Hamish McRae: Growing take-up of broadband can give the UK an advantage

The broadband revolution is proceeding apace but the commercial consequences are as unclear as ever. Indeed, most of the public comment is still about the internet as changing the consumption side of the equation: how the ways in which we buy things will continue to change and how what we buy will itself be altered by improvements in the delivery. It is not about the production side: how we will work differently as a result.

The switch from narrowband has happened quite suddenly. Figures out from the Office of National Statistics this week show that 56 per cent of the UK online users are on broadband (see pie chart). Dial-up is becoming a dying species. But I was more intrigued by another statistic that has just come out: that 8 per cent of the British workforce (and 10 per cent in London and the South-east) are teleworking. That is defined as people who do most of their work online from home or from a variety of places, using their home as a base.

This is potentially as big a change as the replacement of home-working by the factory system two centuries ago.

These results came from a study in the latest labour market trends survey. They suggest that in large parts of the country there are now more teleworkers than manufacturing ones. In some ways this is an even bigger shift than the move from manufacturing to services. That shift still requires people to commute to a single place of work. Instead of travelling to a factory, they travel to an office - the office being in effect a white-collar factory - and they are still employed.

The new shift no longer requires people to commute or at least not to make a single regular commute every day. It also shifts the balance between employment and self-employment. The survey found that 62 per cent of the teleworkers were self-employed, much higher than the proportion of workers as a whole.

Some further light on this comes from work by the Future Foundation. Michael Wilmott, its director, gave a presentation last week to an Estates Gazette conference that looked at the work implications of the rising penetration of broadband and more generally, the growing e-competence of the workforce. As the other graphs suggest, broadband will soon become so widespread that just about everyone who wants it will have it at home.

If, as the study suggests, 8 per cent of the workforce is a regular teleworker, the Future Foundation projects that this proportion will just about double over the next decade. My guess is that this may be too conservative. As yet, the share of self-employment is rising only slowly. My instinct there is that the projection of a slow further rise may also be an underestimate. The reason in both cases is that what has happened to date has happened largely under a dial-up regime. While it is perfectly possible to work from home on dial-up, it is still a bit clunky. On broadband, you might as well be in the same office but simply on a different floor.

If this line of argument is right, what are the implications? Here are some.

For a start, increasing tele-working is going to become a matter of international competition. This is happening for several reasons but the principal ones are cost and efficiency. It is cheaper for a company to outsource an online function to someone at home, whether they are on staff or not, if only because it does not need to pay for the floor space in the office. It is more efficient for the employee because he or she does not need to spend an hour, or maybe even two, commuting.

Beyond this, it also probably suits a workforce that is increasingly becoming part-time and one where a growing proportion will be elderly. (In the UK, one of the fastest-growing sources of labour is people beyond normal retirement age). Countries that encourage the shift will, on balance, tend to prosper vis-à-vis those that resist it.

For companies, teleworking will become an alternative to off-shoring. The new technologies have, of course, made it possible to have clerical and computer functions done on the other side of the world at much lower costs. But there are problems of quality control, cultural barriers and consumer resistance. There have been examples of some functions being brought back home as a result. Teleworking in the home country will not bring the same savings as shifting offshore but if the people who are doing the work are self-employed, it becomes a more flexible option to sending out the work to a specialist service company in a lower-wage country.

Of course, change brings problems. There are obvious ones on the part of the workers. There is a danger of exploitation, particularly with people who are self-employed. But there are less easily identified social dangers. How, for example, will people manage to live fulfilled lives if they are working mainly on their own? Some people prefer it, but for the majority the hurly-burly of the office is more fun than the tranquillity of working at home ... if indeed the latter really is calm and tranquil.

But the biggest changes will be for public policy. Policy is directed towards people in employment, either in the state or private sectors. It is directed towards people who travel to a single workplace. Tax, pensions and regulations are framed to be handled by specialist departments of companies.

Every day systems become more complicated and hence more difficult for the self-employed home worker to tackle. Now this will push these people towards seeking professional advice, which is fine for the higher earners. But it is not ideal for a mass market.

Beyond that, there are other implications: planning, for example. How do we run a planning system where there is no longer a clear distinction between office and home? The home is the new factory.

A wise government would take these figures - its own figures - and shift its policies to cope. It should regard self-employment as the new norm, not a hangover from the past. It should frame all tax legislation to encourage self-employment; pensions should shift at least some way towards being a personal responsibility rather than a corporate or public one.

And we should think of our modest lead in developing teleworking as a competitive advantage internationally.