BT warns of more job losses as rising bills force bigger cost-cutting drive

Telecom giant blames 18% fall in profits on need for extra savings after £200m energy bill increase and soaring inflation

BT has warned of more job cuts to come after it was forced to find more than £500m in additional savings due to soaring inflation and energy bills.

The company, which reported an 18% slump in pretax profits from just over £1bn to £831m year-on-year in the six months to the end of September, said its energy bill will be £200m higher this year.

The telecoms company said it has been forced to raise its cost-savings target from £2.5bn to £3bn by the end of its financial year in 2025 in response to inflation hitting a 40-year high and a surge in energy costs.

“We are leaving no stone unturned to make sure BT can be the most-efficient organisation it can be,” said Philip Jansen, the chief executive at BT.

“Inevitably it means some jobs will not exist in the future but that has been true of the last few years too. We will use natural attrition as much as we can. In these difficult conditions we know we have to double down on our costs. There are no specific numbers in mind. This [cost-cutting programme] is up until the end of 2025. Everyone has to share the pain – all 100,000 people at BT – to get to this £3bn on cost savings.”

BT’s last official job cuts plan resulted in a 13,000 reduction in the workforce over a three-year period, in a cost cutting strategy initiated by the former chief executive Gavin Patterson in 2018.

Jansen also vowed to push through inflation-busting price rises for its millions of customers next spring when mid-contract increases in the cost of their bills are pushed through despite the cost of living crisis.

BT uses a mechanism to increase the cost of bills annually by the rate of inflation as measured by the consumer prices index (CPI) in January, plus 3.9%, which means that customers are facing bill increases of about 14% next year.

Companies including BT have been criticised for making billions from the price rises and the telecoms regulator Ofcom – which has said a record 8 million households have already experienced difficulty paying their bills – has told internet companies to “think hard” about continuing to make major hikes.

“Household bills prices will go up by CPI plus 3.9% next year,” said Jansen. “We have been transparent about that. It is in the contracts.”

The company said the half-year profit slump is due to a combination of higher costs across its business as well as relating to the £15bn cost of rolling out next generation full-fibre broadband across the UK.

BT also said that about 40,000 homes missed out on having their broadband connections completed on time due to ongoing strike action.

The telecoms company, which is dealing with rolling national strikes by tens of thousands of its almost 60,000 frontline workforce over pay and conditions, said that the industrial action affected the rollout of broadband to new customers.

Jansen, who said the eight days of strike action so far had caused only a “relatively modest” impact on costs, criticised the Communications Workers Union (CWU) over the impact it is having on broadband customers.

“Those 40,000 are disappointed customers,” said Jansen. “Hopefully they are just delayed customers. They had appointments planned on days of strike and if we can’t get to them they don’t get connected. We hope to make [those lost appointments] up. The biggest impact is on our customers which is why we want to stop that and end a dispute that helps nobody.”

Openreach, the BT subsidiary responsible for expanding and maintaining much of the UK’s broadband network, said its customer base fell by 89,000 in the company’s second quarter, compared with an increase of 29,000 in the same period last year.

BT’s energy costs are set to rise significantly more next year as mechanisms to hedge against price rises run their course.

Simon Lowth, BT’s chief financial officer, said that BT’s energy costs are 75% to 80% hedged at “reasonable” prices this year – although this still equates to a £200m increase. However, next year energy costs are set to increase significantly further with BT’s energy usage only 50% hedged, meaning it will have to trade at market prices on the other half of its energy consumption next year.

Lowth also said that BT has held talks with the government over potentially using the thousands of back-up generators it has at its exchanges across the UK, which are designed to kick-in if there are power disruptions, for wider use to help cope with potential nationwide rolling black outs this winter.

“We have had conversations about whether we can help the government over peak energy demand [this winter] by pro-actively using [our] back up power to help cope with demand at peaks,” he said. “We will do what we can to manage the overall UK energy position.”

BT operates 6,000 exchanges across the UK, each of which has a backup generator in case of disruption to power supplies.


Mark Sweney

The GuardianTramp

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