Wednesday, April 08, 2009

Royal Bank of Scotland to sack 9000 as Sir Fred’s failures bite into banking jobs

In an attempt to cut costs, the Royal Bank of Scotland, brought to the brink of near collapse by its former Chief Sir Fred Goodwin, is to sack 9000 employees in what may be the first round of many lay offs.

The Scotsman reports :

RBS axes 9,000 jobs in bid to cut £2.5bn

Published Date: 08 April 2009

THE beleaguered Royal Bank of Scotland yesterday announced it was to axe 9,000 jobs – 4,500 of them in the UK – as part of a move to cut its costs by £2.5 billion in the next three to five years.

This will take total job losses at RBS to 15,000 worldwide since late last year.

Chief executive Stephen Hester said the cuts were necessary to put the bank back on its feet "as soon as practicable".

The union Unite described the announcement as "truly devastating" and said it expected more redundancies at the bank.

It was confirmed yesterday that taxpayers now own more than 70 per cent of RBS – up from 58 per cent – after investors shunned a sale of new shares.

The bank said private sector shareholders had bought only 0.7 per cent of the stock offered, leaving the Treasury to pick up the remaining 16.8 billion new shares, taking the taxpayers' stake to 70.3 per cent.

Analysis: Worldwide discomfort on the cards as Hester swings the axe in divisions across the globe to make the bank profitable

As it swung the axe again, effectively cutting just under one in 20 jobs in the UK, RBS faced criticism for creating uncertainty among thousands of staff by refusing to specify exactly where the job losses would fall.

It said jobs would go in areas such as document processing, information technology, procurement and bank property – a division known as group manufacturing.

The bank said it would cut jobs in that division by a fifth globally, and union leaders warned they expected Edinburgh and Glasgow to be hard hit as some 5,500 of the 27,000 posts in the UK group manufacturing division were in Scotland.

If the cuts fall proportionately across the UK, this would leave up to 920 people at risk north of the Border.

The bank last year announced record UK corporate losses of £24.1 billion and has been kept afloat by a £20 billion bail-out from the UK government.

The impact of the cuts is likely to be widespread, affecting staff of RBS-owned NatWest as well as the insurance businesses Direct Line and Churchill. RBS said a redeployment programme had already identified 650 vacancies, while a number of workers were expected to leave in the next two years due to natural turnover.

Agency staff will be reduced and efforts will be made to avoid compulsory redundancies.

But Rob MacGregor, Unite's national officer for the finance sector, said: "The news that 4,500 RBS staff in the UK are to lose their jobs is truly devastating."

The job losses come on top of the 2,700 announced in February for RBS's UK division, and Mr MacGregor told The Scotsman: "What we are looking at is a total cost-saving figure of £2.5 billion over the next three to five years.

"From what we can gather, the announcement that has been made for group manufacturing is contributing towards that cost saving but is by no means the full amount they're after. There are further savings to be realised.

"When Stephen Hester was speaking to the media (in February], they came up with a figure of 20,000 global job losses, and he didn't demur from that. This is obviously a significant announcement and we would hope that there wouldn't be many more, but we don't believe this will be the last one."

Graham Birse, chief executive designate of Edinburgh Chamber of Commerce, said it was a "dark day" for the capital, but he added that knowing the extent of the restructuring should help to rebuild confidence.

"Edinburgh has been bracing itself to come to terms with the extent of the job losses that might emerge from this restructuring, and now we know," he said.

RBS's annual report showed the group manufacturing division cost almost £1.2 billion in wages alone last year. It had undergone rapid expansion since 2006, with staffing numbers shooting up from 34,100 to 44,900. RBS has a global workforce of 170,000, including 106,000 in the UK – 16,000 of whom are based in Scotland.

In February, RBS announced a radical restructuring, involving withdrawal from 36 of 54 countries and a one-sixth cut in costs.

Mr Hester said yesterday that he aimed to return RBS to "standalone strength" to allow the government to sell its investment. "To do so, we need to cut our costs, as in all businesses, given the current recession," he said. "Unfortunately, that means taking difficult decisions about jobs as well as taking many other cost-reduction actions.

"We want to be as open and transparent as possible and are announcing these plans at the earliest possible opportunity so that our employees can prepare for the future."

The Conservatives condemned the announcement, noting that it came weeks after Mr Hester's deputy, Gordon Pell, told the Scottish affairs select committee at Westminster that "around 260" jobs would be lost in Scotland as a result of the February decision, and no further losses were imminent. He later said no actual target had been set for job cuts in Scotland, the UK or globally.

MP David Mundell, the shadow Scottish secretary, called on Chancellor Alistair Darling and Scottish Secretary Jim Murphy to rein in the bank's "cavalier approach" to job-loss announcements. He said: "RBS has a duty to work out restructuring plans in an orderly manner and to be straight with Scots. Otherwise, it risks making job cuts and announcements that it later comes to regret."

The Treasury said the job losses were a matter for RBS and declined to comment. But Mr Murphy described it as "disappointing news". He said: "I hope that RBS will be able to scale back the number of overall job losses and ensure that compulsory redundancies are avoided."

Finance secretary John Swinney said the bank had assured him compulsory redundancies would be a last resort and added: "I made clear the Scottish Government would work extremely closely with the company to help those affected and minimise the impact in Scotland as far as possible."

Vince Cable, the Liberal Democrats' Treasury spokesman, said: "Ordinary workers are now paying with their jobs for the unsustainable and irresponsible practices of RBS's previous management.

"As he enjoys his multi-million-pound pension, Sir Fred Goodwin should spare a thought for the thousands of people he has now put out of work."

David McLetchie, the Tory MSP for Edinburgh Pentlands, said: "This is news that RBS employees will have been dreading. I suspect no-one will be leaving on the same redundancy terms as the government approved for Sir Fred Goodwin."

Isabel Schauerte, a financial analyst, said the government, as a majority shareholder, would have to suffer its share of criticism for the job losses. She said: "While RBS's move further in the direction of full-scale nationalisation hardly comes as a surprise, the job-cut announcement is sure to stir up another wave of public indignation, if not outrage."

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