policy development and evaluation, business strategy, and regulatory and competition policy. Our reputation for independent analysis and client-driven, world-class and academically robust economic research has been built up over 30 years. Drawing on our solid understanding of the economics of space, expertise in economic analysis and industry knowledge, our space team has extensive experience of providing independent analysis and innovative solutions to reduce uncertainty and guide decision-makers in this most challenging of operating environments. Our consultants are highly-qualified economists with extensive experience in applying a wide variety of best practice analytical techniques to the space sector, including: Insightful and accurate market analysis and demand forecasting; Analysis of industrial structure, competitive forces and strategy development; New technology adoption modelling; Mapping and estimation of public utility and spillover benefits; Opportunity prioritisation and targeting to maximise exploitation of investment options; Sophisticated statistical analysis (econometrics, regression); Literature reviews, survey questionnaires, interviews and focus groups; Economic and financial modelling, including: Cost-Benefit Analysis (CBA), cost effectiveness analysis, Value for Money (VfM), Multi-Criteria Analysis (MCA), impact assessment, policy evaluation, business case development, cash flow and financial sustainability analysis. Head Office: London Economics, Somerset House (New Wing), Strand, London WC2R 1LA, United Kingdom. w: londoneconomics.co.uk/aerospace e: [email protected] t: +44 (0)20 3701 7707 : @LE_Aerospace Acknowledgements We would like to acknowledge the useful guidance and feedback provided by Innovate UK, the UK Space Agency and the Royal Institute of Navigation throughout this research, and the assistance of more than 35 stakeholders who have kindly contributed their time and expertise to inform this report. Responsibility for the content of this report remains with London Economics. Authors Greg Sadlier, Divisional Director, Space, +44 (0)20 3701 7707, [email protected] Rasmus Flytkjær, Senior Economic Consultant, +44 (0)20 3701 7717, [email protected] Farooq Sabri, Economic Analyst, +44 (0)20 3701 7721, [email protected] Daniel Herr, Economic Analyst, +44 (0)20 3701 7715, [email protected] Wherever possible London Economics uses paper sourced from sustainably managed forests using production processes that meet the EU Ecolabel requirements. Copyright © 2017 London Economics. Except for the quotation of short passages for the purposes of criticism or review, no part of this document may be reproduced without permission. London Economics Ltd is a Limited Company registered in England and Wales with registered number 04083204 and registered offices at Somerset House, New Wing, Strand, London WC2R 1LA. London Economics Ltd's registration number for Value Added Tax in the United Kingdom is GB769529863. Table of Contents Page Key Findings iii Executive Summary iv 1 Introduction 1 1.1 What is GNSS? 1 1.2 Motivation for the study 1 1.3 Research objectives 2 1.4 Caveats and limitations 3 2 Review of existing studies 5 2.1 Usage and benefits of GNSS 5 2.2 Consequences of a disruption to GNSS 7 2.3 Economic impact resulting from a loss of GNSS 9 2.4 Limitations on relevance to the UK case 10 3 Analytical framework 12 3.1 Scope 12 3.2 Counterfactual 12 3.3 Impact logic model 13 3.4 Inputs required for successful implementation 14 4 Current usage and benefits of GNSS in the UK 15 4.1 Critical National Infrastructures 15 4.2 Professional (industrial activity) 33 4.3 Mass market (consumer applications) 39 4.4 Summary of benefits 43 5 Analysis of impact of five-day GNSS disruption 45 5.1 Critical National Infrastructures 46 5.2 Professional (industrial activity) 59 5.3 Mass market (consumer applications) 67 5.4 Summary of impacts 70 6 Alternative and potential future mitigation strategies 73 6.1 Traditional/current methods 73 6.2 Current and future technologies 74 6.3 Summary of mitigating strategies 78 7 Contribution of UK public funding 79 7.1 Rationale for public funding for GNSS 79 7.2 Overview of UK public funding for GNSS 81 7.3 Impact of UK public funding for GNSS 83 London Economics The economic impact on the UK of a disruption to GNSS i Table of Contents Page 7.4 Conclusion on the contribution of UK public funding 91 8 Conclusions and recommendations for future research 92 8.1 Conclusions 92 8.2 Recommendations for future research 94 INDEX 96 References 97 Index of Tables, Figures and Boxes 107 ANNEXES 108 Annex 1 Definitions 109 Annex 2 Benefits of GNSS 111 Annex 3 Oscillator errors over time 112 Annex 4 Supplementary information – mitigation strategies 113 A4.1 eLoran and compact