BT has said it is facing £100m in extra costs as a result of the budget last week, as the telecoms company revealed another 2,000 jobs have gone under a long-term plan to cut costs.
BT’s chief executive, Allison Kirkby, revealed that changes to employers’ national insurance contributions and increases in the minimum wage would add to its costs next year, with the company being forced to offset this through higher pricing and the use of AI to improve productivity.
Kirkby, who took over at BT in February, told the Financial Times that the employers’ NIC changes would account for about 70-75% of the cost increase, with the 6.7% rise in the national minimum wage accounting for the rest.
She has joined bosses at Sainsbury’s, Marks & Spencer and Primark in highlighting the cost increases they face after Rachel Reeves’s decision to increase employers’ NIC by 1.2 percentage points to 15% from next April. The chancellor also cut the level at which employers start paying national insurance for workers from £9,100 to £5,000.
Kirkby said: “It’s a new inflationary pressure that we need to suffer in our business. We will be going harder and faster on the cost transformation and plans that we have already laid out.”
The comments came as BT reported a 10% drop in pre-tax profits to £967m for the six months to 30 September, while revenues fell 3% to £10.1bn amid a “competitive retail environment”.
It revised its outlook, with revenue expected to be down by 1% or 2% in 2024-25, compared with the increase of 1% that was forecast earlier in the year. It blamed this on trading outside the UK and reductions in sales of less profitable kits, as well as a weaker performance in the corporate and public sectors.
The company kept its underlying earnings guidance unchanged, for about £8.2bn.
It revealed in its results that it had cut its workforce by 2,000, or 4%, taking its overall headcount to 118,000, and that this helped save the company £433m in annual costs.
Last year BT revealed it was looking to slim down to between 75,000 and 90,000 workers by 2030 as it aimed to shave billions of pounds in costs. The company estimates that about 10,000 jobs in the long-term cuts will be replaced by artificial intelligence.
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In May, the group announced a further £3bn in cuts over the coming years, as Kirkby expanded on plans to turn around the struggling company. She said at the time that BT had hit its initial target of £3bn in savings a year before schedule, and that it would cut the same sum by 2029.
Kirkby said that alongside widespread cost-cutting, the group was also investing heavily and ramping up its full-fibre rollout. “Our nationwide full-fibre rollout has set new records, now reaching more than 16m premises, and we have further extended our industry-leading take-up rate to 35%.”
The group had also expanded its 5G network to cover 80% of the UK population. “The accelerated modernisation of our operations, combined with a focus on connecting the UK, puts us in a strong position,” Kirkby added.