The Economic Impact of Huawei in The UK-Final
The Economic Impact of Huawei in The UK-Final
The Economic Impact of Huawei in The UK-Final
of Huawei in the UK
June 2015
Contents
Executive Summary 4
1 Introduction 8
1.1 About Huawei 8
1.2 Report structure 9
1.3 Methodology and sources 9
Executive Summary
Huawei has publicly committed to spending £1.3 billion in the UK. The company
Huawei has publicly made this commitment in September 2012, when it announced its intention to spend
committed to spending £1.3 billion (US$2 billion) in the UK over the five years from 2013-2017, split equally
£1.3 billion in the UK. between procurement and investment. This report assesses whether Huawei is on
Huawei is on track to track to meet these targets. It does so by analysing the economic impact that the
meet this spending company’s activities had on the UK economy in the years 2012-2014. It explores
commitment, making a range of quantifiable and less easily measurable channels and analyses these
it one of China’s largest impacts in the context of the £1.3 billion public commitment.
inward investors in Huawei is on track to meet this spending commitment, making it one of China’s
the UK. largest inward investors in the UK. If the levels of activity undertaken in 2014 were
merely maintained, then over the five years 2013-2017 procurement alone would
total £1.02 billion, and the total for investment and procurement combined would
reach £1.41 billion.
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June 2015 The economic impact of Huawei in the UK
Total 2013-2017
Commitment
£ million 2012 2013 2014 if 2014 level
for 2013-2017
maintained
Total of investment
178.3 226.9 295.1 1,300 1,407
and procurement
The story is similar for investment, which in Huawei’s case mainly comprises
Research & Development (R&D). This spending started from a low base but increased
substantially between 2012 and 2014. If the recent rate of growth, excluding the
impact of ‘one-off’ events, is maintained, then total investment over 2013-2017
would reach £811 million, thereby also meeting the £650 million commitment.
150 149.7
114.4
100
50 102.8
65.4 62.6
0
2012 2013 2014
Source: Oxford Economics
By 2014 Huawei supported 7,400 jobs in the UK economy, across the three
channels of impact. For every person employed directly by Huawei in the UK in
that year, a further six UK-based jobs were supported by supply chain linkages and
employee spending. Over the three years combined, the total contribution to GDP
was also sufficient to generate £411.4 million in tax revenues for the UK Exchequer.
In 2014 alone these tax revenues, at £161.9 million, would have been enough to
cover the wages of over 5,000 full-time nurses.
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The economic impact of Huawei in the UK June 2015
Total Annual
£ million 2012 2013 2014
2012-2014 growth rate
Direct GDP 230.8 65.4 62.6 102.8 25.4%
Indirect GDP 435.3 114.4 149.7 171.2 22.3%
Induced GDP 289.8 75.2 98.5 116.2 24.3%
Total GDP contribution 955.9 255.0 310.8 390.1 23.7%
Annual
Headcount 2012 2013 2014
growth rate
Direct jobs 781 916 1,030 14.8%
Indirect jobs 2,539 3,181 3,724 21.1%
Induced jobs 1,759 2,255 2,632 22.3%
Total jobs contribution 5,079 6,352 7,386 20.6%
Total Annual
£ million 2012 2013 2014
2012-2014 growth rate
Direct tax revenues 128.6 39.6 38.8 50.3 12.7%
Indirect tax revenues 125.7 33.1 43.6 49.0 21.5%
Induced tax revenues 157.1 41.4 53.0 62.7 23.1%
Total tax contribution 411.4 114.1 135.4 161.9 19.1%
Source: Oxford Economics; Huawei
Huawei’s economic impact is spread throughout the UK. The company now
has a presence in 15 locations across the UK. In the period 2012-2014 it sourced
goods and services from suppliers based in 86 of the UK’s 121 postcode areas. As
a result the contribution it makes to GDP and employment has a positive impact on
all of the UK’s regions. The largest contributions are found in the South East and
East of England, followed by London, but in 2014 the company’s activities also
supported over 300 jobs in each of the South West, Yorkshire and the Humber, and
North West regions.
