Reeves’s planned budget changes will lead to a slowdown in UK investment, warns BT
Telecommunications giant BT is the latest company to warn about proposed changes under Chancellor Rachel Reeves’s upcoming budget.
The group noted that proposed changes to UK business rates risk a slowdown in infrastructure investment at a time when the nation needs it most.
“The financial impact on firms like BT is currently unknown, and will depend on the outcome of ongoing discussions with the Valuation Office Agency (VOA), and on decisions taken at the next Budget on 26 November,” said Simon Lowth, BT Group Chief Financial Officer.
“But what is clear is that any increase in this tax on infrastructure could threaten investment across a broad range of infrastructure sectors.”
Lowth noted that BT is investing more than any other FTSE business into the UK – over £24 billion so far this decade.
“While we’re making great progress, it’s far from job done. We plan to invest billions more before the end of the decade to build a better BT for customers and fuel growth across the country,” he said.
Opportunities for a new system
Business rates are widely seen as outdated, unfair, and a drag on growth, said Lowth. He added that successive governments have tried different reviews and reliefs, but criticism remains high among economists and businesses alike.
“Addressing these challenges and providing greater support to high street businesses is rightly a priority for the government.
“While the UK’s business rates system taxes commercial properties like shops, offices, and warehouses, it also impacts other physical assets – like fibre cables and ducts, telephone exchanges, and mobile masts – which digital infrastructure providers like BT rely on to connect the country.
“It is also worth noting that business property is already taxed considerably more in this country than our European neighbours, decreasing UK competitiveness.”
What’s being proposed?
Lowth warned that the latest proposed change is a major one: the Government plans to abolish the VOA, which oversees how business rates are calculated, and move its functions into HMRC.
“This could be a positive step; especially if HMRC uses the opportunity to build a fairer and more transparent system. They’re also considering a range of other longer-term reforms which could improve how the system works,” he said.
“The VOA is currently revaluing every commercial property in the UK. This is a major concern to businesses of all sizes, as it has been argued that its approach can lack transparency and accountability. There is also a significant risk that the VOA takes decisions which stifle economic growth.”
At the same time, the government is also introducing a new reform charging a higher rate to businesses with properties and physical infrastructure valued over £500,000, which aims to fund lower tax rates for retail, hospitality, and leisure firms, Lowth said.
He notes that the goal was to get online giants to pay more while giving high street firms a much-needed break.
But the reality is more complicated – with serious unintended consequences for the services that keep the country and the economy running.
“These changes could instead result in a small number of UK infrastructure providers bearing a disproportionate level of the cost – potentially up to £400m between them each year.
“These are businesses investing in the energy, transport, and digital networks that underpin the economy and the country as a whole. Penalising them risks slowing investment in the fabric of the nation and the networks and services we need to fuel growth.”
“Meanwhile, large distribution warehouses – often associated with online tech giants – could end up contributing just £250 million a year between them. But that figure also includes warehouses used by haulage firms and UK retailers, meaning that tech giants may only pay a small portion of what is needed to properly support small businesses.”
As a result, these reforms are unlikely to rebalance the system in favour of the high street. And more than that, the new business rates could become a tax on UK infrastructure, at a time when the country needs investment most, he said.
