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Spring UK Budget 2023 – Full Expensing May Help FTTP and 5G Rollout UPDATE2

Wednesday, Mar 15th, 2023 (2:10 pm) - Score 3,376
Parliament UK Building at Dusk in London 2021

The Chancellor of the UK Government, Jeremy Hunt, has today announced the Spring 2023 Budget, which sadly made no mention of any extra support for gigabit broadband or 5G mobile deployments. But the new “full expensing” measure could help to bring down the cost of some related plant and machinery (capital expenses).

Firstly, we weren’t expecting to see any major “new” broadband and mobile related infrastructure funding announcements from the Government this time around, which is because they’re already running two such schemes. The first one is their £1bn Shared Rural Network project (progress update), which aims to extend geographic 4G based mobile (mobile broadband) coverage to 95% of the UK by end of 2025 (it will help 5G too).

NOTE: Some 47% of the UK can currently access a “full fibre broadband” (FTTP/B) network, which rises to 73.5% for “gigabit-capable broadband” (both FTTP/B and Hybrid Fibre Coax).

The second one is their £5bn Project Gigabit programme, which aims to make gigabit-capable (1Gbps+) broadband ISP networks available to at least 85% of UK premises by the end of 2025 and then “nationwide” by 2030 (Winter 2023 Progress Update). The project consists of several support schemes, including vouchers (£210m), funding to extend Dark Fibre in the public sector (£110m) and gap-funded deployments with suppliers (rest of the funding).

We should point out that commercial investment alone is largely expected to push gigabit connectivity to cover c.80% of UK premises by the end of 2025, with public funding only then being used to help upgrade those in the final 20% of hardest to reach premises (via gap-funded rollout contracts and demand-side interventions like vouchers).

Spring UK Budget 2023 Details

As expected, the Chancellor’s speech didn’t provide any new details on their broadband and mobile infrastructure programmes. Indeed, the official Spring Budget 2023 Document (PDF) does NOT contain even a single mention of the words “broadband“,”mobile“, “gigabit“, “5G” or “fibre“, which we found to be quite surprising (there’s usually at least some general info.).

In general, this meant the government missed another opportunity to reintroduce relief from business rates on new fibre and extend their “Super Deduction” policy for businesses that invest in new plant and machinery assets. But given the current economic climate, we can’t say we’re all that surprised.

However, the Chancellor did announce a new policy of “Full Expensing” (the first European country to do so), which is due to be introduced from 1st April. This will essentially offer 100% first-year relief to companies on qualifying new main rate plant and machinery investments from 1st April 2023 until 31st March 2026, although they “aim” to make this permanent (not making it permanent today risks a “cliff edge” scenario).

The change actually builds on the success of the prior super-deduction, which we know has benefitted the rollout of full fibre broadband across the UK. What this means is that every pound invested in IT equipment, plant or machinery can be deducted immediately from profits. The Chancellor said this could be worth £9bn a year, while the OBR predicts it will increase business investment by 3% every year.

Without this change, a network builder would otherwise only be able to deduct a small fraction of the cost of related investment each year over the accounting lifespan of that investment (inflation tends to erode the value of the money operators can claim back in future years). At the time of writing, we haven’t been able to canvass much opinion from fibre builders, but those we did engage seemed cautiously optimistic (i.e. they’re checking the fine print).

One possible catch here is that most new network builders, such as alternative networks, will already be running at a loss due to the high cost of network build (reaching payback will be years away). As such, this change may not benefit them as much as it might benefit more immediately profitable network operators and ISPs.

Catherine Colloms, Openreach MD for Corporate Affairs and Brand, said:

“The introduction of Full Expensing for three years, with the intention of making it permanent, is positive news for Openreach and many other businesses investing in national infrastructure projects. It’s what we’d called for, and it gives us a higher degree of certainty to back the plan we’re pursuing to fully fibre the UK.

The latest research from the Centre for Economics and Business Research predicts that our full fibre broadband network will help grow the UK economy by £72bn over the next few years, and we’re playing a huge role in that as we deliver ultrafast and ultra-reliable broadband in rural and urban areas.

