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BT claims Labour nationalisation plan would cost up to £100bn - business live

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Rolling coverage of the latest economic and financial news, including reaction to Labour’s pledge to bring BT under partial state ownership if elected

 Updated 
Fri 15 Nov 2019 10.01 ESTFirst published on Fri 15 Nov 2019 03.02 EST
An engineer for BT Openreach works on a network cabinet in Enfield, UK.
An engineer for BT Openreach works on a network cabinet in Enfield, UK. Photograph: Bloomberg/Bloomberg via Getty Images
An engineer for BT Openreach works on a network cabinet in Enfield, UK. Photograph: Bloomberg/Bloomberg via Getty Images

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Key events

Summary

Time for a recap of the reaction to Labour’s divisive broadband pledge:

  • 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”
  • BT rival TalkTalk said it was holding off on a decision to sell its own infrastructure arm to see how this whole Labour plan pans out
  • Unsurprisingly, prime minister Boris Johnson criticised what he said was Labour’s “crackpot scheme
  • 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.

The main US markets have opened and all three have hit new record highs:

  • S&P 500 +0.41% at 3,109 points
  • Nasdaq +0.53% at 8,524 points
  • Dow +0.36% at 27,881 points

DATA ALERT: US industrial output contracted -0.8% in October.

That’s a larger contraction than was forecasted by analysts, who were expecting a -0.4% drop. It is also worse than September’s -0.3% fall.

A General Motors employee loads a battery into a Chevrolet Volt hybrid electric vehicle. Photograph: Bill Pugliano/Getty Images

NEWSFLASH: Engineering firm Babcock have been awarded the contract to build to the next fleet of warships for the UK defence ministry.

It will be working on a fleet of five ships for the Royal Navy at its Rosyth facility, at an average cost of £250m each.

Babcock was named the preferred bidder back in September.

Analysts from investment bank Jefferies say BT could launch a legal challenge if Labour attempts to nationalise part of the business.

The Royal Courts of Justice. Photograph: Alamy

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.

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NEWSFLASH: US retail sales rose +0.3% in October.

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.

You can read the full piece here:

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BT’s share price has been shifting all morning, but its stock is no longer the worst performer on the FTSE 100.

Its shares fell as much as 3% in early trading, hitting lows of about 189p but have slightly recovered.

The telecom giant’s shares are now down 1.7% and hovering around 191p per share.

BT’s share price has been shifting. Composite: Refinitiv
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A Lloyds Banking Group spokesperson has said:

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

The government eventually took a 43% stake in the enlarged Lloyds Banking Group but no longer owns any shares after selling its final tranche in May 2017.

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.

#Breaking Lloyds shareholders have lost a multimillion-pound High Court action over the acquisition of HBOS

— PA Media (@PA) November 15, 2019

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.

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Labour’s John McDonnell, the shadow chancellor, is back on the telly, giving the next speech at the party’s event in Lancaster.

He said the broadband plan would benefit businesses which are both using and developing 5G technologies.

Let’s be clear, it’s not a return to the 1970s ... This is public ownership of the future.

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If you prefer to take a listen, ITV have some clips from Corbyn’s speech:

The Labour leader confirms that poorly connected areas will be first to benefit from plans to nationalise parts of BT and provide free full-fibre broadband https://t.co/mjI68gHoDz pic.twitter.com/jmLUuXYLm4

— ITV News (@itvnews) November 15, 2019

Free broadband will fire up our economy and bring 'half a million people back into the workforce', Jeremy Corbyn says https://t.co/mjI68gHoDz pic.twitter.com/4CeKQ6rFwq

— ITV News (@itvnews) November 15, 2019

"I pay my tax, everybody in this rooms pays their tax... so why do the giant multinationals think they can get away from not paying their fair share?"

Jeremy Corbyn takes aim at corporations for not paying their "fair share" in taxes https://t.co/mjI68gHoDz pic.twitter.com/Oi2IbiWNQu

— ITV News (@itvnews) November 15, 2019
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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.

Jeremy Corbyn gives a speech in Lancaster on Friday. Photograph: Sky News
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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.

A Confederation of British Industry (CBI) logo is seen during their annual conference in London. Photograph: Toby Melville/Reuters

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.

Atletico Madrid’s Spanish forward Diego Costa controls the ball during the UEFA Champions League Group D football match between Atletico Madrid and Juventus, at The Wanda Metropolitano Stadium in Madrid, on September 18, 2019. Photograph: Óscar del Pozo/AFP via Getty Images

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