STIMULATING REGIONAL ECONOMIC GROWTH
A Socio-Economic Analysis of Smart Working
A Report by Jim Power Commissioned By Vodafone Ireland
FOREWORD
Ireland’s economic story has changed considerably in recent years. Between 2013 and 2018, we witnessed a 65% increase in our gross domestic product (GDP), our household expenditure (personal consumption) and our average weekly earnings are rising year-on-year and we now have an employment rate of 94.66%. These figures made us the fastest growing economy in the European Union four years in a row. However, Ireland is a country divided by two macroeconomic stories. The first, a country with a progressive and developed urban economy under pressure from an increasing population and the second, a rural community requiring investment, infrastructure and jobs to ensure its growth and survival into the future.
65% increase in our gross domestic product (GDP)
A closer look at Ireland’s economic performance post-recession, highlights that since our economy began to show signs of recovery in 2013, there has been a deepening divide between our urban and rural economies.
The socio-economic pressures on urban centres, particularly in the Greater Dublin Area, and the businesses and communities based there are well known. Our cities are growing rapidly, commercial and residential rents are rising, childcare and transportation costs are increasing, and traffic congestion is at an all-time high.
This is having a significant effect on quality of life. People are looking for alternative ways of living and working, with more flexibility and look to technological solutions to help us work and live smarter.
Vodafone Ireland has commissioned this report to better understand the impact of this. Smart working - flexible or remote working from home or a digital hub - is having a positive effect on rural economic recovery and providing a real solution to the pressures on our cities. The research examines the economic and social value of smart working in six vibrant digital hubs in Carlow, Kilkenny, Skibbereen, Tralee, Dundalk and Drogheda.
The research and conversations with people operating from the digital hubs shows how businesses have set up locally at a lower cost and with far more ease than in a city. Talent retention and productivity levels are higher because people live nearby, have shorter commute times and want to stay in their local areas - they are home.
Diverse and exciting indigenous businesses create high-value, quality jobs locally, injecting revenue back into rural towns and reducing the migration of people to urban centres. Overall, it is stimulating local economies and breathing life back into rural towns. In some cases, businesses have outgrown the hubs and gone on to employ more people locally. Nearby businesses have reaped the rewards of this renewed local economic activity.
Throughout the research, people spoke about how smart working has revived local communities and supported other local businesses, increased pupil numbers in rural schools and members in GAA and other sports clubs. This ecosystem of good created in towns and villages across Ireland is immeasurable.
At Vodafone Ireland, we want connectivity to enable new ways of working that advance our rural communities and towns and help solve economic and social challenges in a meaningful way. We hope the findings set out in this report will provide useful evidence to start a national conversation between industry, government and communities on how advancing smart working opportunities can revitalise the regions and ensure our cities are sustainable in the long-term.
2 STIMULATING REGIONAL ECONOMIC GROWTH
65
%
94.66
94.66% employment rate
4
Years
fastest growing economy in the EU 4 years in a row
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INTRODUCTION
In 2017, Vodafone and SIRO launched the Gigabit Hub Initiative. This initiative offers free 1 Gigabit broadband connectivity to digital hubs, community centres and co-working facilities around the country. The objective was to spark a digital enabled transformation across Irish towns, and in the process, support the creation of jobs, bringing life back to rural towns across Ireland.
The purpose of this study is to assess the impact of smart working by assessing the socio-economic value of six digital hubs: Ludgate, Skibbereen; HQ Tralee; Creative Spark, Dundalk; The Mill, Drogheda; New Work Junction, Kilkenny and Enterprise House, Carlow. The assessment helps paint a picture of how smart working – from home or a hub – can help rural communities thrive in a meaningful way and give people a better quality of life. A quantitative analysis of job creation, talent migration, economic activity and outputs of the businesses that operate in the six digital hubs provides insight into the potential socio-economic benefits smart working practices could have, if replicated nationally in every county. Additionally, the study included a qualitative assessment with hub managers/owners, business owners and remote workers who operate from the digital hubs to gain insights into the societal benefits of smart working such as: quality of life, cost of living and community engagement. This study shows clearly that the creation of viable smart working opportunities in a hub, homeworking or a hybrid model in Ireland’s regions could prove transformative for people, businesses and local communities. The findings, which attest to substantial income generation and improvements in people’s quality of life, offer a viable basis for wider adoption of smart working in Ireland. It also provides proof of concept that smart working and digital hubs can act as a stimulus to addressing the urban and rural socio-economic challenges that exist in Ireland.
