Transcript - Episode 16: The Impact of Drones on the UK Economy


Freddie Martin: Hello and welcome to the economics in business podcast. I am your host, Freddie Martin, and today we will be discussing a technology that has a potential to disrupt industries across the economy - from construction, to emergency services, and it has even been used in the fight against climate change. I am, of course, talking about drones.

Whilst businesses and governments are excited about the prospect of significant cost savings and productivity gains from this technology, many people are concerned about the impact that ever increasing use of drones will have on our privacy and security. Last year PwC published a report, titled Skies Without Limits, which estimated that by 2030, drones could increase UK GDP by up to 42 billion pounds, and lead to 16 billion pounds worth of cost savings. Here to discuss the findings of this report, and the potential benefits and risks of drones more widely, are two of the authors of this report.

Elaine Whyte, who leads UKs drone team; and Dr. Jonathan Gillham, who leads the economic modelling and econometrics team at PwC UK. Thank you both for joining me today.

Elaine White: Thank you for the invite.

Jonathan Gillham: Thanks very much.

Freddie: Now Elaine, before we discuss the overall impact that drones could have on the UK economy, I am interested to learn some more about why this technology has the potential to achieve such significant productivity gains. I am sure that many of our listeners will be surprised to hear about the range of applications that drones have across sectors.

Elaine: Perhaps I will start then by exploring some of those use cases and we outlined them within the ‘Sky is Without Limit’ report. The scale of the numbers are what surprised us all here, and it’s largely because this technology has the opportunity to touch so many different industries. From public sector emergency services through to surveying, inspection, and potentially in the future as well for delivery, and even in the further future we may one day see them being used from a transport perspective as well, and transport not just of goods, but also of people.

You can see how this technology could impact such a wide spread of industries, and that has created this potential £16 billion of productivity savings, which quite surprised us as we undertook the analysis.

Freddie: I was wondering, could you give some specific examples of any interesting applications you’ve come across recently for using drone technology?

Elaine: We are currently working with a client, where we undertook a proof of concept to show how drones can be used to manage their assets. In this particular example, we are talking about their real estate assets. We demonstrated that drones are 65% cheaper and 83% quicker than their traditional methods to manage and capture the condition of those real assets of that real estate. We are now working with that client to scale up and to be able to embed this technology across all of their different sites, because they could see the advantages that were gained by using that. Not only is it faster and cheaper, but it is also safer than their traditional methods, and they are also capturing data of a higher quality. When you put that onto a platform that can be shared back to their users, you can see how the access to that data widens, and increases the quality of the decisions they are making as a result.

Freddie: And so actually, it’s not surprising that we found such high figures in the overall impact of the report, because drone technology can be used in the data that’s collected, can be used in any industry, and provide cost savings in any area.

I was wondering could you explain a bit more, Jonathan, about how you conducted your analysis in the report, and some of the main findings that you’ve had.

Jonathan: Thanks Freddie. So, the main finding is around the uplift of the UK GDP and the productivity savings that businesses can make. Between now and 2030, which is where we’ve conducted our analysis, we think that GDP could grow by around an additional 1.89%. That equates to around 42 billion pounds in today’s prices. We are not completely sure that this will be additional GDP, but this is the GDP that will be attributable to drone technology. We’ve captured the impact in what we call an S-curve.

We know at the moment, for the next two or three years, businesses are still learning how to use drones, still understanding the different applications, but as their understanding grows, we think that productivity will start to increase significantly over the next 5, 6 or 10 years. That’s the critical point here. So, when we talk about a 42 billion pound gain, we are looking quite far out to the future, but learning by doing is absolutely critical to this path of economic growth. We look to applications across different sectors of the economy. As Elaine says, we’ve seen that transport and logistics could have some real opportunities and that stands out as being the fairly obvious sector, but also in sectors like construction, and also professional and administrative services, we could expect significant gains, as well as in the public sector, and perhaps we can talk about those in a bit more detail as we go through this session.

Freddie: Something that I know concerns many people is the impact that emerging technologies have on employment. Did you find that there will be a net positive or net negative impact on employment from drone technology?

Jonathan: I think what the main thing to take away is that drones don’t necessarily replace jobs, they augment them, and people will need to change their underlying skillsets over time, they might need to upskill, they might need to retrain in different areas, but overall because of the economic boost that can come with drones, we would expect that to be a net positive increase in employment going forward.

Elaine: I could perhaps add to that the client I spoke about before, who are using drones now to keep tabs on the condition of their real estate, they are using a hybrid method of capturing data using drones. Part of that involved retraining their staff, so that drones are a tool that they can employ when they sense they have got an issue, and they want to do their period checks, they just deploy this drone to collect the data as they would have previously potentially put scaffolding up, or used to cherry-picker to be able to give them the reach to be able to view, say the roof of a larger hanger.

Freddie: Rather than replacing entire jobs, drones might take over particular tasks, and then actually that frees up the employee to be more productive elsewhere.

Elaine: Absolutely.

Freddie: As you mentioned, some sectors are set to gain particularly more than others, do you know which sector has the most that could benefit from drone technology in the next 20 years?