Huawei is contributing to R&D and innovation in the UK. Huawei’s R&D spending
grew from £30.6 million in 2012 to £78.4 million in 2014 – an average annual
increase of 60.2% – helped among other things by the expansion of the Ipswich-
based Centre for Integrated Photonics (CIP), acquired in 2012, and the acquisition
of the Cambridge-based company Neul in 2014. Huawei has set a target of almost
doubling its R&D workforce from 156 currently to 300 by 2017.
The company has established a strong and growing set of R&D activities, under the
banner of the Huawei UK Innovation Programme. This programme has included
opening a new R&D centre in Bristol, focused on researching ICT chips, and
investing £10 million in joint project work with leading British universities, such as
the University of Surrey’s 5G Innovation Centre, where 5G technologies are being
pioneered. Huawei also operates two joint innovation centres in the UK, where it
collaborates on research with BT and Vodafone.
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June 2015 The economic impact of Huawei in the UK
70
60 60.2%
annual growth
50
40 £38.0 m
£30.6 m
30
20
10
0
2012 2013 2014
Source: Huawei
Oxford Economics estimates that, if Huawei’s 2014 level of R&D activity were merely
maintained, UK GDP would eventually benefit by a further £310 million per annum,
on top of the £170 million annual return earned by Huawei itself. Much of this so-
called ‘spillover’ benefit could be expected to be felt, at least initially, by firms and
institutions local to Huawei’s project work.
Huawei’s activities have other positive impacts for the UK. These include, for
example, the benefits that arise for UK consumers, as illustrated by its partnerships
with customers in the UK. This report looks at two of these partnerships in more
detail, namely those with EE and Openreach on the rollout of 4G mobile telephone
infrastructure and superfast broadband infrastructure respectively. In addition,
Huawei’s aims align with some of the UK Government’s key goals in economic, trade
and technology policy. The company also has a strong commitment to corporate
social responsibility.
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The economic impact of Huawei in the UK June 2015
1
Introduction
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June 2015 The economic impact of Huawei in the UK
As one of China’s largest inward investors in the UK, Huawei plays an important
role in investing in the next generation of computer scientists and engineers, their
skills and research and development in the UK. This is demonstrated through
the company’s support of undergraduates, through partnership projects with the
University of Cambridge, Imperial College London and the University of Surrey, and
through investing in technology research programmes with other British universities.
The company describes its vision as being “to build a better connected world and
enrich life through communication”.
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The economic impact of Huawei in the UK June 2015
In accordance with standard economic impact assessments, the scale of the impact
of the business is measured using three key metrics:
■■ The contribution to the economy’s gross domestic product (GDP), i.e. the value
of goods and services produced.1
■■ Employment – measured in terms of headcount and embracing all ‘workforce
jobs’, i.e. including self-employed as well as employee posts.
■■ Taxation – covering tax revenue streams of all kinds generated for the UK
Exchequer.
The contributions were worked out by combining financial and employment data
supplied by Huawei, consistent where relevant with financial data supplied by the
company to Companies House, with a range of official datasets concerned with
patterns of output, income, expenditure and transactions across the UK economy.
The Annex explains the Economic Impact Assessment methodology in detail as well
as listing the specific data sources.
1 A company’s contribution to GDP is calculated as the difference between the value of its turnover and its payments
to other businesses for raw materials, non-capital goods and services. This will be equal to the sum of other
business operating costs (mainly staff costs) and gross profits. In standard economic assessments such as this,
gross domestic product is measured at ‘basic prices’, i.e. net of taxes on sales such as VAT. This measure, which
is also known as ‘gross value added’, is typically a little lower than the ‘headline’ measure of GDP, which is valued
at ‘market prices’ – i.e. including sales taxes.