fluorescent lamps 113 A4.2 Effectiveness of mitigation 113 Annex 5 Estimated UK public funding for GNSS 115 Annex 6 Impact logic model: UK funding for GNSS 116 Annex 7 Impact logic model: counterfactual 117 London Economics ii The economic impact on the UK of a disruption to GNSS Key Findings GNSS – Global Navigation Satellite System(s) – has been described as the invisible utility, and the findings of this research suggest that status to be well justified. GNSS is an integral source of timing and positioning information for a very wide range of economic sectors in the UK, enabling and enhancing daily activities for public, commercial and private citizen users. All critical national infrastructures (CNI) rely on GNSS to some extent, with Communications, Emergency Services, Finance, Government and Transport identified as particularly intensive users. This reliance has developed over decades, based on assumed availability and continuity of GNSS signals. GNSS is also a primary input for Transport (road, air, maritime, and rail), Agriculture, Surveying, and Legal users. It has been estimated that the UK space industry derived turnover of £1.7bn from Position, Navigation and Timing (PNT) services in 2014/15, supporting 4,000 jobs. More broadly, it has been estimated that sectors generating 11.3% of UK GDP are supported directly by GNSS, but the primacy of GNSS in CNI means that an even wider range of economic activity is underpinned by GNSS indirectly. Quantified economic benefits to the UK of GNSS have been monetised at £6.7bn per annum, comprised of £1.2bn in Gross Value-Added (GVA) benefits and £5.5bn in utility benefits (efficiency, safety, etc.). These values have been estimated conservatively as the incremental benefit of using GNSS rather than the well-functioning next best alternative. Road and Emergency Service applications account for almost 80% of estimated benefits. However, a range of benefits has not been quantified, as GNSS underpins activity for which a global source of accurate timing is a necessity. This includes financial markets, where the internationalisation of the industry has relied on a universally referenceable time source. Accordingly, the total benefits of GNSS estimated in this report may be considered a lower bound, and the true value of GNSS benefits to the UK economy is much higher. GNSS LOSS The economic impact to GNSS-reliant present-day LBS, 0% UK of a loss of GNSS has been estimated at £5.2bn Surveying, 7% over a five-day period, comprised of £1.7bn in lost GVA and £3.5bn in lost utility benefits. Applications in road, maritime, and emergency and justice services account for 67% of all impacts. This is limited Road, 37% by the resilience that stakeholders have confirmed Emergency and justice are in place for a duration of five days, and the services, 30% difficulty of robustly estimating the costs associated with loss of certain activities. For maritime shipping, for example, the loss of GNSS would severely disrupt all ports and the loading and unloading of containers for the duration of the outage. The knock-on effects are difficult to estimate in monetary terms, but evidence suggests that factories relying on just-in- Food, 3% Rail, 2% time delivery would likely run out of inputs on the Aviation, 0% first day. Goods imported to the UK by other means Maritime, 21% would be severely delayed as ports and other transport operations would lose all the efficiencies brought about by GNSS. The telecommunications network, however, would not be affected. The impact on the domestic transport network would be substantial, at £2bn. Congestion would build very quickly, and delivery and minicab drivers would lose their preferred navigation method. This would impact all drivers as the increased congestion would mean that even drivers that know their route would see increases in travel time. Similarly, surveying activity – a critical input in all construction activities – would be expected to shut down for the duration of the outage, costing £345m in lost activity. The UK government has invested almost £1.2bn (€1.5bn) since 2000 to develop the European GNSS infrastructure, promising greater performance and resilience, and to foster the lucrative downstream applications market, which provides significant benefits to users and the rest of society. As well as generating significant GVA, high-productivity jobs and taxes for the UK, the contracts have improved the overall competitiveness of the UK space sector and helped cement the UK’s reputation as a leading partner in European space programmes. Several mitigation strategies have been discussed in this report. The most applicable mitigation strategies for the largest number of applications are eLoran and Satelles Time and Location (STL).