Our network will bring thousands of people back into work and help to reignite the economy whilst simultaneously reducing carbon emissions. The budget also has some welcome measures for people all over the UK, including our 38,000 employees, and brings cause for some optimism as we continue to navigate the higher cost of living.”

Tristia Harrison, CEO of TalkTalk Group, said:

“For levelling up to work, local leaders need to be able to provide local solutions to grow the economy and answer their specific local challenges. So today’s measures are a welcome step in giving more responsibility for local economic development to local authorities and more certainty via multi-year funding settlements.

As a proud Greater Manchester based business, we look forward to continuing to play our part in growing both the local – and national – economy. Programmes such as ‘returnerships’ for over-50s will help to bring much-needed skills back into the workforce; and as a tech-based business, we also welcome the increased investment in AI and innovation accelerators, providing funds for both the businesses and job creation of the future.”

A spokesperson for Mobile UK said:

“The Spring Budget revealed that there is still a long way to go before adequate measures are in place to address the connectivity investment gap. And while the Chancellor outlined a new focus on AI and intelligent connectivity, it was disappointing that there was barely a reference to mobile and 4G connectivity, and a missed opportunity to announce much needed funding for local authority digital champions.

We hope to see the Government’s ambitions in this space in the much-anticipated Wireless Infrastructure Strategy, which is expected soon. And, we remain focused on fostering a great working relationship with the Government, to deliver world-class connectivity in the UK and meet its ambition for the nation.

Specifically, we hope to work with the Government to break down barriers and create a positive investment environment which supports the deployment of mobile infrastructure to help to sustain people’s ultra-connected lifestyles, along with the recruitment of Digital Champions within local authorities.”

Overall, we weren’t expecting anything completely new from this budget for digital infrastructure, and in that respect, there were no real surprises. But the expenses change may have a benefit for some. We’ll end on a brief and rough recap of what the UK Government has already pledged for broadband infrastructure since 2010 (prior to that, broadband policy was still very much a work-in-progress).

Summary of Previous UK Broadband Developments

➤ The £2.5bn+ Superfast Broadband (SFBB) programme helped to put fixed line “superfast broadband” (24Mbps+) networks within reach of around 97-98% of premises. Openreach (BT) hold most of the contracts but a few AltNets were also involved in the later stages. More recent contracts targetted a slightly faster speed of 30Mbps+ and involved FTTP.

£200m was put toward a Rural Gigabit Connectivity (RGC) programme, which ended in March 2021 and aimed to encourage an “outside-in” approach to building new ultrafast broadband ISP networks by focusing on helping to connect rural areas via gigabit vouchers and other schemes (here). Hundreds of rural schools were also upgraded to full fibre through this.

➤ The Government has worked to make it easier for “gigabit-capable” broadband ISPs and mobile network operators to access buildings – usually big apartment blocks (Multi-Dwelling Units) – where “rogue landlords” fail to respond (here). On top of that they’re also working to mandate Gigabit capable broadband connections for new build homes (here).

➤ The legally-binding and industry-funded Universal Service Obligation (USO) for broadband, which will offer a 10Mbps minimum download speed (1Mbps upload) to all – upon request – went live on 20th March 2020. Most of this is expected to be delivered via EE / BT’s 4G network, with only a little from fibre (FTTP), but there have been problems with high costs in very remote areas (here).

£400m has been provided via the Digital Infrastructure Investment Fund (here), matched by private finance, to help invest in new “full fibre” (FTTP/B) networks until late 2021 (focused on helping to boost altnet providers). It’s hoped that this could foster FTTP capable connections for an extra 2 million premises by the end of 2020.

➤ £294m was set aside to support the Local Full Fibre Networks (LFFN) scheme (details, here, here and here), which is funding a programme of local projects to help accelerate market delivery of new “full fibre” broadband networks (e.g. connection vouchers for businesses, aggregated demand schemes, opening access to existing public sector infrastructure etc.). This is being extended via Project Gigabit.

