Edinburgh spared the worst as RBS axe swings

Published on Thursday 2 September 2010 20:15

ROYAL Bank of Scotland has delivered another blow to the beleaguered financial services community by revealing 3,500 more jobs are to be slashed in its UK business - including several hundred in Scotland.

• Royal Bank of Scotland's Gyle office in Edinburgh Picture: Ian Rutherford

While the majority of the cuts will be in business services centres in England, about 1,000 posts are to go in the bank's IT services division which has a major hub in Edinburgh.

However, RBS claimed the announcement would mean a net jobs gain for Scotland, as hundreds of the redundant roles are relocated north of the Border, where the bank plans to consolidate its back-office operations. A further 500 back-office jobs will be moved overseas - to India, the Far East and the US. The job losses are the latest in a string of cuts unveiled by Scottish financial companies in the past week.

Only seven days ago, RBS revealed it was to close two Glasgow offices belonging to its Direct Line insurance arm as part of its plan to axe 14 out of the 27 offices across the UK - with the loss of 400 Scottish posts. And on Wednesday, insurance giant Standard Life said it was to slash 600 jobs by the end of 2011, including 480 at its Edinburgh offices.

RBS had to be rescued by the UK Government in 2008 after its finances were stretched by the credit crisis and its part in the acquisition of Dutch bank ABN Amro. The Royal Bank said about a third of the cuts were a direct result of the sale of 318 of its branches to Spanish rival Santander, as stipulated by a European Union competition ruling. The remainder, it said, were due to ongoing cost-cutting programmes and "efficiencies" in the business.

After its 20 billion lifeline of public money, the taxpayer owns an 83 per cent stake in the bank.

"Having to cut jobs is the most difficult part of our work to rebuild RBS and repay taxpayers for their support," the bank said yesterday.

"We continue to make efficiencies across our business and adjust our plans in line with the divestments we have been required to make by the EU. We will do all we can to support our staff, offer redeployment opportunities wherever possible and keep compulsory redundancies to an absolute minimum."

The latest news comes as staff at insurer Aegon's UK headquarters in Edinburgh prepare for up to 600 job losses as the firm looks to make deep cost savings.

RBS, which employs 160,000 people worldwide, excluding those due to go after yesterday's announcement, has cut 23,100 posts since the beginning of the financial crisis.

The latest cutbacks take the total number of RBS job losses to 26,600 worldwide, including 20,600 in the UK.

Although chief executive Stephen Hester claims the "worst" of the cuts has passed, he indicated at the time of the bank's half-year results that there would be a number of announcements still to come. Analysts say the total number of jobs lost could be as high as 30,000.

RBS staff at Gogarburn and the Gyle in Edinburgh yesterday refused to discuss the jobs announcements. But one employee posted on an online message board: "Hope everyone spares a thought for those affected by the announcements today. We are still none the wiser where we stand, we just got told our centres would close, no actual info about redundancy/relocation etc! Sad day!"

Rob MacGregor, national officer for the union Unite, described the cuts as a "horror story". He said: "The scale beggars belief. Staff across the country will be left reeling."

Finance experts welcomed the creation of jobs in Scotland but cautioned that the posts set to migrate from business services centres - where staff process mortgage and credit-card applications and provide support for customer transactions - were likely to be lower paid and less highly skilled than the IT jobs to be lost.

Last October, the company announced it would invest almost 6bn in its IT provision over the next five years, as it worked to complete the integration of ABN Amro. "One concern is that the type of jobs that are being lost are skilled IT jobs," said Jeremy Peat, former group chief economist at RBS.

Other experts raised concerns over Scotland's image as a financial services centre. Earlier this week, leading lawyer Alastair Dickson, of Dickson Minto, warned that Scotland was yet to feel the full impact of the banking crisis, adding that high-value jobs were likely to migrate to London.

Former RBS chairman Sir George Mathewson, echoing comments he made earlier this week, said: "I am very worried about Scotland's identity as a financial services centre - it would be silly not to be worried about it. This is highly regrettable and I would hope that the traditional high level of service to the customers of the bank can be maintained." But many financial experts claimed the latest jobs blood-letting at RBS was an inevitable part of Mr Hester's bid to turn around the bank's fortunes.

"When jobs have to go, it is very sad," said CBI Scotland director Iain McMillan.

"I don't think we should be talking down Edinburgh as a financial centre. It's still very important and if companies like Standard Life, RBS and Lloyds don't grasp the nettle and do what is necessary, it's a shame. Job cuts are never welcome, but they make a company more profitable and more competitive in a very tough environment going forward."

Joseph Dickerson, of investment bank Execution Noble, said: "It's in line with the Royal's consolidation plans. As a group, they are scaling down - it's a fundamental rescaling of the business to a smaller capacity."

He said analysts saw the cuts as a positive move on the part of the chief executive to streamline the business. "For one thing, the shares in the group are up 57 per cent in the year to date," he said. "That has to be an endorsement of Mr Hester."

Bryan Johnston, divisional director of investment management firm Brewin Dolphin in Edinburgh, pointed to the financial services sector's record of job creation in the decade leading up to the credit crunch and said: "A retrenchment was inevitable."

A total of 12 business services centres are to be closed or downsized in England including Leeds, Bolton, Enfield and Harrogate in 2011 and Norwich, Bradford, Telford, Plymouth, Milton Keynes, Liverpool, Bristol and Borehamwood the following year. The Leicester, Southampton and Nottingham centres are under review.

RBS's two Scottish business services centres, in Greenock and at Drummond House at Edinburgh Park, are likely to see their numbers increased by several hundred as posts are relocated north of the Border.

Politicians expressed regret at the cuts but welcomed new jobs in Scotland.

Finance secretary John Swinney said: "We understand that the overall impact of today's announcement for Scotland in terms of employment is neutral, although we are, of course, very concerned for RBS employees and their families."

Derek Brownlee, finance spokesman for the Scottish Tories, said: "I think we all recognise RBS has a lot of fundamental restructuring to do to get back on its feet - and we've got to hope for all of our sakes that it does."

Scottish Secretary Michael Moore pledged to help the financial services industry "adapt to new circumstances".

Labour's David Whitton urged RBS to work with unions and do "everything possible to support its employees through what will be a very difficult time.