Shadow chancellor John McDonnell did the media rounds this morning to explain how the part nationalisation of BT would be funded: including swapping shares for UK government bonds, and taxing tech giants
Labour leader Jeremy Corbyn later hailed the plans during a speech in Lancaster, saying “British Broadband will be our treasured public institution for the 21st century”
And in other news...Lloyds Banking Group shareholders lost a court case over what they say was a lack of transparency around the lender’s 2008 acquisition of HBOS
That’s all from us. Thanks for reading and have a great weekend. We’ll be back on Monday.
Analysts from investment bank Jefferies say BT could launch a legal challenge if Labour attempts to nationalise part of the business.
The note, written by Jerry Dellis, Ulrich Rathe and Martin Hammerschmidt, explains:
In a nationalisation scenario, we understand that BT’s most effective legal recourse might be to defend shareholder value, not attempt to block government policy.
The UK has bilateral investment treaties with countries in which overseas BT shareholders are located, and these are intended to protect against asset expropriation.
UK-based shareholders might expect to receive equal treatment.
That is higher than consensus forecasts for a +0.2% rise and an improvement on the -0.3% fall in September.
Excluding car sales, the numbers were slightly disappointing, up just +0.2% compared to expectations for a +0.4% increase. But it’s still better than September when retail sales contracted by -0.1%.
My colleagues Mark Sweney and Patrick Collinson have put together a comprehensive Q&A on the feasibility of the Labour broadband policy, covering key issues including whether the policy would breach state aid rules:
Could the policy fall foul of policies on state aid?
The EU has strict rules against state aid – or government subsidies that benefit one EU company at the expense of others – but according to some commentators, there are no regulations against businesses becoming entirely state-owned.
How easy would it be to nationalise BT?
Labour’s plans do not involve nationalising all of BT, just Openreach, which operates the UK’s broadband network, and other parts that relate to broadband provision, such as the retail arm BT Consumer.
Openreach was set up as a subsidiary of BT in 2006 but two years ago was legally separated from its parent company by the telecoms regulator, Ofcom, to counter complaints from rivals that its lack of independence was limiting competition in the market. That separation would make the nationalisation of Openreach much simpler but taking the business into state ownership would be a daunting proposition.
Openreach employs about 32,000 staff – almost a third of BT’s global workforce – and has a turnover of about £5bn.
It is responsible for the rollout of full fibre across the UK, which at an estimated cost of £35bn is the biggest infrastructure project after the HS2 rail project.
Is BT’s pension deficit an issue?
Ofcom, the communications industry regulator, examined the possibility of breaking up BT in 2016 and cited BT’s £4.5bn pension deficit as one of the reasons why it would not be a good idea. Steve Unger, Ofcom’s director of strategy, said at the time a full-blown separation would trigger “very significant costs” related to the deficit.
The group welcomes the Court’s decision. Throughout this process, the group has sought to act in the interests of our shareholders as a whole.
To refresh your memories, Lloyds announced the takeover of HBOS on 18 September 2008.
Claimants said they suffered substantial financial losses as a result of the deal, Their lawyers claimed Lloyds had been bullied into the takeover by Gordon Brown’s government, which hoped to save struggling HBOS
BREAKING: Lloyds shareholders lose court case over HBOS acquisition
The Press Association is reporting that shareholders have lost a high court battle over the 2008 takeover of HBOS.
The case was brought by almost 6,000 private investors who claimed they were not provided with the full details about the financial health of HBOS before the deal went through.
While the big tech giants will be taxed to help fund the broadband scheme, McDonnell says the cash will actually be funding the infrastructure that their businesses run on:
Yes, tech giants like Google and Facebook will have to pay a bit more for internet connectivity that they all benefit from.
Corbyn hails Labour broadband plans during speech in Lancaster
Labour leader Jeremy Corbyn has hailed the party’s broadband pledge during a speech in Lancaster.
He said it would just be the next in a string of successful nationalisation of essential services in the UK:
In the 19th century, it was the public water supply and water works...in the 20th century it was our fantastic National Health Service...British Broadband will be our treasured public institution for the 21st century.
CBI says Labour's plan "is not the way" to improve broadband
Britain’s leading business lobby group the Confederation of British Industry believes Labour’s plan is not the the way to improve broadband across the UK.
Matthew Fell, CBI’s Chief UK Policy Director, says:
Fast reliable broadband is an absolute priority for people and firms and does need improving. But Labour’s plan is not the way to do it. The roll out of full fibre broadband across the country is underway, and all renationalisation will achieve is to slow down a process that needs speeding up.
It is private sector investment that has driven connectivity, massively widened internet access and put faster speeds within reach for most UK households. This progress will be stopped in its tracks and the bill passed to pensioners and savers.
Fell adds:
With so many challenges facing the UK, blinkered ideologies must be left behind and replaced by forward-looking public-private partnerships that deliver rather than delay.
As the scope of Labour’s radical re-nationalisation plans expands almost daily, firms around the world lose confidence in the UK as a place to invest safely. Some will be asking if they are next. This threat damages the livelihoods of communities across the country. It’s time for all parties to work with business, not against it.
My colleague Rajeev Syal has rounded up key comments from shadow chancellor John McDonnell’s media tour this morning.
Labour’s view on the benefits:
It doesn’t just have economic benefits. It has environmental benefits in terms of basically people locating in their local towns and not commuting, some people moving into rural and coastal areas as well so they’re properly connected, and it has social implications as well.
On whether staff would be paid at the same rate as BT:
We will always ensure that we attract the talent that we need.
On Labour’s intention to tax big technology companies to fund the policy, McDonnell said:
We’re not being unfair to anyone, we’re simply saying you make your profits here, on the percentage of the profits you make here, you pay your taxes properly.
On rival companies:
McDonnell said he hoped to come to an agreement with rival broadband companies such as Sky and TalkTalk over ensuring access, and if necessary they could “come within the ambit of British Broadband”.
We’ll come to an agreement with them, either an agreement of access arrangements or working alongside us, or, yes, if necessary they can then come within the ambit of British Broadband itself.
Rival Virgin Media says private investment "essential" to improving UK broadband
BT competitor Virgin Media has weighed in.
It’s taken a subtle swipe at nationalisation proposals, saying that private – not public – investment is to thank for its own growth and success.
A Virgin Media spokesperson said:
Virgin Media has the fastest scaled network in the UK and has pledged to bring next-generation Gigabit broadband to half of the UK, by the end of 2021. As this commitment shows, private investment is essential to delivering improved broadband infrastructure.
With billions of pounds worth of private money invested in the UK, Virgin Media continues to expand its network, providing competition and choice to consumers.
Government policy has a role to play and can help to accelerate broadband deployment in a way that minimises the level of public subsidy needed and provides the UK and consumers with incredible connectivity within a competitive market.
Amidst the flurry of reaction and commentary to Labour’s BT pledge, we’ve had the final reading of eurozone inflation released this morning.
The 19-country bloc’s headline inflation slowed to 0.7% year-on-year in October, from 0.8% in September. That’s line with preliminary estimates by Eurostat.
The drop was caused by a fall in energy prices, which offset higher prices for services, food, alcohol and tobacco.
BT wins exclusive UEFA broadcasting rights to 2024
NEWSFLASH: In other BT news, the telecoms giant has won the exclusive rights to broadcast all 420 games of the UEFA Champions League, UEFA Europa League and the new UEFA Europa Conference League fora further three seasons.
BT will pay £400m each year for the privilege, but says its financial outlook for 2019/2020 remains unchanged.
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