100% business rates relief for new full-fibre infrastructure, backdated for a 5 year period from 1st April 2017. But this ended in March 2022 and doesn’t look likely to be extended. Scotland continues to apply a similar relief and that will run for many years longer.

£200m to support a programme of 5G mobile / wireless technology trials and spectrum (here).

Various local voucher / subsidy schemes are still on-going to help those areas that suffer slow broadband speeds, including under Project Gigabit.

Ofcom’s regulatory changes are attempting to boost competition by making Openreach more independent from BT and giving rivals greater access to the operator’s national network of fibre optic cables and cable ducts/poles. Not to mention improving the overall quality of service (here).

The Government and Ofcom are also supporting various other broadband related measures, such as automatic compensation from ISPs for service faults, improved / cheaper access to build new infrastructure on private land and more enhancements for consumer switching (adding support for FTTP etc.) and phone number portability (making it easier to adopt VoIP etc.).

£75m was assigned to help improve broadband connectivity in hard to reach areas via the RDPE’s Rural Broadband Infrastructure Scheme (here).

Part of the new £3.6bn Towns Fund is due to be used to help “improved broadband connectivity” cover selected towns (here). Exactly how much of this will go toward broadband remains unclear, but each town/city looks set to receive up to £25 million and most of that will probably be eaten up by improvements to local transport infrastructure.

➤ A small part of the £900m that has been committed via the Getting Building Fund (GBF) has also gone toward broadband improvements (here).

➤ The Government are also making other updates via the Product Security and Telecommunications Infrastructure Act (PSTI), which involves more changes to the ECC that will aim to make it easier for full fibre broadband and mobile operators to upgrade, share and deploy new infrastructure (here).

➤ A “super deduction” policy for businesses that invest in new plant and machinery assets was introduced in 2021, which is something that fibre optic network builders did benefit from. Effectively this allowed FTTP builders to reduce their tax bill by 25p for every £1 invested. But this is coming to an end in 2023 and is likely to be off-set by the subsequent increase in the corporation tax to 25% from April 2023.

UPDATE 4:33pm

We’ve added a comment from Mobile UK and TalkTalk above.

UPDATE 16th March 2023 @ 8:56am

We’ve added a comment from Openreach too above, and one from INCA below (putting it below to stop comment spam breaking up the main article).

Malcolm Corbett, INCA CEO, said:

“The Chancellor’s Spring budget is often used to provide eye-catching handouts for headline grabbing infrastructure projects. While the statement was light on new infrastructure spending, there are several existing areas of the economy looking for more of the taxpayer’s cash – the independent broadband sector isn’t one of them.

Over £20bn has been invested into the UK’s alt-nets recently. But this injection of capital, which can have a transformative impact on the UK’s digital landscape, must be protected by a regulatory environment which follows the Government’s stated policy aim of ensuring a continued competitive broadband market which provides a healthy level of consumer choice. Inaction against monopolistic behaviour like Equinox 2 – BT Openreach’s proposed pricing plan that will harm competition and raise prices for consumers in the long run – directly threatens the creation and maintenance of such a market.

An environment in which independent operators can flourish is the only way that the UK will achieve its goals of becoming a science and technology superpower, powered by ubiquitous broadband networks that match the demands of emergent technologies.”

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Mark-Jackson
By Mark Jackson
Mark is a professional technology writer, IT consultant and computer engineer from Dorset (England), he also founded ISPreview in 1999 and enjoys analysing the latest telecoms and broadband developments. Find me on X (Twitter), Mastodon, Facebook and .
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12 Responses
  1. Avatar photo Don't be silly we're not an olygargy says:

    “Full Expensing” of “new main rate plant and machinery investments”? Could that possibly further enrich a billionaire, whose family owns a well known plant and machinery manufacturer, and absolutely did not receive a peerage in exchange for his multi million pound donations to the Tory party… Of course not!.. Don’t be silly, this is not Russia! We’re British!

