Getting Britain building
By Philip Jansen, Chief Executive
I’m in my last few months at BT Group. The whole time that I’ve been here, the central focus for the company has been our investment in full fibre broadband, and my commitment to build it like fury.
The long-term investments that we’re making in fibre, 5G and digital systems will create a stronger, better company with brighter prospects. It’s also the sort of commitment that the country badly needs for jobs, productivity and public services across the UK.
For once, however, I want to focus less on all the economic benefits of this technology and instead spend a moment on the economic underpinnings of our investment case and in particular the innovations in our taxation system without which it would not have been possible.
In general, the UK has suffered in recent decades from a comparative lack of corporate investment. Businesses face a lot of short-term pressures. The BT Board, in deciding to make enormous long-term commitments on full fibre worth some £15bn, had to do so in the knowledge that the investment would all be made up front with the returns some way off. The nature of our business is that most of our investments take at least five years to generate a return; but in the case of fibre that period will stretch to at least a decade.
We took that tough decision to commit to fibre, nonetheless, in part because policymakers and regulators understood this point and acted on it. That’s where decisions on tax have been so important.
The introduction of a tax ‘super deduction’ for infrastructure investors from April 2021 allowed BT Group to increase and accelerate our fibre rollout targets – from 20m to 25m homes.
As economic conditions hardened over the winter of 2022-23, and the super deduction came to an end, those targets were under real pressure. That’s why the replacement of the super deduction with a new policy of full expensing was also critical: it allowed us to accelerate our capital investment by some £300m per year, to stick to the 25m target and to simultaneously increase the pace at which we were connecting new customers to the new fibre network (itself a capital-intensive process).
I think politicians on all sides have now understood the important role that tax incentives can play in promoting investment. In our industry, the results are very clear from the record-breaking pace at which Openreach is now rolling out the new network.
However, like the super deduction before it, full expensing is only a short-term intervention. It is due to expire in two and a half years. The investment demands and needs of the industry and the country won’t stop there, though. There is a £20bn investment gap to close, for example, if government ambitions for 5G mobile services are to be met, and an ever-increasing need to make our networks more energy efficient, secure and resilient against future risks and threats.
The real game-changer would be to put these tax incentives on a permanent basis. That would give businesses like BT Group genuine long-term certainty to plan and shift the investment environment in Britain from good to great.
I know the Chancellor is considering this as one option for next week’s Autumn statement. He has said he would like to take this step when the economic conditions allow. With billions of pounds of potential investment at stake, it’s also important to ask whether, as a country, we can afford not to. This one measure could have a transformative effect in getting Britain building: not only digital infrastructure but much else besides.