In the latest woes on the economic front, Lloyds has announced it will soon slash another 15,000 jobs, amounting to a total of 14% of its entire workforce. The downsize in workforce is part of an overall move aimed at saving approximately £1.5bn by the year 2014 while at the same time reducing company’s international presence
This latest reduction in workforce follows a reduction of 27,500 jobs since the company merged with HBOS two years ago. The bank has stated it does not intend to close any branches in the UK, which would seem to imply that such job cuts will likely primarily involve middle-management and possibly functions that are more back-office focused.
In relation to the company’s strategic view, Lloyd’s has also promised further changes including improved end-to-end processes and IT platforms as well as changes that would move to delayer the management structure and simplify the company’s legal structure while centralising support functions.
Critics of the changes are not so certain the end will result will be positive and could potentially further affect the British economy. Among other changes planned by the bank group are plans to reduce the number of suppliers used; a move that will certain produce a significant impact on numerous other companies. Overall, markets did respond well to the news. The share price for Lloyd’s closed upward at 9.7%.
The strategic review launching the recent changes was initiated by Antonio Horta-Osorio, the banking group’s newest chief executive. Horta-Osorio has been in place since 1 March, after leaving his position at Santander’s.
Aimed at cutting costs across the board, the recent changes are estimated to cost a total of £2.3bn; but are also expected to save approximately £2bn through the year 2014. Lloyd’s has stated it plans to use the funds saved in order to further develop its UK businesses; including Birmingham Midshires, Bank of Scotland, Cheltenham & Gloucester and Intelligent Finance. In addition, Lloyd’s has stated it remains committed towards life insurance, investments and pensions provider Scottish Widows. Horta-Osorio has stated that one of his primary priorities is to implement an increase in sales of insurance products to the current 30 million Lloyds’ customers.
A significant majority of savings will be taken from operations on an international scale. The bank plans to close operations in some 15 countries of the 30 in which it now provides services. Furthermore, it has also been confirmed by Lloyds that they intend to release the identity later in the year of a buyer for its branches, totaling 632 offices. Competition authorities in Europe stipulated the sale as a condition for the merger between Lloyds and HBOS.
In his short time as chief executive, Horta-Osorio has stated that the company’s ultimate goal is to become the best bank possible for its valued customers by establishing a more agile and simple organization and also making significant investments in improved value services and products.
There is little doubt that Mr. Horta-Osorio has wasted no time in shaking up the management of Lloyds since his arrival. Two board members have already departed since the Portuguese banker took the helm. Among his many promises has been an assurance to wean the banking group from government backed funding. The timeline for doing so is the end of the year.
Unions have also not responded favourably to the changes or proposed plans. The Unite union has stated the changes would ultimately result in serious anxiety and stress as even more employees lose their jobs. In spite of the most recent cuts, Horta-Osorio has indicated the bank associates its tremendous success with its contributions to supporting the economic recovery in the UK. He has also been quick to point out a 2% increase over the last year in lending to both small and medium businesses.
Still, it would seem the job cuts will not decrease anytime in the near future. HSBC has also announced it plans to cut a total of 700 jobs throughout the UK, with most cuts concentrated in the wealth management division, the arm responsible for providing financial advice.
According to a spokesman, the cuts are part of a plan to reshape the entire unit prior to regulatory changes that are anticipated to take place by the end of 2012; resulting in bank customers paying for financing advice that has previously been offered free of charge.
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