    1. Mark-Jackson Mark Jackson says:

      I think you might be kicking this one way.. out of field. This is an accounting change that impacts businesses UK wide, and a seemingly positive one at that. Plant and machinery is also a general HMRC description for a type of expense, it’s not strictly literal.

    2. Avatar photo Don't be silly we're not an olygargy says:

      I whole hardheartedly agree Mark! Our Dear Leaders are beyond reproach, the least corrupt, incompetent and self-serving in human history, all round good eggs!

      Never have they given “fast lanes” to their chums to get plum contracts for hundreds of millions of pounds, despite certainly knowing they had no hope in hell to fulfill them.

      Never gave they given ferry contracts to their chums whose businesses only exist on paper and a sloppy website.

      Never have they expanded the House of Lords beyond all recognition after receiving donations and/or other favours, certainly never installed the son of known KGB agent, who the security services describe as a Russian ‘asset’..

      Never have they appointed their chums to public positions certainly not the BBC after they never had assistance in gaining a personal £800k credit line.

      Never have their family members been non-domiciled in the UK for tax purposes.

      Never have they attempted to give knighthoods to their fathers.

      Never had they attempted to bypass the recruitment stage to install their chum as the head of OFCOM, only for the process to be thrown out and started again with their chum pushed to the front of the line.

      Never have they suppressed a report into Russian money, influence and interference in British democracy.

      Never have they lied their bottoms off at every possible opportunity.

      Never have they attempted to persistently distract from their incessant omnishambolic failures with their ‘culture wars’ claptrap and wedge issues.

      The nevers are endless and cannot under any circumstance be described as profoundly corrupt, dirty or a smash and grab raid! Perish the thought!!

    3. Avatar photo HR2Res says:

      I wish some people would get a basic economics understanding. This (i.e. full expensing) has absolutely nothing to do with any perceived or real cronyism/wrongdoing. That will happen regardless of whether one uses full expensing or not!

      Any business, big, medium, or small, paying taxes is permitted to deduct ordinary business costs (like salaries and bills paid to keep an operation running) from its revenue immediately to determine taxable income and tax owed in a period.

      However, hitherto, a business that makes a capital investment (e.g. building a new facility, installing new equipment), instead of deducting that cost from revenue immediately as it does for ordinary business costs, is required to deduct only a fraction of the cost in the first year according to some schedule, with the rest being deducted over future years on future tax returns (in depreciation deductions).

      For example, using straightline depreciation over 4 years on the purchase of a £1000 PC means, hitherto, I would only be able to deduct, say, 25% of that £1000 (i.e. £250) each year over 4 years from my revenue before calculating the business profit and corporation tax due in those 4 years.

      Because a pound in the future will be worth less than a pound now due to inflation and the time value of money, stretching the depreciation deductions for capital investment over time means a business cannot fully recover the cost of making the investment. The upshot is this discourages businesses from making an investment in a timely manner that might otherwise be worthwhile pursuing. That is, it slows down investment decisions, and so can have/has an adverse effect on productivity (something the UK is bad at) and profitability.

      The change to full expensing (which is just for “plant and machinery”, i.e. not buildings or land, at the mo anyway), when it becomes a reality on 1st April, it is hoped will improve UK business investment nearer to the OECD average of 12.5% (2021 figures) from a comparatively woeful 10%. The plant and machinery aspect of full expensing is modelled/hoped to add around 0.7% to the UK’s GDP. Using full expensing on buildings, etc. would (it has been modelled) add around 2.5% to GDP. They can’t do this immediately (or extend the plant and machinery aspect beyond 2026) for reasons I didn’t quite fathom during the budget speech. I daresay this aspect will become clear (to me) in time.

      Full expensing just means that a company claims all that capital investment in year 1 and can’t claim for it in successive years through depreciation deductions. Returning to my PC example, after April this year I can now claim all that £1000 deduction in the first year, and so my corporation tax bill would be lower than it would have been. But since I claim the full cost of investment in year 1 I cannot then offset that investment against the revenue in those succeeding years, and then my corporation tax bill (sadly for me) is larger in those years (without me making any additional investment in those succeeding years). But being able to claim in the first year means that except for any inflationary loss, which I can mitigate against to some extent by timing the investment to my best advantage (late in the tax year), I get the best value out of my investment and almost all of the true cost of it.

