UK move to cut business rates to boost fibre roll out ‘could change investment case for operators’

Experts have broadly approved the UK government’s announcement of business rate relief for companies that commit to building new fibre networks.

As part of the Autumn Statement announcement on Wednesday, Chancellor Philip Hammond promised to introduce 100 percent business rates relief for a five-year period starting from next April on pure fibre infrastructure.

This built on the pre-announced plan to commit £400 million to a new Digital Infrastructure Investment Fund that aims to drive deployments of FTTP/H-based networks.

Hammond said: “We have chosen to borrow to kick-start a transformation in infrastructure and innovation investment.

“But we must sustain this effort over the long term if we are to make a lasting difference to the UK’s productivity performance.”

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Alex Holt, Partner and Head of Technology, Media and Telecommunications, KPMG UK, said the announcement was designed “to change the investment economics for operators”.

“As always, the devil will be in the detail, but today’s announcement is likely to be an important consideration for a number of network operators when planning their fibre strategies for the next few years,” Holt said.

“These operators will be looking for clarity from the government on what the announcement means in practice, and this will need to be provided quickly if the government’s goal of changing investment plans is to be achieved.”

He added: “The private sector will provide the vast bulk of the investment required to upgrade our mobile and fixed networks, but the economics don’t work quickly, or everywhere in the UK for that matter.

“The Government can and should continue to step-in, to fill the gaps and to further incentivise investment in strategic technologies like fibre and 5G mobile networks if the UK to be a leader in ultrafast fixed and mobile communications.”

James Thompson, Head of Business Rates at Deloitte Real Estate, said the announcement would remove one of the major barriers to fibre deployment.

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“We would expect the speed of roll-out delivery to be increased as a result of this relief,” he commented.

“It is however disappointing that similar relief will not be given to the roll-out of new wireless broadband in rural areas.”

It is the second major announcement on business rates in the space of two months.

The industry warned prices could rise in September, when the UK’s Valuation Office Agency (VOA) announced a fourfold rise in business rates on some major infrastructure providers’ bills.

The total rateable value of telecommunications fibre and cable networks, excluding national networks, went up from £141 million to £421 million as a result of the VOA’s decision, according to Deloitte analysis.

Richard Hooper, Chair of The Broadband Stakeholder Group, said at the time that this “huge increase” went against the government’s objective to support “world-class connectivity” and introduced “instability and risk”.

Commenting on the Autumn Statement decision, Hooper said it was “a welcome move”.

Adrian Baschnonga, Global Lead Telecommunications Analyst at EY, concluded: “News of the business rates relief will be welcomed by service providers, who had previously voiced concerns over a prospective hike and its impact on network investment levels going forward.

“The rate relief is an important complement to the £400 million investment fund, and will help incentivise the rollout of ‘full fibre’ infrastructure as part of the UK’s long-term digital growth plans.”

Source: European Communications

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