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June 2015 The economic impact of Huawei in the UK
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The economic impact of Huawei in the UK June 2015
2
The economic impact of Huawei
in the UK, 2012-2014
Huawei’s direct 2.1 Direct effects arising from Huawei’s activities in the UK
contribution to UK gross Demonstrating Huawei’s commitment to the UK, the direct contribution of the
domestic product company to UK GDP totalled £230.8 million over the three year period 2012-2014,
totalled £230.8 million and grew at an average annual rate of 25.4% between 2012 and 2014 – a strong
over the three year growth curve. As a result, the number of individuals employed directly by Huawei in
the UK increased by 14.8% per annum, to reach 1,030. Further details are shown in
period 2012-2014, and
Table 2.1 and Chart 2.12.
grew by 25.4% per
annum in that time. Table 2.1: The direct contribution of Huawei to UK GDP and jobs
Total Annual
£ million 2012 2013 2014
2012-2014 growth rate
Annual
Headcount 2012 2013 2014
growth rate
2 The direct GDP contribution is calculated by summing up over the cost elements included in GDP – wages,
employers’ national insurance and pension contributions, and taxes on production – and profits before tax, interest
and depreciation (‘EBITDA’ in company accounts).
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June 2015 The economic impact of Huawei in the UK
These figures include the activities of R&D establishments CIP and Neul, acquired
in 2012 and 2014 respectively, as well as Huawei’s more longstanding UK-based
operations.
Looking at 2014 in isolation, GDP per employee – labour productivity – works out at
With 1,030 staff in 2014,
approximately £99,800, compared to the UK average of some £43,8003 (Chart 2.2).
Huawei’s GDP per
This is likely to be due to the high-skilled and technical nature of much of Huawei’s
employee works out at
work in the UK.
£99,800 compared to the
UK average of £43,800. It is worth noting here that Huawei has a policy of recruiting locally. Before 2014 it
achieved a 70% local recruitment target in the UK. This was stepped up to 75% in
that year.
90 900
75 750
60 600
45 450
30 300
15 150
0 0
2012 2013 2014
Source: Huawei, Oxford Economics
UK economy £43,800
per head
£99,800
Huawei
per head
3 The UK figure is for GDP at basic prices excluding imputed owner-occupied rent, per workforce job.
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The economic impact of Huawei in the UK June 2015
20 14.4 VAT
11.2
7.2
15
10
13.7 14.0 13.9
5
0
2012 2013 2014
Source: Huawei, Oxford Economics
The direct tax contribution of £50.3 million in 2014 alone was equivalent to 49% of
Huawei’s direct GDP contribution, compared to the equivalent UK economy-wide
ratio of around 37%.
A small amount of the value of these purchases from UK suppliers can be accounted
for by content that was ultimately imported further along the supply chain, with
an even smaller amount needing to cover the cost of sales taxes on transactions
within the supply chain. The majority, however, represents the GDP either of the UK
suppliers to Huawei, or that of further rounds of UK-based suppliers. The value of this
so-called indirect GDP impact is put at £435.3 million over the three years. Average
annual growth in indirect GDP, between 2012 and 2014, amounted to 22.3%.
4 Business taxes as shown in the chart mainly comprise employers’ national insurance, corporation tax and business
property tax (‘rates’). Employee taxes comprise income tax and employees’ national insurance.
5 This includes purchases by Huawei’s global headquarters as well as UK-to-UK transactions.
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June 2015 The economic impact of Huawei in the UK
Chart 2.4 gives more details of these procurement and indirect GDP numbers.
125 £114.4 m
100
75
50
25
0
2012 2013 2014
Source: Huawei, Oxford Economics
This activity was sufficient to generate £125.7 million in indirect tax revenues over
the three years6, with these revenues growing at 21.5% per annum. It was sufficient
to support annual growth of 21.1% in supply chain jobs, with indirect employment
reaching 3,724 in the final year. The jobs supported are to be found in a wide range
of sectors as illustrated by Chart 2.5.
6 The indirect tax take includes sales taxes, production taxes, corporation tax and employers’ national insurance
paid by businesses in the supply chain, and income tax and national insurance paid by their employees.
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The economic impact of Huawei in the UK June 2015
Associated with this, Huawei’s induced jobs contribution grew by 22.3% per annum
between 2012 and 2014, to reach 2,631 jobs in the latest year.