      If you don’t make the investment in the business then you get no value out of this, either from a lost investment you should perhaps make if you have a business case to do so or to set against your corporation tax liability if you make the investment.

    4. Avatar photo Don't be silly we're not an olygargy says:

      I couldn’t agree more HR2Res! Some people eh!

      Nothing to be seen here, there’s absolutely no cronyism at all, businesses won’t be able to write off costs of plant and machinery against tax on profits and this absolutely will not boost sales and therefor profits of the UK’s leading plant and machinery manufacturer, which is not owned by the family of a wonderful and most deserving peer, who absolutely did not receive his peerage for donating millions of pounds to our Dear Leaders, certainly did not host St Boris’ umpteenth wedding FOC nor housed him FOC in a swanky £20m London pad!

    5. Avatar photo NE555 says:

      But then does the item no longer appear as an asset on your balance sheet, in effect being written off straight away?

      Presumably the asset that you’ve bought does have *some* ongoing value to the business, if only that you can use it and don’t need to buy another one just yet.

      And will it apply to small businesses buying office equipment like laptops?

    6. Avatar photo HR2Res says:

      @Don’t be silly…
      Er, well, I’d suggest you take practise what your handle initially says. And I just refer you to my first paragraph re cronyism, etc.

      @NE555
      I’ll have to have a chat with my accountant on the pros and cons and balance sheet effects, and indeed whether I can still use the depreciation route over 3 or 4 years if I want to if it is to my benefit. On the face of it, though, in my business situation I can’t see the benefit of multi-year depreciation when full expensing is an option.

      As far as I understand it at the moment, anyone who runs a company that is subject to corporation tax can make use of the system. As I’m in that category as a small business, I see two new PCs and a colour laser printer coming my way before the end of the 2023/24 tax year.

  2. Avatar photo Andrew G says:

    Benefits some more than others! A tax allowance is used to offset taxable profit. If you’re an altnet that’s not making any profit, then this change is of probably no benefit unless they are part of a wider group that can make use of tax losses in one part of the group to offset tax on profits elsewhere (so largely large investor groups). For BT group who do have taxable profits this is a benefit immediately. For the smaller altnet who are many years from profitability and aren’t part of a wider group, then it’s potentially no benefit at all as by the time they can use it, they’d have “saved up” near enough the full asset value from existing P&M allowances anyway. Treasury aren’t stupid, they know this. Decide for yourself with a gift to BT and financial investors is political cronyism…..

    1. Avatar photo Alex says:

      poor old Goldman Sachs, Infracapital, Mubadala etc etc. I’m really welling up here.

    2. Avatar photo Mr Sensible says:

      Those altnets decided to get into the business of providing broadband services.

      Just saying

    3. Avatar photo Phil says:

      When Andrew Bridgen gets the whip for asking a public health question about underlying cronyism, there sure is cronyism

  3. Avatar photo Andrew G says:

    On further thought, whilst this change is a reasonably big benefit to Openreach, it’s probably of even less value to altnets (unless using PIA) because it doesn’t help at all with the tax treatment of new ducting, that is probably 75% of the investment cost, and which I would expect will fall under the long life asset allowance arrangements, although I admit I don’t know how fibre optic cable is treated for tax purposes.

    So regardless of who benefits, all in all yesterday’s announcement is typical of all UK governments: There is nothing so bad, so complex, so unjust that further half-witted tinkering can’t make it worse. This change further complicates the UK’s tax code, which is already the longest, most arcane, complex and inconsistent in the developed world, and according to the FT and other reputable sources, a staggering 48 times the size of Hong Kong’s tax code that is generally acknowledged as a model of excellence. I can’t dispute the words of the Guardian, who acknowledged that Labour were as culpable as the Conservatives, and described the complexity of the UK tax system as “a dog whistle to the very rich”.

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