Smart city projects are exceptionally well supported in the United Kingdom. The potential of London’s smart city market alone could reach $13.4 billion by 2020. The UK government is pushing for rapid and sustainable partnerships to realize its vision for future cities. The immense growth in this initiative is creating many opportunities for U.S. companies.
In the below Q&A, Claudia Colombo, Commercial Specialist for Energy and Environment, U.S. Embassy, United Kingdom, highlights the UK smart city market. Her office is part of the U.S. Commercial Service of the U.S. Department of Commerce’s International Trade Administration—a worldwide network of offices that help U.S. companies export.
Q: Why should U.S. companies in the smart cities sector consider selling to the UK market?
Colombo: The United Kingdom (UK) is home to a large number of smart cities and, in fact, a report by the European Parliament states that the UK is one of only three European countries that have more than 31 cities with at least one smart initiative.
The potential of London’s smart city market could reach $13.4 billion by 2020, and London is already a highly developed, sophisticated, and diversified market. The UK market is the largest in Europe and 5th largest in the world for U.S. goods exports, and the number one market for U.S. services exports. In addition, it is an open and transparent market for goods, services and smart cities-related technologies, with low access barriers for U.S. firms looking to do business. The UK government, through Innovate UK has implemented a series of programs that provide direct funding to cities for investing in smart initiatives.
Q: What kinds of opportunities are there for U.S. companies in the different smart city industry subsectors?
Colombo: The UK faces the global challenges of rapid urban population growth, climate change, and pressure on resources and infrastructure, so the provision of services presents big opportunities for digital business in the following industry sectors:
Smart Mobility and Transportation Infrastructure
Poor air quality and traffic congestion are creating demand for technologies and services related to smart, intelligent transport. Traffic congestion alone is expected to cost the UK economy US$33 billion annually by 2030, increasing 63% from 2013. Congestion charging zones and oyster cards have been implemented to tackle this issue. The UK is also headed toward an electric car revolution, which could see driverless vehicles charge up as they use a Scalextric-style road network across the country. The UK Ministry of Transport plans to unveil a new government strategy within two years that will give Britain a leading position in the electric car market in both usage and production.
The UK also faces energy challenges, including security of supply, aging infrastructure, fuel poverty, and failure to align retail energy prices with wholesale costs. Thanks to a highly competitive electricity sector, the UK has quickly developed into one of the most attractive markets in the world for advanced smart grid technology and applications (demand side management, renewables integration, smart metering, communications and customer engagement platforms, transmission & distribution, etc.) By 2020, the United Kingdom is planning a mass roll-out of smart meters, replacing 53 million gas and electricity meters at a cost of US$18 billion.
Smart Water and Waste Infrastructure
Smart technology can help to optimize both the water and waste management sectors, presenting opportunities for U.S. companies. For example, due to population growth, it is estimated that the UK’s demand for water will exceed supply by 10 percent by 2025, so maximizing efficiencies with smart technologies will be imperative during the next decade. Opportunities include the areas of smart leakage detection, supply and demand management, smart metering, data analytics, and smart flood risk management. Smart technology solid waste management can help facilitate the transition from a linear model of making, using, and disposing of items to a circular model, where items are designed with the aim of reusing, recycling, or remanufacturing them.
The UK home automation market is estimated to be worth US$200 million in 2016. Smart homes are a small proportion of the total U.K. housing stock; however, the building automation system market is growing in regard to commercial buildings. Building management systems are widely implemented to improve comfort and save energy.
Smart Health Care
The need to provide adequate health- and social-care solutions is becoming more pressing than ever—opportunities exist in health apps, analytics, telecare, telehealth, and wearables segments. The UK smart health-care system is predicted to grow by an additional US$1.4 billion by 2018 as a result of increased use of innovative technology to provide cost-effective solutions and more diverse models of care.
Supporting citizen-led, bottom up initiatives and engaging a broad spectrum of people is at the heart of the U.K. smart governance strategy.
Q: What are some specific challenges facing the smart cities market?