Huawei’s total tax contribution, meanwhile, totalled £411.4 million over the three
years. This contribution grew by 19.1% per annum, so that in the final year it would
have been sufficient to have covered the wages of 5,130 full-time nurses.8
Chart 2.6 shows greater detail on the breakdown by channel of impact and year.
7 This includes sales taxes (e.g. VAT and excise duties) on the consumer spending of Huawei employees and those
in its supply chain, as well as sales taxes, production taxes, corporation tax and employers’ national insurance paid
by businesses in the consumer supply chain, and income tax and national insurance paid by their employees.
8 Based on the average pay of a full-time nurse in that year, sourced from: ONS, Annual Survey of Hours and
Earnings, 2014 provisional results.
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June 2015 The economic impact of Huawei in the UK
Information on staff costs, employee taxes and purchases of goods and services, by
postcode of employee and supplier, were provided by Huawei to Oxford Economics,
enabling the regional distribution of the direct, indirect and induced contributions to
be estimated. The results are summarised in Table 2.2.
Yorkshire
South East of South North Rest of
£ million (total, 2012-2014) London and the Total UK
East England West West UK
Humber
Direct GDP 135.5 33.0 30.4 12.4 0.9 5.1 13.4 230.8
Indirect GDP 122.7 120.2 70.5 13.6 60.2 26.4 21.8 435.3
Induced GDP 109.8 57.9 56.1 11.6 20.4 14.7 19.2 289.8
Total GDP contribution 368.0 211.1 157.1 37.7 81.5 46.2 54.4 955.9
Total tax contribution 168.3 86.4 66.9 16.5 31.2 18.3 23.9 411.4
Yorkshire
South East of South North Rest of
Headcount London & the Total UK
East England West West UK
Humber
Total jobs contribution 2012 1,991 619 663 206 664 424 511 5,079
Total jobs contribution 2013 2,004 1,792 925 198 546 444 442 6,352
Total jobs contribution 2014 2,542 2,436 788 536 451 345 289 7,386
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The economic impact of Huawei in the UK June 2015
Focusing first on supply chain impacts, in the course of the three years Huawei
In the course of the
purchased inputs of goods and services from suppliers located in 86 out of the
three years Huawei UK’s 121 postcode areas. Chart 2.7 illustrates how this translates into purchases by
purchased inputs from standard UK region.
suppliers located in 86
out of the UK’s 121 Chart 2.7: Huawei purchases of goods and services by region, 2012-2014
postcode areas. (£m, 2012–2014)
0 154
0
1
91
30
13
5 154
83
149
15
Chart 2.8 meanwhile illustrates the regional distribution of Huawei’s total contribution
Total GDP contributions
to GDP. This takes into account supply chain linkages between the regions as well
of £10 million or more as the regional distribution of Huawei’s own activities. It also includes the regional
were made over 2012- distribution of the induced impact, which is derived from the distribution of the
2014 in eight out of the spending power of Huawei and supply chain employees.
nine English regions.
The largest impacts are found in the South East, East of England and London, but
contributions of £10 million or more were made to the economies of eight out of the
nine English regions.
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June 2015 The economic impact of Huawei in the UK
Chart 2.8: Huawei’s total GDP contribution Chart 2.9: Huawei’s total employment
by region, 2012-2014 contribution by region in 2014
(£m, 2012–2014) (headcount, 2014)
0 368 0 2,600
5 24
2 12
1 5
81 451
46 345
10 62
27 94
9 211 92 2,436
157 788
368 2,542
38 536
In terms of the resulting total jobs impact in 2014, the largest contributions are found
Reasonably significant
in the South East and East of England, followed by London, but significant impacts –
total jobs impacts are of well over 300 jobs in each case – are also found in the South West, Yorkshire and
found in the South West, the Humber, and North West.
Yorkshire and North
West, in addition to the
strong jobs support
provided for the South
East, East and London.
