Budget 2018: what does it mean for telecoms?
Written by: Sam Fenwick | Published:

Land Mobile looks at the budget’s implications including the additional funding for fibre and R&D, along with the measures that could indirectly stimulate demand for two-way radio.

As part of the government’s strategy to ensure a nationwide full fibre network by 2033 (as set out in the Future Telecoms Infrastructure Review published in July) the budget has allocated £200 million from the NPIF (National Productivity Investment Fund – the government’s main initiative aimed at addressing the UK’s productivity gap) to pilot approaches to deploying full fibre in rural locations, starting with primary schools, and with a voucher scheme for homes and businesses nearby. The first wave of this will include the Borderlands, Cornwall, and the Welsh Valleys. Suffolk will be the first local area to be awarded from the £5.9 million of funding from the third wave of the Local Full Fibre Networks challenge fund, enabling full fibre connections to key public buildings.

Phil Sorsky, vice president of Service Providers International at CommScope welcomed the additional investment in fibre infrastructure, adding “According to the Cable.co.uk broadband speed league, the UK sits in 35th place in terms of global internet speeds – and is third bottom out of the EU countries included, behind the likes of Madagascar and Bulgaria. This simply isn’t sustainable, particularly in the run up-to Brexit. Access to fibre is a key component for businesses across the UK, with companies even more under pressure to deliver on a global scale, and this is yet another reminder of why we need more investment in this area.”

“While it is great news to see Philip Hammond promising to invest £200 million to pilot innovative approaches to deploying full fibre internet, it is important that digital businesses don’t jeopardise this opportunity by undermining the network expansion with poor digital experiences…. We always need to accompany network expansion with a laser focus on remedying latency issues that spoil digital experience and hurts our digital economy,” said Steve Miller-Jones, VP of product strategy, Limelight Networks.

The government is increasing the size of the Industrial Strategy Challenge Fund by £1.1 billion, which includes up to £121 million for Made Smarter, “to support the transformation of manufacturing through digitally-enabled technologies, such as the Internet of Things and virtual reality. The budget has also allocated a further £1.6 billion for R&D funding.

Turning to changes that could benefit the UK’s two-way radio sector by indirectly simulating demand for its products and services, perhaps the most significant is the decision to increase the NPIF from £31 billion to £37 billion and extend it by an extra year. There is also a strategic roads investment package worth £28.8 billion that will run from 2020 to 2025, a Future High Streets Fund that will invest £675 million to support local areas to improve access to high streets and town centres, and an extension to the Transforming Cities Fund, funding significant transport projects in English cities.

The budget provides an extra £160 million for counter-terrorism policing. The budget will also fund the construction of HM Prison Glen Parva and will provide £30 million this year to “to improve security and decency across the prison estate”.

Moving to taxation, the government has announced that from April 2020 it will introduce the digital services tax (DST) – a two per cent tax on the revenues of “certain digital businesses”, those that generate global revenues from in-scope business activities of more than £500 million per annum. It will apply to revenues that are linked to the participation of UK users, subject to a £25 million per annum allowance. It applies to revenues generated from search engines, social media platforms and online marketplaces and will include a safe harbour provision that will exempt loss-makers and reduces the effective rate of tax on businesses with very low profit margins. The government has said that it will only apply the DST until an appropriate long-term solution is in place and remains committed to G20 and OECD discussions on potential future reforms to the international corporate tax framework. It will consult on the detailed design of the DST, which will be included in Finance Bill 2019-20.

Commenting on the budget, techUK CEO, Julian David said that the DST cuts “across the grain” of the positive narrative created by the chancellor’s other announcements.

“techUK remains opposed to any tax that seeks to narrowly target businesses simply because they are digital. The kind of tax being proposed will be bad for investment and bad for the UK economy.

“This approach risks undermining the UK’s reputation as the best place to start a tech business or to invest. The £500 million threshold the chancellor proposed is low and risks capturing much smaller companies than anticipated. techUK will engage with the chancellor’s consultation but it is vital that policy is developed based on the reality of how businesses work, not on theoretical models of how they operate,” David said.

He added that ““We welcome the chancellor’s recognition of the benefits of an international approach but the OECD and the EU Expert Group on tax have said that a national digital services tax is the wrong idea. This is an international tax issue that needs an internationally agreed solution. Work at OECD level is progressing. The UK should show commitment to that process and not encourage others to look to unilateral action.”

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