Colombo: Lack of funding is the major obstacle to the realization of smart cities with many local government authorities facing financial difficulties. There is also a lack of consumer awareness and security and privacy concerns. Many public services are privatized to a greater extent in the UK than in other European countries, and implementing smart technology that is interoperable across the various private sector suppliers is extremely challenging. Market uncertainty has been introduced by Brexit—many UK smart cities projects have been funded through the European Union (EU) and this funding may cease in the near future as the United Kingdom prepares to leave the EU.
Q: What types of advantages might U.S. firms have over other international competitors in the U.K. smart city market?
Colombo: U.S. firms are well perceived in the United Kingdom, especially in the technology space. The relative abundance of a highly educated labor force and technically sophisticated equipment in the United States, as well as the renowned entrepreneurial attitude toward innovation and development of new technology, gives U.S. companies an advantage over foreign competitors.
Q: What are some common “lessons learned” among U.S. companies selling to your market?
Colombo: It is really important to take advantage of pilot projects—these are a key path to enter the market, and not overlooking these opportunities could prove critical. As mentioned, many of the players in the smart cities space can be quite conservative and risk-averse, and pilot projects have been very effective in opening the market to innovative companies. Another important thing to keep in mind is the timeline linked to smart cities projects—more often than not, U.S. companies will not be able to do a quick sale and will have to devote time to develop solid connections with the industry.
Q: What types of qualities do you look for in a U.S. company and potential buyer in order to maximize the chances for export success?
Colombo: U.S. companies that are successful in the UK market have unique selling points that differentiate them from foreign competitors and are adept at continuously developing their capability and future proof of offerings. Most U.S. firms entering the United Kingdom already have a strong track-record in the United States. Although relatively new U.S. companies can be quite successful in the UK, both local city administrations and businesses like the utilities are quite conservative and often have “first-of-a-kind” reservations. As a result, U.S. companies with a solid record of projects have a great advantage over less experienced companies. The most successful U.S. companies in the United Kingdom are also adept at customizing their solutions for the UK market, developing solid connections with key stakeholders, and spending time getting to know their clients and needs.
Q: Based on your experience, what are some key export tips that a U.S. business should know?
Colombo: To establish a presence in the UK smart cities market place, a U.S. business must develop a compelling business model that includes the following:
- A deep understanding of where the value is and a sound grasp of government and regulatory incentives and impact of legislation
- An understanding of long sales cycles that characterize the utility and public procurement processes
- The provision of interoperable, secure, flexible solutions. From the city perspective, getting secure, future-proofed products and technologies has become a top priority.
- The ability to identify and manage partnerships to provide multi-disciplinary solutions. All U.S. companies (from large to small) doing business in the United Kingdom are collaborating with partners—establishing relationships and getting to know all the players in the market is key.
U.S. Department of Commerce Export Resources
U.S. Commercial Service trade professionals located in 108 cities across the United States and in U.S. Embassies and Consulates in more than 75 countries help U.S. companies export. Services include export counseling, market intelligence, business matchmaking, advocacy, trade show support, and other customized services. To get started, visit export.gov, the U.S. federal government’s export assistance portal..
- View the short video on U.S. Commercial Service resources and our global office directory, where you can locate your nearest U.S. Commercial Service office and our office in the UK.
- Learn more about selling internationally through the Export Basics video series.
- Read our Country Commercial Guides with the latest market intelligence from U.S. embassies abroad on more than 140 countries.
- More information about global markets for smart cities-relevant industries is available in the International Trade Administration’s 2016 Smart Grid Top Markets Report, Environmental Technologies Top Markets Report, and smart Cities Guide.
- U.S. environmental technology and services companies can register on the U.S. Environmental Solutions Toolkit, an online buyer’s resource guide that marries Environmental Protection Agency (EPA) expertise on solving environmental challenges with a catalog of U.S. technology providers.
Smart City Expo World -U.S. businesses looking for new export opportunities can participate in the Smart City Expo World Congress taking place in Barcelona, Spain, November 14-16. The event features more than 400 speakers, 300 exhibitors, and 10,000 visitors, including key decision makers, city administrations, thought leaders, and technology providers. The U.S. Department of Commerce (DOC) has certified the show and will host a U.S. Pavilion to provide direct marketing support such as export counseling, matchmaking, reception and guided tours with international delegations.To register for the U.S. pavilion, contact [email protected] or [email protected].
Curt Cultice and Nimra Zia are part of the U.S. Commercial Service.