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UK confirms telco kit tax cut and lists quantum missions

The UK government has announced a permanent tax break that will benefit the country’s telecoms infrastructure investors, as well as making a raft of pledges on topics such as AI and quantum computing.

Mary Lennighan

November 24, 2023

4 Min Read
Autumn Statement

In his Autumn Statement delivered this week, UK Chancellor of the Exchequer Jeremy Hunt revealed that the so-called full expensing policy, introduced on a temporary basis in March, will become a permanent fixture. It’s a tax break for businesses that incur hefty plant and machinery costs, which in telecoms terms means network equipment basically.

Full expensing means operators can deduct the cost of network gear from their pretax profits and thereby avoid paying tax on it. That’s good news for the industry’s big guns, BT in particular, although largely irrelevant to smaller players yet to turn a profit, for now at least.

BT has been a strong proponent of the move. Just last week outgoing CEO Philip Jansen, who’s due to make way for his replacement Allison Kirkby in the new year, penned a missive extolling the virtues of full expensing tax incentives and doubtless made his position clear to the chancellor while he was at it.

His comments are worth looking back at, as they help to paint a picture of the climate for network investment in the UK…and many of his points are valid for other markets too.

“The BT Board, in deciding to make enormous long-term commitments on full fibre worth some £15 billion, had to do so in the knowledge that the investment would all be made up front with the returns some way off,” Jansen said. “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.”

The board had the confidence to make that call in no small part thanks to previous decisions on tax, he explained.

A tax super deduction for infrastructure investors that came into force in April 2021 enabled BT to accelerate its fibre rollout target to 25 million homes by the end of 2026, up from 20 million. The full expensing policy, which replaced the super deduction, meant BT could add £300 million per year to its capital spending allocation, something it implies it needed in order to hit that new target and to speed up customer additions, also a capital-intensive process.

Those figures clearly helped build a convincing argument for policy makers. But now Jansen has got his way on full expensing, the UK incumbent has moved on to another key element of the Autumn Statement: quantum computing.

BT cheered the government’s stance on quantum technologies, describing its five quantum missions as “a critical step forward in the UK’s ability to lead” in this area.

“We’re delighted to see that one of the mission headlines is for the UK to deploy the world’s most advanced quantum network at scale by 2035, pioneering the future quantum internet. Nationwide quantum secure connectivity coupled with early commercialisation and an ambition for international quantum networks will be critical enablers of the UK quantum economy,” the telco wrote in a blog post.

Also by 2035, the government has pledged that there will be accessible, UK-based quantum computers capable of running 1 trillion operations and supporting applications that provide benefits well in excess of classical supercomputers across key sectors of the economy.

That comes in addition to three missions scheduled for completion by 2030. One will see quantum sensing-enabled solutions launched in every NHS Trust. Another outlines the installation of quantum navigation systems on aircraft, and a third looks at the deployment of mobile, networked quantum sensors to enable situational awareness capabilities in critical infrastructure in transport, telecoms, energy and defence.

The five missions form part of the government’s £2.5 billion Quantum Strategy. That’s a 10-year plan, running from 2024 to 2034, and includes at least £1 billion in investment from the private sector, incidentally.

In the shorter term, the state is spending £500 million on AI over two years. It aims to provide UK scientists and AI researchers with access to the computing power they need to process complicated tasks. Naturally, it talked up the non-controversial aspects of AI; the added investment “will help researchers make the extraordinary discoveries, such as better understanding climate change, discovering new drugs, and maximising the use of AI to improve lives,” it said.

The government is also working on facilitating the manufacture of semiconductors in the UK, including exploring opportunities for UK Infrastructure Bank funding and potentially giving chip makers a break on energy prices.

And it detailed a litany of other science, innovation and technology initiatives in areas including R&D, manufacturing, upskilling, LEO satellite development, and regulation. There are more details in this Department for Science, Innovation and Technology round-up.

As above, though, the most critical element of the statement for the telecoms industry at present is that full expensing policy. It removes a major potential hurdle to investment. Or indeed an excuse not to.

About the Author(s)

Mary Lennighan

Mary has been following developments in the telecoms industry for more than 20 years. She is currently a freelance journalist, having stepped down as editor of Total Telecom in late 2017; her career history also includes three years at CIT Publications (now part of Telegeography) and a stint at Reuters. Mary's key area of focus is on the business of telecoms, looking at operator strategy and financial performance, as well as regulatory developments, spectrum allocation and the like. She holds a Bachelor's degree in modern languages and an MA in Italian language and literature.

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