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08 December 2011

Broadband policy must be right for online trade to grow

Reference number: PR/2011/72

FSB News Release
PR 2011 72
Issue date: Thursday 8 December 2011 

Broadband policy must be right for online trade to grow

The Government must get its policy on broadband right by ensuring that everyone has access to adequate broadband as a new report from the Federation of Small Businesses (FSB) shows online trade is vital for growth.

The internet helps to shrink borders and is an important tool for small businesses to find new customers in other countries. Of those that trade online, 97 per cent do so within the UK, but four in 10 trade in other countries in the European Economic Area (EEA), a third trade online with North America and Canada, and a quarter with Australasia.

However, the FSB believes that online trading could be much higher if the number of barriers were removed.

A key barrier is lack of access to high speed broadband.  In a new report, ‘Small businesses and online trading'',  the FSB has raised concerns that lack of broadband coverage and slow broadband speeds are putting off small firms from trading online – and so expanding their business. For nine per cent of small firms, current generation broadband – up to 24Mbps – is not available across any of their sites and 22 per cent said it is not available on at least one. Around a quarter of small businesses only have access to speeds of up to 2Mbps – acting as a major barrier to trading online.


The FSB is concerned that the Government is not doing enough to ensure that the UK has a seamless broadband infrastructure, and one which avoids a divide between rural and urban areas.


In 2010, business-to-business online trade contributed £60 billion to the UK economy. E-commerce has great potential to help small businesses innovate and grow – something which can help economic growth. Research also shows that small businesses that trade online have been more likely to weather the economic storm. The FSB believes it is vital that the Government gets it broadband policy right and targets funding at those areas the market will not reach on its own.


Ahead of the European Commission''s announcement on e-commerce, the FSB is calling for a fast, reliable and guaranteed broadband service for small businesses wherever they are located as the Government looks to them for greater economic growth.

The Government has made a commitment to ensure there is universal broadband coverage by 2015, and superfast broadband coverage for 90 per cent of the population in each local authority by 2015. However, the FSB is concerned that a divide will still remain between urban and rural areas as more urban parts of the country receive superfast broadband and rural areas are left in the ‘digital'' dark.


In its Autumn Statement, the Government announced a further £100 million for up to 10 ‘super connected cities'' that will receive speeds of 80-100Mbps. It also announced that it would open its £20 million Rural Community Broadband Fund (RCBF) for the hardest to reach rural areas. The FSB is concerned that the £20 million RCBF is not enough to meet the challenge of the digital divide and questions whether some of the £100 million wouldn''t be better spent in areas where the market won''t reach.


The FSB is also concerned that other significant barriers are putting small firms off developing their business online. The FSB is calling for:


  • Guaranteed postal delivery services as 16 per cent of small businesses said poor delivery services have prevented them from trading online
  • The Payments Industry to work with businesses on raising awareness of security issues to help reduce risks of ‘card-not-present'' fraud
  • The Government to ensure it sticks to its ‘Let''s choose growth'' plan and continue to press for  the removal of barriers in the single market
  • Specialised advice services to be in place as a quarter of small firms said it would help them sell online because they lack the knowledge to be able to do so
  • VAT rules to be simplified throughout the EEA as three in 10 said this would help trade online


John Walker, National Chairman, Federation of Small Businesses, said:


"Online trading has helped to empower small businesses to find new markets, sell new products, try new models and compete on an equal footing with larger businesses. Online trade has great potentials for small businesses but it still has its barriers. These must be removed. The biggest obstacle for many small businesses is the lack of broadband speeds and so as a result they cannot compete online. The FSB is calling on the Government to ensure that all small businesses are connected and have access to the broadband speeds they need to allow those that want to, to do business online."