Jonathan: Well, ultimately in terms of the numbers that we’ve got behind the report, we would expect the technology, media and communication sector to really grow the most. That’s closely followed by financial, insurance, professional and administrative services, which is obviously the sector that PwC sits in. Construction and manufacturing are also important. How those industries evolve will very much depend on the tasks and as part of this report, we looked at the different tasks that drones might augment. So, that’s where the productivity gains from. When we talk about productivity here, we are talking not about labour productivity, we are talking about something called multifactor productivity. That measures the overall efficiency of a business in terms of all of the inputs going in and all of the outputs going out.

So, the drone applications in those sectors, that’s where we think, there can be some quite serious gains going forward.

Elaine: If I could perhaps add to that from maybe some tangible examples that we can sense and feel right now, I look at how drones are used as a bit of a spectrum, how they are used herein today, and how they might be used in the near and long term future.

So, if we take the here and now, undoubtedly the filming industry is the most mature at using this technology, it’s just we don’t realise it a lot of the time, because what we are seeing is the output of those images, so we don’t know that they are captured using drones. Then from additional commercial uses, we see them being used in the surveying field, and in the inspection field. That probably is the most advanced, or those are the most advanced, at this moment in time from a commercial application. We then looked to the near future and certainly in the science and technology committee that I recently gave evidence at, we saw a prediction that they would be used for delivery within five years. That’s not a long period of time.

By 2025 we can see ourselves having drones being used more ubiquitously for delivery. That’s not necessarily delivery to your front door, and some of the recent work by Nesta through their ‘flying high challenge,’ they’ve been exploring the use of transporting medical results from one location to another or medicines and are much more about using that technology for good, so how they are used within that risk-to-life scenario.

Freddie: Industries which are currently benefitting the most from drone technology will not necessarily be the industries in 20 years’ time that have the largest productivity gains, because the technology hasn’t quite evolved to that level yet.

Elaine: Absolutely, in the ‘Skies Without Limit’ reports, we reflect there are three things that need to advance in order to allow us to reach the 2030 figures. We will need to see an expansion of the regulation, we will need to see a growth in the technology and what that can offer us, and finally but actually probably the most important, we also need to see an increase in social acceptance. We recently undertook a drone survey to understand what that level of acceptance is of this technology. Not surprisingly, when we are looking at how it can be used in a risk to life scenario, like search and rescue, greater than 80% of the general public is supportive of it being used in that way. But when we then look at it being used for delivery, the figures are much smaller. We are looking much closer to the some 26% of the general public accepting of that used case.

Social acceptance is a really key factor that needs to grow with the technology if we want to be able to see it used more and more.

Freddie: What are the factors that are driving this concern around drones, what are the repeating concerns that the public raise over drone technology?

Elaine: I think it’s multilevel. We’ve seen the risks they presented with the closures at Gatwick and that’s probably the most high profile one as it stands at the moment. There are privacy risks, there is noise pollution. If we are going to use any form of technology to replace an existing method, we always ought to work by the principle that environmentally has to be more friendly than the process that it’s replacing. Some of those concerns we see come up with people right now. Accountability is a key as well.

Freddie: Do you think, therefore, there is a large role for the government to encourage and increase social acceptance of drones as well as partly through its regulatory regime that it will put in the future to allay these fears?

Elaine: The regulatory regimen is really important in building that trust. We are quite fortunate with drones as a nascent technology that there already is a regulator in this space. So lots of talk about how we deal with the mass data that’s collected right now, is around do we need to have a regulator, what does that look like, what does AI of the future look like, how do we control that. The difference with drones is we already have a regulator in this space and that in itself will build a level of trust around the safety and accountability of how the technology is operated.

Freddie: Looking at it from a business point of view, obviously there is lots that the government can do in order to help encourage uptake of drones, but what advice would you give to businesses looking to use drones now to increase productivity, and reduce costs?

Elaine: In our survey we found that 33% of business users do not believe that drones are yet being used as effectively as they could do in their industry. That combined with the S-curve growth that Jonathan talked about, shows a definite opportunity here for increase in seeing how this technology can be used. There are some front runners in industries, largely driven by health and safety needs. If there is a real risk to how operators are currently performing their duties and they could be done using a drone, then that seems to be the frontrunner of how they are being used.

We just need to increase understanding and education about the benefits they can bring. That is for all of us within the industry to encourage the growth of.

Jonathan: I would encourage businesses to think strategically about how they integrate drones with other types of technology, so driverless vehicles, internet of things, robotics, etc., because then that combined effect of bringing those technologies together could perhaps even lead to a bigger boost than one we are currently estimating.

Elaine: Absolutely.

Freddie: Thank you both very much for joining me today for a really interesting discussion on what the future holds for drones. Certainly, it is a very exciting space to be working in, and hopefully we’ll be able to see much of the benefits that you’ve described in your report in the next 20 years.

If you would like to read more about PwC’s analysis a link to the report will be included in the description of the podcast. There will also be a link to the PwC’s drone site, which includes a lot more research and analysis as mentioned earlier.

Thank you very much for listening and don’t forget to subscribe to keep up to date with future episodes of economics in business.

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Barret Kupelian

Barret Kupelian

UK Chief Economist, PwC United Kingdom

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