BT’s chief executive has called on the new UK government to extend the “super-deduction” tax break in order to boost growth, as Britain’s biggest mobile and broadband operator is forced to raise its cost-cutting target because of soaring inflation.
Philip Jansen said the scheme was “a major success, not just for our industry” and it had enabled the creation of 4,000 jobs across BT Group since it was introduced in March.
Prime Minister Rishi Sunak, who was chancellor at the time, was the architect of the “super-deduction” allowance, which gave significant tax breaks to businesses that invested in new infrastructure, plant and machinery assets. The allowance is due to expire at the end of March 2023.
Former prime minister Liz Truss made no commitment to continue the scheme and was intent on replacing it with so-called low-tax investment zones.
“Digital infrastructure is an absolutely certain, unequivocal, no regrets move” for the new Conservative government, Jansen said in an interview with the Financial Times, adding that continuing the tax relief would support “their business case, not ours”.
Jansen’s comments came as BT said it would increase its cost-savings target by a fifth and push ahead with inflation-linked price rises in 2023 for the majority of its consumer and wholesale customers, as it seeks to mitigate higher energy and inflation costs than previously forecast.
BT revised its cost-savings target from £2.5bn to £3bn by the end of 2025 as the company said its energy bill had increased by £200mn this year compared with last year.
“Inflation is pushing us hard,” said Jansen. “Everyone is going to have to share the pain on cost savings. Everyone needs to treat the money as though it’s their own money.”
This could lead to job losses, he added, but he did not elaborate on numbers.
“Inevitably that means some jobs won’t exist in the future . . . We’re doing this in a sensible, controlled way, using natural attrition as much as possible to reduce overall headcount,” he said.
BT is embroiled in a pay dispute with staff, led by the Communication Workers Union, about a pay package offered in April. Over the past few months, about 40,000 employees have downed tools across eight days, calling on Jansen to return to the negotiating table to discuss pay.
The group on Thursday posted second-quarter revenues and profits broadly in line with analysts’ estimates, bolstered by its consumer and Openreach divisions, which both implemented inflation-linked price increases in April.
BT shares have floundered this year, shedding more than a quarter of their value. They fell nearly 7 per cent on Thursday morning.
The former UK monopoly reported flat revenue during the period compared with the previous year at £5.24bn, which was in line with consensus forecasts, and a 5 per cent increase in adjusted earnings before interest, taxes, depreciation and amortisation to £1.97bn, which was slightly above estimates.
Earnings in the consumer division increased by a fifth to £670mn, offsetting an 18 per cent drop in adjusted ebitda in the enterprise division.
Most telecoms groups have passed on some inflation rises to customers this year. BT opted to increase its mobile and broadband prices in line with the consumer price index, plus a further 3.9 per cent.
BT has said it will use the same formula next year, when inflation is set to top 10 per cent, despite pressure from the UK regulator and the Labour party to rethink the model during the cost of living crisis.
Source: Economy - ft.com