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The assessment helps paint a picture of how smart working – from home or a hub – can help rural communities thrive in a meaningful way and give people a better quality of life.
A quantitative analysis of job creation, talent migration, economic activity and outputs of the businesses that operate in the six digital hubs provides insight into the potential socio-economic benefits smart working practices could have, if replicated nationally in every county.
Additionally, the study included a qualitative assessment with hub managers/owners, business owners and remote workers who operate from the digital hubs to gain insights
into the societal benefits of smart working such as: quality of life, cost of living and community engagement.
This study shows clearly that the creation of viable smart working opportunities in a hub, homeworking or a hybrid model in Ireland’s regions could prove transformative for people, businesses and local communities. The findings, which attest to substantial income generation and improvements in people’s quality of life, offer a viable basis for wider adoption of smart working in Ireland. It also provides proof of concept that smart working and digital hubs can act as a stimulus to addressing the urban and rural socio-economic challenges that exist in Ireland.
This initiative offers free 1 Gigabit broadband connectivity to up 15 digital hubs, community centres and co-working facilities around the country.
1 Gb
Free
THE National ECONOMIC Story
However, there are justifiable concerns that the recovery has been concentrated in the Greater Dublin Area (GDA) and that rural and regional economies have not experienced the same level of recovery - particularly in terms of economic activity, employment opportunities and income levels.
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The Irish economy has experienced strong and sustained economic recovery since 2013. In 2018 alone, Ireland’s gross domestic product (GDP) increased by 8.2% and household expenditure (personal consumption) increased 3.4% – according to the Dublin Economic Monitor, August 2019.
In 2014, one year on from the beginning of Ireland’s post-recession recovery, statistics highlight a significant gap already emerging in the economic activity between the GDA
and the regions. Gross Value Added (GVA - the value of final goods and services produced per person) in the Dublin region was 65% higher than the national average. By 2016, disposable income per capita in Dublin was 18.4% higher than the national average and 40.6% above the lowest, which was the Border region.
Consequently, the GDA region has seen a significant increase in demand on public and private services and the housing market as more and more people seek to live where employment opportunities and economic output are highest. In the GDA, rental prices and the cost of living dramatically increased between 2013 and 2018. According to the Mercer Cost of Living Report for 2019, Dublin ranks as the most expensive city in the Eurozone.
According to the Dublin Economic Monitor, August 2019, rents in Dublin City alone had increased to €1,650, while outside the GDA residential rents are reported as €850. In 2018, childcare costs in the GDA were reported at an average cost of €1,047, €300 above the national average.
In terms of the business environment, rising business costs in the GDA are prevalent with office rents rising higher than the national average and additional pressures such as high wage levels and recruitment and retention increasingly affecting competitiveness.
This pressure is also apparent on our roads as traffic congestion into urban centres has increased across the country. For example, Vodafone Ireland’s network data shows that more than 22,000 people commute from Kilkenny, Carlow and Wexford to the GDA everyday and 43,000 people commute into Cork City.1
It is clear from a number of different metrics that Ireland’s economic performance is varied from a regional perspective. Ireland’s regions are being seen as attractive, more affordable places to live but have lacked the high value jobs required by citizens to live and work in the area. In parallel, the greater Dublin area has seen exponential growth and the creation of high-value jobs at high wage levels, which has brought a large migration of workers and increasing pressure on the economy and society.
The challenge for industry bodies, business owners, policymakers and community representatives, is to invest in the right infrastructure to ensure there is equilibrium between both the small and large economies in Ireland and to support equal migration between urban and rural areas and the businesses in both.
1 The Vodafone network data, which was captured for network improvement purposes, was gathered anonymously, processed and deleted, so only aggregated metadata remains to show the volume of motorway users. This data is not stored in any additional locations or shared with any third parties. Note this is also based on CSO census data from 2011, 2016 with a trended yearly increase to bring it up to 2019.
GDP increase between 2013 and 2018
GVA per person in the Dublin region was 65% higher than the national average.
Dublin ranked as the most expensive city in the Eurozone.
IRELAND’S ECONOMIC RECOVERY MYTH OR REALITY?
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IRELAND’S ECONOMIC RECOVERY
PER PERSON
- Indices of GVA per person at Basic Prices, 2008 to 2017 (State = 100)
Post-recovery economic activity in the Regions and the Greater Dublin Area
a Data for 2015,2016 and 2017 suppressed for reasons of confidentiality b Preliminary
NATIONAL GVA 2008 - 2017
(measure of the value of the final goods and services produced in a region)
Source: CSO, County Incomes & Regional GDP, April 3rd 2019.
