Slash dividend to plug £11.3bn gap in pension fund

Frank Field’s warning to new BT boss...

THE new boss of BT should consider slashing the dividend to reduce the company pension fund’s black hole, influential Labour MP Frank Field warned this weekend.

Field, who chairs the work and pensions committee, said the pension fund shortfall should be the first priority for whoever takes over from departing boss Gavin Patterson. He or she should look at reducing the dividend payout to keep a grip on the pension deficit, which stood at £11.3 billion at the latest count.

BT revealed on Friday that Patterson, its suave 50-year-old chief executive, would step down later this year after calls from City investors for a change at the top.

Field said: ‘I would hope the new person would be able to think imagi natively on what would be a healthy and sustainable relationship between dividend and pension payments within that company. And I hope they would be looking for a woman or man who could deliver on that.’

Patterson last month revealed plans for 13,000 job cuts shortly before BT revealed he himself had earned £2.3 million last year.

Investors became increasingly unhappy with the share price performance, falling revenues, bruising battles with regulator Ofcom over Openreach, the division that owns the wires and cables, and an accounting scandal in Italy.

Opinion is divided over whether Patterson’s decision to spend billions on football television rights paid off. However, the £12.5 billion takeover of mobile operator EE is seen as a highlight of his reign.

He failed to control BT’s pension shortfall, which has ballooned from £7 billion in 2014. BT promised last month to add £4.5 billion by 2020 to trim the shortfall, but refused to cut the dividend. The hunt for a replacement is being led by chairman Jan du Plessis. The search is understood to be focused on external candidates with a telecoms background.

Liv Garfield, who left BT Openreach in 2014 to run water company Severn Trent, has been named as a potential successor, as has Olaf Swantee, the former EE boss.

Patterson will be classed as a ‘good leaver’, meaning he will get 12 months of severance pay. However, he will give up £3.5 million in bonus shares that were recently handed to him.