Credit crunch blamed as HBOS axes 425 jobs

Published on Wednesday 13 August 2008 22:08

THE Scottish banking giant HBOS is to cut more than 400 jobs in an overhaul of its mortgage services and IT division.

The cuts are on top of the 650 job losses in its business banking divisions, announced earlier in the summer.

Last night, analysts predicted more trouble ahead for the banking sector.

Union leaders said they expected up to 100 jobs to go north of the Border, in Rosyth and Livingston, but they hoped about 30 workers would be redeployed within the company.

However, HBOS said it was unable to break down the 425 UK-wide losses.

The announcement came as new figures showed unemployment had fallen in Scotland over the past quarter, in contrast to rising joblessness across the UK, and as the Bank of England admitted there was unlikely to be any economic upturn this year.

Graham Goddard, the deputy general secretary of the Unite trade union, said it was "a further blow for jobs in the UK financial services sector, which is being brought about by the credit crunch and changing economic climate".

Under HBOS's latest plan, it will close its TMB mortgage brand to new business, streamline its Intelligent Finance arm so it deals only in offset mortgages, and shrink its IT and design teams in that area.

This jobs will go through redeployment, voluntary severance and normal turnover – and there will be a further 100 losses in the IT departments throughout the bank.

Garry Clark, the head of policy and campaigns at Scottish Chambers of Commerce, said it was "obviously disappointing news but not entirely surprising" given the pressures the banking industry had been under in the past year.

A Scottish Government spokesman echoed his disappointment and said Holyrood would do all it could to mitigate the problems.

This is the second round of HBOS job cuts in as many months. On 16 July, it announced 650 posts would go over 18 months as part of its plan to merge two of its business banking divisions. It has also suffered through a humiliating rights issue, which saw underwriters pick up the majority of shares.

Jon Moulton, head of the private equity group Alchemy, warned there was more bad news from banks to come, with further writedowns anticipated.

Meanwhile, figures from the International Labour Organisation showed fewer Scots were jobless and claiming benefits than at this time last year – the reverse trend is true throughout the UK. The figures were revealed as the Bank of England admitted the UK economy was unlikely to grow for another year.

Mervyn King, the governor, strongly indicated he believes a recession is on the way and the Bank said inflation – already at a record high – would probably keep rising.

IN NUMBERS

113,000

The number of people in Scotland unemployed in June

12,000

The size of the reduction since the previous quarter

9,000

The reduction compared with the previous year

4.2%

Scotland's unemployment rate

1.67m

The total number of people unemployed in the UK in June

60,000

The increase over the previous quarter

15,000

The increase over the previous year

5.4%

The UK unemployment rate