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The economic impact of Huawei in the UK June 2015
3
Benchmarking against the public
commitment made in 2012
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June 2015 The economic impact of Huawei in the UK
150
100
50
0
2012 2013 2014
Source: Huawei
208.5
100
186.0
146.5
50
0
2012 2013 2014
Source: Huawei
This means that even if net procurement spending were only maintained at the 2014
level over the next three years, the total over the five years 2013-17 would amount
to £1.02 billion – comfortably meeting the objective.
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The economic impact of Huawei in the UK June 2015
Given the nature of its business, Huawei’s spending on physical assets such as
buildings, plant and machinery is comparatively small. It does however undertake
significant amounts of research and development work, which falls within the national
accounts definition of fixed investment (‘fixed capital formation’) as that also includes
investment in ‘intellectual property products’.
As Chart 3.3 shows, R&D spending falling within the national accounts definition of
investment amounted to £30.6 million in 2012, rising to £38.0 million in 2013 and £78.4
million in 2014 – meaning a growth rate of 60.2% per annum. These figures include the
R&D activities of CIP and, in 2014, the newly acquired Neul, together with R&D-type
activities at the Device Design Centre and Cyber Security Centre, and co-operation on
ICT and software development with both commercial and university partners.
70
60
50
£38.0 m
40
£30.6 m
30
20
10
0
2012 2013 2014
Source: Huawei
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June 2015 The economic impact of Huawei in the UK
The investment also includes key collaborations with these British universities, with
a focus on advanced multimedia, IT and optical technology, green radio, wireless
communications and product engineering. The funding has been made available
through the Huawei Innovation Programme, which extends the company’s long-term
focus on research and development into the academic world by forging partnerships
with global educational institutions.
Huawei also opened a new R&D centre in Bristol in 2014, with the work there focusing
on researching ICT chips, software and chip technology for the future. Taking this
initiative into account, the number of Huawei staff focused solely on R&D activity
stood at 156 by May 2015. Huawei plans for this number to grow to 300 in 2017.
Currently under construction, the first phase of the testbed will be operational by
mid-2015. This will be used collaboratively by 5GIC researchers and industry partners
to develop and test advanced technologies and actively contribute to shaping the
communications standards of the future. In due course, it is envisaged that 5G will deliver
unprecedented data speeds and transform wireless communication, allowing a myriad
of applications in the Internet of Things in areas such as healthcare, transport, vehicle
telematics, the development of smart cities and entertainment.
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The economic impact of Huawei in the UK June 2015
50 Equity investment
£41.0 m Capital equipment
40 78.4
£31.8 m R&D activities
30
20 38.0
30.6
10
0
2012 2013 2014
Source: Huawei
Total investment on this broader basis amounted to £41.0 million in 2013 and £86.6
million in 2014. To meet the target for 2013-17, investment on this basis would have
to total £522 million over the three years 2015-2017, or an average of £174 million
per annum, requiring growth of 40% per annum.
Recent past performance suggests that this can indeed be achieved. The average
increase over the two years to 2014 was 65%, or 57% even if ‘one-off’ impacts
– the effect of Neul and the purchase of XMOS equity – are excluded. If this 57%
per annum ‘underlying’ growth rate were maintained through to 2017, investment
broadly defined would total £810.6 million over the five year period 2013-2017.
The achievement of the target will be helped by plans to develop Huawei’s own
R&D outlays (as described in Section 3.3 above) and to undertake the staff training
necessary as the UK-based workforce grows to the target of over 1,500 by 2017.
In addition, Huawei will continue to look for the potential to take up suitable equity
stakes in other UK-based R&D-rich businesses.
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June 2015 The economic impact of Huawei in the UK
“We are proud of this position. We intend to work hard to keep London pre-eminent in the
global financial sector.”
The opening of Huawei Global Finance clearly aligns with this goal. When the
announcement was made the Secretary of State stated: “Huawei’s announcement
reiterates London’s position as a key financial hub.” The UK Government is keen for more
Chinese businesses to use the UK as a financial centre and Huawei’s decision to locate
the finance company here can be seen as setting an example to those other enterprises.
The company chose London as the base for Huawei Global Finance due to “its strategic
role as a leading global financial hub, with associated support services and a workforce
with the necessary skills and expertise to realise operational excellence”.