PER REGION
- GVA per Region at Basic Prices, 2008 to 2017
€ million
a Data for 2015, 2016 and 2017 suppressed for reasons of confidentiality b Preliminary
GVA at Basic Prices, Population and Persons at Work for Each Region 2017†
2017 – GVA, population and employment
† Data for 2017 suppressed for reasons of confidentiality † Preliminary
THE LABOUR MARKET
Employment between 2012 and Q1 2019
Source: CSO, Labour Force Survey May 21st 2019
In the first quarter of 2019, the Border region had the highest rate of unemployment at 7.4% of the labour force, while the South West had the lowest rate at just 4%. The national average stood at 4.8%, so there is considerable variation across the regions. 2017†
Unemployment Rate by Region (Q1 2019)
Dublin saw the strongest growth to their labour market experiencing an increase of 29.7%
The Mid-West experienced the slowest growth at 14.2%
29.7
14.2
Disposable Income Per Person by Region (2016)
INCOME
Source: CSO, County Incomes & Regional GDP, April 3rd 2019
DISPOSABLE INCOME
Disposable income per capita in Dublin in 2016 was 18.4% higher than the national average and 40.6% above the lowest, which was the Border region.
Dublin income is 40.6% higher than the Border region
40.6
Greater Dublin Area
Socio-Economic Pressures
RESIDENTIAL RENTS €
OFFICE RENTS €
Source: RTB. Note. GDA (Ex. Dublin) is Kildare, Meath and Wicklow
Dublin Office Rents Index (2006 = 100)
Source: CBRE
SMART WORKING AS A SOLUTION TO THE ECONOMIC DIVIDE
The widespread adoption of technology made it possible for employees to work remotely, allowing staff to enjoy the benefits of a greater work-life balance, shorter commutes and financial savings, while employers have access to a wider talent pool and greater levels of staff retention and productivity. These practices
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Finland has been at the forefront of smart working for decades, formally incorporating this practice into national legislation in 1996. The Nordic nation embraces a culture of remote, flexible working, allowing employees to adjust their typical working hours by starting or finishing three hours earlier.
have benefited Finland which was voted the third most prosperous country globally in the 2018 Legatum Prosperity Index.The success of remote working and flexible practices seen in Finland is a blueprint for what rural Ireland has the potential to become. Co-working hubs and home working have the ability to rejuvenate regions by bringing high quality, high-value roles to the region, breathing new life into the local economy. The Vodafone - SIRO Gigabit Hubs Initiative is a positive step in rebuilding rural Ireland and reducing the divide between Ireland’s urban and rural economies.
15
CASE STUDY: FINLAND
Finland, voted the third most prosperous country globally.
Smart working is the combined use of technology with flexibility and agility for employees to work from home, from a hub or using a hybrid model (part-home, part-office).
Enterprise Hubs
1 Gigabit per second broadband connectivity
The Vodafone – SIRO Gigabit Hubs Initiative is a positive step in rebuilding rural Ireland and reducing the divide between Ireland’s urban and rural economies.
NATIONAL ECONOMIC VALUE OF SMART WORKING
Gigabit connectivity is fundamental to enabling smart working. It is playing a transformative role in businesses and the lives of many employees as it becomes available in more locations, not just our major urban centres. In creating opportunities for local business development – this connectivity can support the migration of high-value businesses and jobs to any location in Ireland. It can act as an economic stimulus for regional towns and villages while relieving pressure on urban areas in the short-term. Smart working also supports global challenges such as the environment, cost of living, health, lifestyle and diversity by allowing people a choice between where, how and when they work, reducing commuter numbers to larger centres and encouraging creativity and innovation in a collaborative work environment.
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Businesses, large and small can benefit from smart working. It is as much about being able to manage assets and resources more effectively, as it is about employee engagement. It enables companies to grow by attracting and retaining top talent, reducing overheads, increasing productivity and operational efficiencies, making a real difference to the bottom line. It also allows people to achieve a good quality of life and brings revenue into towns as people choose to work and live outside Dublin and other cities.
Through examining this data, we can see the potential significant economic, social and financial contribution of smart working.
The experience in the six digital hubs analysed for this report clearly demonstrates the positive impact smart working is having on towns and their surrounding areas. The data analysed included the number of businesses that are supported in the hubs, the total annual gross and net wages earned by those working in thehubs, the taxes they pay, plus the income generated and indirect employment supported in the local areas as a result of economic activity and spending. This income multiplier effect seeks to capture how many times a given euro spent in an economy literally turns-over or otherwise results in other transactions. When an employee in a hub receives income, they spend some of that income in the broader economy, thereby supporting other income and other jobs in the town or region. Every euro earned, percolates down through the economy to generate a significant economic impact.
