Standard Life axes 600 jobs to secure its future

Published on Wednesday 1 September 2010 23:46

SCOTLAND has been rocked by another jobs blow after insurance giant Standard Life announced plans to make hundreds of workers redundant at its Edinburgh headquarters.

The group is axing 600 posts by the end of 2011, including about 480 in Edinburgh, as it looks to streamline the business.

The redundancies, which are part of an attenpt to cut 100 million in costs by the end of next year, were announced to staff yesterday morning.

Some 6,000 of the company's 10,000 staff are based in the capital, which is braced for another redundancy announcement later this month from fellow insurer Aegon UK, where up to 600 jobs could go.

The news comes as it was confirmed that Edinburgh has slipped down the ranking of the top global financial cities after its reputation was "tarnished" by the banking crisis.

Standard Life, which recently posted a 10 per cent rise in first-half operating profit to 182 million, claimed the job losses were due to organisational restructuring rather than explicit cost-cutting. Earlier this year it announced that it was doubling investment to 200m as it targets expansion in key markets.

Chief executive David Nish said: "As we transform Standard Life to deliver its growth ambitions, there is a need to both invest for future growth and actively manage our costs to be competitive.

"The decision is part of the journey towards being a more adaptable and flexible organisation. Our people will be provided with the support they need while the group goes through this necessary change."

Speaking outside the building, one Standard Life employee said: "The news of cuts wasn't a shock to me, but the number of job cuts shocked everybody. There was a massive transformation exercise already going on within Standard Life with a number of senior management jobs already cut, and we were told about that last month.

"But the sheer scale of cuts announced today was a real surprise, with potential losses for people at the bottom of the ladder, too."

The majority of the jobs being cut by Standard Life are in IT, finance, marketing and communications positions. However, the company is also creating 100 jobs and pledged to keep compulsory redundancies at a minimum. About 100 of the roles are currently being performed by contractors and 24 are vacancies that will now not be filled.

Standard Life will now begin a 90-day consultation period with its staff association on the proposed changes.

The cuts are part of a "transformation programme" put in place by Mr Nish, who succeeded Sir Sandy Crombie in the top role in January. Mr Nish wants to cut 100m in costs by the end of 2011 as the group focuses more on long-term savings products, such as pensions, and less on life insurance and investment bonds.

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The redundancies are the second stage of the restructure, aimed at reducing duplication and "excess layers", with 11 seniorlevel staff leaving the company in the first stage in June.

Standard Life follows fellow Edinburgh-based insurer Aegon in making hefty job cuts this summer. It was revealed in June that hundreds of jobs are set to be axed at Aegon UK's Edinburgh base after its Dutch owner revealed it wanted to cut a quarter of its UK costs.

Finance secretary John Swinney described the job losses as "disappointing" and pledged that the Scottish Government would do all it could to help those affected.

He said: "I have today spoken with David Nish and the Scottish Government has offered the assistance of the finance sector jobs taskforce, which will work to try to ensure that any further job losses are kept to an absolute minimum following the consultation period."

Secretary of State for Scotland Michael Moore said he would hold urgent talks with Mr Nish.

He said: "Financial services will continue to play a key role in Scotland's economy and I will continue to do all I can at UK government level to support and grow the number of jobs the sector brings to Scotland."

Former Royal Bank of Scotland chairman Sir George Mathewson yesterday said: "I would also worry not just about the number of jobs, but the quality of jobs. I'd like to be more positive, but I find it difficult. I'd like to see some of the leadership jobs in banking and financial services return to Scotland, but I'm not quite sure how to go about it."

However, others downplayed the job cuts as a sign of strength in the industry. Owen Kelly, chief executive of industry body Scottish Financial Enterprise, claimed that financial services firms were creating as many jobs as they were losing.

He said: "Companies across the industry are reconfiguring to deal with changing market realities. In some sectors of the Scottish industry, like asset servicing, that means increasing job numbers immediately.

"In others, it means reallocating resources to new business areas. Such responsiveness is essential to long-term success."

As news of the job losses broke, it emerged that the annual Global Financial Centres report, due out in the coming weeks, will confirm that Edinburgh has slipped from 28th position in the past year.

Mark Yeandle, associate director of research firm Z/Yen, which produces the report, said both Edinburgh and Glasgow were experiencing a brain drain of top financial talent.

Standard Life joins fellow Edinburgh-based groups RBS, Lloyds Banking Group and Aegon UK in making redundancies since the banking crisis began, and experts predict that more are on the way.

The latest job cuts come just days after one of Scotland's leading corporate lawyers warned Scotland had yet to feel the full impact of the banking crisis.

Alastair Dickson, senior partner at Dickson Minto and Scotland's most successful corporate lawyer, told The Scotsman this week: "With the demise of HBOS leading to it moving south, and the future of RBS uncertain, that will have a huge impact. The impact will be gradual but, as decision-makers move south, then so do a lot of jobs that go along with them."

Yesterday, Jim Murphy, the shadow secretary of state for Scotland, described the job losses as a "real blow" to the capital.

He said: "We urgently need to see more action to get Edinburgh's financial services industry back on a steady footing."

Scott White, managing director of communications firm Black to White and a former head of communications for Standard Life, said the firm would benefit from cuts in the long term.

He said: "It looks like short-term pain for long-term gain. It will be done for clear reasons to make Standard Life a stronger entity. There's no obfuscation. Everyone understands what he (chief executive David Nish] is going to do."

Since Standard Life became a listed company in 2006 it has cut about 5,000 jobs, including 190 (47 in Edinburgh) last year as part of a previous savings programme. Jobs were also lost as a result of the sale of its banking and healthcare arms last year.

The former was bought by Barclays, which has since proposed to close the 254-strong Standard Life cash savings and mortgages operation site in Edinburgh by December next year, although it said it aimed to avoid compulsory redundancies.

Standard Life and Aegon both say they have been forced by insurance industry pressures to restructure their businesses. New legislation coming into force in 2012 changing the way pensions and investments are sold will include a ban on commissions on the sale of financial products, fundamentally altering the relationships between insurance firms, consumers and financial advisers.

An Aegon spokeswoman said: "Insurers have been slow in the past to respond to change and to meet the needs of customers and we're now seeing companies move more quickly."