Huawei Global Finance is responsible for the critical financial functions of Huawei’s
extensive global operations, including treasury, accounting risk and credit control. It is a
key financial risk assessment and control centre for the global company, reinforcing its
international finance capabilities. It employs teams of senior professionals who advise
globally on credit and financial restructuring and recovery.
In the 18 months since the November 2013, operations have grown, with employment
now standing at around 60 and plans to grow to up to 130 local and expat employees by
the end of 2015. A significant majority of local employees are senior experts with over
15 years’ experience providing internal global advisory services to the Huawei group on
treasury, accounting and credit matters. Such growth has resulted in the centre recently
increasing its office space in the City of London.
Further growth in the operations of Huawei Global Finance is expected in the years
immediately ahead, bringing closer cooperation between London and Huawei’s headquarters
in China. Activities currently being established include setting up a fixed income portfolio in
excess of $1bn and FX transactions concentration to be held in London. These businesses
will result in trading relationships with over ten financial institutions located in London, and
intercompany funding and payment structures with global transactions flowing through
Huawei Global Finance. The finance company also regularly engages the London offices of
the large audit, advisory and legal firms to support its activities.
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The economic impact of Huawei in the UK June 2015
4
Huawei’s wider contribution
to the UK
On 4G Long Term Evolution (4G LTE) specifically, the report highlighted how:
■■ The technology delivers a step change in mobile broadband speeds compared
to the predecessor system, 3G.
9 Capital Economics, Improving connectivity – stimulating the economy: Mobile network operators and the UK
economy, November 2014.
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June 2015 The economic impact of Huawei in the UK
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The economic impact of Huawei in the UK June 2015
Over that decade Huawei has supplied multi-service access node products and core
optical products to Openreach. In the last few years we’ve supplied kit for the Openreach
Next Generation Access (NGA) programme – aiming to increase broadband speeds.
Huawei has played a significant role in supplying Openreach. Our equipment has been
deployed throughout the UK. We have also supplied ‘head end’ exchanges, modems and
home hubs.
As well as supplying kit for fibre rollout, Huawei has also supported Openreach and BDUK
(Broadband Delivery UK) in extending broadband availability to rural areas.
R&D activity can result 4.2 How Huawei’s R&D benefits the wider UK economy
in economic gains well Through its commitment to supporting the UK to become a world leader in ICT,
in excess of the Huawei invests over 10% of its total revenue into R&D at a global level and, as set
commercial return out in Section 3.3, it spent £78.4 million on these activities in the UK in 2014. In this
section we explore the extent to which these activities can be expected to benefit
subsequently captured
the wider UK economy.
by those carrying out or
funding the activity. Huawei’s spending on R&D should generate significant sales revenues for the
business itself further into the future. But the economic benefits from research and
development are not confined to such ‘private’ returns. The work can also lead to
gains for other UK-based entities, and benefit the wider UK economy and society,
through so-called ‘positive spillover impacts’.
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June 2015 The economic impact of Huawei in the UK
Academic studies have sought to quantify the economic benefits of R&D10. The
private return to this activity11 is broadly 25% on average in the literature, but the total
return is found to be in the order of 70%. The average spillover return – the difference
between the two – can therefore be put in the region of 45% per annum.
The wider UK economy therefore stands to benefit much more from the R&D that
Huawei undertakes specifically in the UK than it does from R&D activity undertaken
elsewhere.
More specifically, these benefits are likely to accrue initially to other businesses located
geographically close to Huawei’s R&D centres in Ipswich, Cambridge and Bristol,
and close to the universities with which Huawei is co-operating, reflecting academic
findings that spillover benefits will tend to be captured, at least initially, by businesses in
the same neighbourhood, before spreading further afield gradually over time14.
10 A summary can be found in, for example, Department of Trade and Industry (DTI), Economics Paper 5: DTI
Strategy – The Analysis, November 2003, page 17.
11 The return to R&D is calculated in relation to the ‘stock’ of R&D – that is, the cumulative amount of R&D spending
over many years with some allowance for ‘depreciation’.