This connectivity can support the creation and migration of high-value businesses and jobs to any location.
NATIONAL IMPACT OF DIGITAL HUBS
The research for this report clearly indicates that the demand for workspace in hubs is very strong and is growing. In the context of congestion in urban areas; environmental considerations; and the desire for improved quality of life, the potential for future increased economic contribution from hubs that provide high quality broadband connection is significant.
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The experience in the six digital Hubs analysed for this report clearly demonstrates the economic and financial impact that they are having in the towns where they are located. The benefits have been the creation of high-quality, high-paid and high-value added jobs and activities in rural towns. The benefits for those involved are very significant and very real and create a template for what is possible.
By applying an average of the findings from the economic data collected at each hub to the scenario where there is one hub in each of the 26 counties in the Republic of Ireland, the following could be achieved at a national level:
At a national level, the potential to make a very significant economic, social and financial contribution is very real.
Note: These calculations are based on the assumption of one new hub in every county; 200 employees per hub; and average salary of €50,000 per worker. The number of employees and the salary are based on the average growth potential of the hubs analysed for this report.
Number of Businesses
1,040
5,200
Direct Staff Employed
€312M
Economic Contribution
(income multiplier effect)
€260M
Gross Wages Earned
€208M
Net Wages Earned
€52M
Employee Taxes Relation to Hub Staff
8,840
Total Employment Supported
€1.56M
Commercial Rates
3,640
Indirect Employment
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REGIONAL ECONOMIC IMPACT
Captured below is the combined and individual economic data collected from each of the six hubs involved in the report. All of the digital hubs are operating at or close to full capacity and all want to expand their physical space further to satisfy growing demand.
Total Direct & Indirect Economic Impact of the Six Digital Hubs analysed in Dundalk, Drogheda, Kilkenny, Carlow, Kerry and Cork
176
€22.81M
Employee Taxes Relating to Hub Staff
€18.25M
425
€27.36M
321
Full Time
38
Part Time
The Mill Enterprise Hub, Drogheda
“It is amazing, the quality of life. The amount of time dedicated to spending at work, I can actually spend it working! I am not spending it in traffic… and that’s priceless”
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Opened in 2014 as a registered charity Reached full capacity within a year Double its size to 15,000 sq ft in 2016 with support from local agencies, businesses and government bodies
• • •
“The economic benefit of opening the hub 5 years ago has been instrumental in bringing jobs to Drogheda… they don’t have to go to Dublin. They can scale and grow a business from the Drogheda region.”
Colin Guilfoyle, MD Nebula Innovations, Drogheda
Breanndán Casey, Innovation Manager, The Mill Enterprise Hub, Drogheda
Direct & Indirect Economic Impact of The Mill Enterprise Hub, Drogheda
Gross Wages Earned by Hub Staff
Net Wages Earned by Hub Staff
Local Economic Contribution
75
3
€3.12M
€2.5M
€0.62M
€3.75M
54
33
NEW WORK JUNCTION, KILKENNY
“The biggest benefit for Irish companies is that the entire country becomes their talent pool. Hiring good people and keeping them is a lot easier when you move their desk to a hub five minutes from where they live.”
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Opened in 2015 and set up as a co-working centre Industries supported include IT, mining, energy, pharmaceutical and construction
• •
“Normally you would not have companies like ours in Kilkenny so this is bringing in a lot of jobs, a lot of tech jobs, jobs that require a skill set where, in the past, they might have had to go to Dublin.”
Tom O’Neill New Work Junction, Kilkenny
Zac Casstephens, Trademark Specialist, Trademark Now, Kilkenny
Direct & Indirect Economic Impact of the New Work Junction, Kilkenny
20
€1.68M
€1.34M
€0.24M
€2M
24
€12,000
ENTERPRISE HOUSE, CARLOW
“The hub afforded us the opportunity to locate a business in my hometown, which I would not otherwise be able to do. The best thing is work life balance. My commute is now 10 minutes, if I was travelling to Dublin it could be 1 3/4 hours, so that headache is now gone.”
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Opened in 2005 as a social enterprise Set up as a co-working centre specifically for entrepreneurs Industries supported include childcare, finance, engineering, adult education and architecture
“The hub has an amazing impact on the local economy. Technology is great, all the facilities are great but it is about people doing business with people.”