12 For example, Adam B Jaffe and Manuel Trajtenberg, Flows of knowledge from universities and federal laboratories:
modeling the flow of patent citations over time and across institutional and geographic boundaries, November
1996.
13 A total return of 70% per annum on the R&D ‘stock’, split in a 25:45 ratio between private and spillover benefits,
with the ‘stock’ depreciating at 10% per annum and no benefit felt after 20 years.
14 See for example Adam B Jaffe, Manuel Trajtenberg and Rebecca Henderson, Geographic localization of
knowledge spillovers as evidenced by patent citations, Quarterly Journal of Economics, August 1993.
OXFORD ECONOMICS 29
The economic impact of Huawei in the UK June 2015
The company’s activities 4.3 Further contributions to the UK’s policy ambitions
also benefit the UK 4.3.1 Alignment with the UK government’s broader growth strategy
economy and society in Huawei is committed to forging close partnerships in and to playing an active role
several other ways. in helping the UK economy grow and develop as a world-leading ICT and digital
economy.
Just as Huawei Global Finance’s London location supports the government’s goal of
maintaining the UK’s pre-eminence as a global financial hub, so the company’s core
operations centred on technological advance align with the government’s broader
economic, trade, innovation and growth strategies.
“The investment announced by Huawei today demonstrates once again that the UK
is open for business. I welcome this and I want to see more companies invest in the
UK as we work to achieve sustainable and balanced growth within our economy.
The British Government values the important relationship with China, both countries
have much to offer each other and the business environment we are creating in the
UK allows us to maximise this potential.”
The British government has claimed that the UK is “one of the world’s most digitally
advanced countries”, and wants to continue the country’s digital growth and
development.15
Huawei has developed the Global Connectivity Index (GCI), which benchmarks
the performance of a range of mature and developing economies in terms of the
availability and use of five major ICT technologies, namely cloud, the Internet of
Things, Big Data, broadband, and datacentre. The GCI report for 201516 concludes
that countries can be grouped into ‘Leaders’, ‘Followers’ and ‘Beginners’ based on
their GCI performance, with the UK falling into the first of these categories. Leaders
have a better supply of connectivity, but more importantly have invested to drive
better adoption in demand. They also benefit from a key factor for ICT development,
namely experience.
In fact the UK is high up amongst the Leaders in the GCI, being ranked fifth out of
the 50 nations included in the study. Huawei’s £1.3 billion commitment aligns with
the government’s ambition for the UK to maintain and build on its position as a front-
runner among the world’s digital economies.
15 https://www.gov.uk/government/speeches/opening-speech-for-d5-byfrancis-maude-minister-for-the-cabinet-office
16 Huawei, Global Connectivity Index 2015: Benchmarking Digital Economy Transformation. The link to the
GCI microsite is here: http://www.huawei.com/minisite/gci/en/index.html?utm_source=hp_nav&utm_
medium=wwwEN&utm_campaign=HomeFlow
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June 2015 The economic impact of Huawei in the UK
Speaking at the time of his appointment, Lord Browne, Chairman of the Huawei UK
Board, said: “It is an honour to serve as the first independent Chairman of Huawei’s
Board in the UK. In a short period of time, Huawei has become a global leader in
technology and one of mainland China’s largest investors in the UK. I have worked
in China and with Chinese businesses for the past 40 years, and continue to be
impressed by the corporate sector’s ambition and potential. I am delighted to be
leading this Board as it supports Huawei’s next phase of growth.”
The three executive directors on the UK Board, sitting alongside the non-executive
directors, are: Ken Hu, Deputy Chairman of the Board, Rotating CEO, Huawei
Group; Chen Lifang, Board Director and Senior Vice-President, Huawei Group; and
Gordon Luo, CEO, Huawei UK.
A key example of this is the hosting of events attracting participants, journalists and
other visitors from all over the world, thereby generating revenues for UK-based
businesses in the hospitality and transport services sectors amongst others. For
example between September 2013 and August 2014, Huawei hosted five events in
London including the Huawei Managed Services World Summit, the Global Mobile
Broadband Forum and the Global Professional Services Forum.
OXFORD ECONOMICS 31
The economic impact of Huawei in the UK June 2015
In 2015, Huawei was awarded the BT Sustainability Gold Award at the BT Better
Future Supplier Forum (BFSF), having gained Silver Award status in 2013. The
scheme was set up to drive innovation in sustainability throughout BT’s supply chain
– a venture that has so far cut CO2 emissions by more than 250,000 tonnes.
Huawei’s ‘Seeds for the Future’ programme was successfully piloted in the UK in 2011
and has now been adopted as Huawei’s global corporate responsibility programme
which last year saw over 400 students from around the world visit China for valuable
work experience. From a UK perspective Huawei offers increasing numbers of
talented STEM (Science, Technology, Engineering and Maths) undergraduates with
the opportunity to travel to China on a four-week programme which provides valuable
Mandarin training and work experience in Huawei HQ in Shenzhen. In 2015, Huawei
will send 32 UK students on the ‘Seeds for the Future’ programme and since 2011
has so far sent over 100 students to China. As part of Huawei’s investment pledge
to the UK market in 2012 Huawei aims to send 50 students a year to China by 2017.
In addition:
■■ Huawei is a member of the Prince’s Trust Technology Leadership Group and
hosts a Winter Concert each year in support of the charity.
■■ The company was honoured with four awards at the World CSR Day conference:
two in the field of ‘Support and Improvement in Quality of Education’, one for
‘Corporate Responsibility in Education’ and one for ‘Green IT Initiative and IT
Excellence’.
32 OXFORD ECONOMICS
The economic impact of Huawei in the UK June 2015
Taxation The indirect tax calculation sums up over the following taxes: HMRC:
• Taxes on products and production, based on the ratio of these taxes to total Official Statistics table 11.5,
GDP for each sector in the input-output table. computation of corporation tax
liability, by industry, financial year
• Corporation tax paid by firms in the supply chain, estimated by combining the
ending 2013, August 2014.
share of each industry’s profits in GDP17 with the ratio of corporation tax to
Overview of Tax Legislation and
profits for each broad industry using HMRC data.
Rates, March 2014.
• Employers’ national insurance and employees’ income tax and national
insurance, estimated for each industry taking into account features of the ONS:
tax and NIC systems for the 2014/15 tax year, average pay in each industrial Annual Survey of Hours and
sector18 and the distribution of pay across the economy.19 Earnings (ASHE), 2014 provisional
results, tables 5 (UK and regional
• For the regions, indirect taxes were split in proportion to indirect GDP, but with
earnings) and P10 (employer
income tax and employee NICs adjusted to take into account the impact of
pension contributions).
higher average wages in London than elsewhere.
17 The share of each industry’s profits in GDP was estimated by taking the ratio of ‘gross operating surplus’ to GDP from the input-output table, and deducting the share
plausibly relating to self-employed income rather than corporate profits, taking into account ratios of self-employed to employee jobs by industry.
18 Average pay for each sector is calculated to be consistent with the GDP composition and jobs data already implicit in the calculations. Indirect GDP for each industry is
scaled by the share of employee compensation in GDP in the input-output table, with this share scaled up to include self-employed earnings and adjusted down to allow
for employer national insurance and pension contributions included in employee compensation. The result is divided by indirect workforce jobs for the sector as already
calculated. The adjustment for pension contributions is based on ‘ASHE’ data for the whole economy.
19 The tax and national insurance revenue totals are first calculated by applying the systems’ rates and thresholds to average pay for each industry. These totals are then
adjusted by factors calculated to reflect the impact of the distribution of pay around the average, based on the distribution of gross annual pay across the economy.
34 OXFORD ECONOMICS
June 2015 The economic impact of Huawei in the UK
20 The ratio of taxes on final household consumption of goods and services to disposable income is calculated on the basis of this data for the five income
quintiles, with the appropriate ratio then applied to each industry based on the disposable income quintile that that industry’s average after-tax pay falls into.
OXFORD ECONOMICS 35
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