Philip Clarke MD, Forest Rock Technologies, Carlow
Kieran Comerford Head of Enterprise, Carlow County Council
Direct & Indirect Economic Impact of the Enterprise House, Carlow
62
8
€2.8M
€2.24M
€0.56M
€3.36M
48
22
€30,000
HQ, TRALEE
“We can work from anywhere; we have a global workforce across Ireland and the US so it doesn’t really matter where we work. This is fantastic. I have a young family, so I can meet them on Banna beach, which is one of the best beaches in the world. I love sea swimming so I can be out on Fenit in 10 minutes and that is something money can’t buy!”
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Opened in 2017 and set up as a co-working centre Industries supported include fintech, design and marketing, engineering, professional services and e-commerce Second premises opened in Listowel
“Being able to work in technology in Kerry is actually amazing”
Richard Sharp, General Manager Horizon Controls, Tralee
Jann le Roux, Head of Software Development & Technical Architect, XINTEC, Tralee
Direct & Indirect Economic Impact of HQ, Tralee
141
12
€8.46M
€6.77M
€1.69M
€10.16M
107
41
Ken Tobin, Co-owner HQ, Tralee
“The fact that we are based in the centre of town means that you have the community aspect, that quality of life. Everything is on your doorstep.”
CREATIVE SPARK, DUNDALK
“Economically for Dundalk and its surrounding areas, it is perfect!”
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Opened in 2012 and set up as a co-working centre for creative businesses Supports 72 full-time employees with an additional 30 people using the print studio, and approximately 50 people hot-desking a year Industries supported include graphic design, media, professional services, marketing and architecture
“The energy and the vibe around the place, meeting other people, you get to learn so much more. You get to bounce ideas off everyone…. The hub brings business into the town, it brings people into the town, who otherwise may not be here, and it brings the community together.”
Gavin McLaughlin, Dundalk Sport
Rachel O’Halloran, Architectural Spaces, Dundalk
Direct & Indirect Economic Impact of Creative Spark, Dundalk
72
€3.24M
€2.59M
€0.65M
€3.88M
50
39
LUDGATE HUB, SKIBBEREEN
“It has a great impact on my work life balance as I don’t have a long commute each day.”
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Opened in 2016 to facilitate up to 75 people in a creative co-working environment It also runs digital education courses for children and adults Industries supported include tech, bio-economy, aviation services, e-commerce and media production Plans for a second building to open in the next year
• • • •
“The hub has facilitated the employment of more people in the town. We are now able to make our lives and employment in the town and we bring our families with us so there is more children in the schools”
Cathy Limerick, Accounts Executive, Six-West Skibbereen
Oliver Farrell, Chairman, Vilicom Skibbereen
Direct & Indirect Economic Impact of Ludgate Hub, Skibbereen
€3.51M
€2.81M
€0.71M
€4.21M
21
Wendy Wilde, Xsellco Skibbereen
“We employ young, local people, they’ve stayed in Skibbereen, they are bringing their skills, their salary and everything else. They stay in the local area; they don’t have to move to Dublin or Cork to get a good, quality career.”
Ireland’s economic recovery has been a story of innovation, growth, drive and ambition by industry, government and communities. The growth of digital hubs and smart working is making a significant contribution to the renaissance of regional towns and is helping to alleviate urban migration and slower regional economic recovery.
To create a successful town, it is necessary to create an environment where people want to work, live and socialise. To achieve this, communities, industry and policymakers must foster an environment of creativity and innovation where high value-added activities are generated and high quality skilled employment is sustained.
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CONCLUSION
The evidence gathered in this report suggests that smart working is generating a number of economic and social benefits that help create that environment:
High-quality, highly skilled jobs in the regions Business creation, growth and expansion Increased economic activity, local spending and employment in rural towns Reduction in congestion and commute times Increased productivity Less pressure on housing in the cities Public and private support for entrepreneurs Employees from global companies basing themselves anywhere in Ireland Reduction in office costs for businesses Improved employee work/life balance, quality of life and well-being Higher talent retention rates Employment of younger graduates locally Increased innovation, creativity and knowledge sharing
The reality is that having access to smart working opportunities means that businesses can now be based in any location, retain local skills, knowledge and talent, and compete on a level playing field with national and international organisations. This helps businesses and individuals in numerous ways, but it also helps alleviate the significant and dangerous problem of congestion in the larger cities in Ireland.
We have an opportunity to be future-focused and to be a world leader in stimulating and sustaining regional socio-economic success through the blueprint of smart working, digital hubs and promoting a culture of agility and innovation in an increasingly digitised, global economy.
• • • • • • • • • • • • •
