UK banking group Close Brothers to axe 600 jobs to cut costs

The news comes as it looks to reduce annual costs by about £85 million after posting further losses in the face of a mounting compensation bill for the motor finance scandal.

Nearly a quarter of its 2,600 workforce will be cut as part of its efforts to slash costs by about £25 million in its current year to the end of September.

This is up from a previous target of £20 million, and it aims to cut it by around another £60 million in the next financial year, which is a year earlier than planned.

To cut the costs, Close Brothers will look to include moves to outsource and offshore work, cut back its office network and roll out the use of artificial intelligence (AI) “at pace”.

Chief executive, Mike Morgan, said: “While the impact on affected colleagues is regrettable, these actions are necessary to structurally lower our cost base, while increasing our agility and ability to serve our customers.”

Close Brothers also reported pre-tax operating losses of £65.5 million for the six months to March 31 after setting aside another £135 million for the car loans mis-selling saga.

But this marked an improvement on the £102.2 million in losses reported a year earlier.

The extra provision made last October saw it nearly double the amount of cash set aside for the car finance compensation scheme, adding to its existing £165 million provision.

It expects to face a bill of about £300 million to cover costs relating to the issue and it comes after the Financial Conduct Authority (FCA) published the details of its proposed compensation scheme for drivers who sold car loans with hidden or unfair commission payments.

The FCA will set out its final plans for the redress scheme by the end of this month, but has faced pushback from lenders including Close Brothers, Santander and Lloyds Banking Group over the regulator’s calculations for how much consumers lost out and should be compensated.

Close Brothers saw shares slump 14% on Monday (March 16) after a short seller, Viceroy Research, claimed Close Brothers would have to at least double its £300 million provision for car finance.

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Viceroy said Close Brothers had “substantially misrepresented” its exposure to the FCA’s redress scheme.

Close Brothers said it “strongly disagrees with the report” in a statement after market close on Monday.

The firm has been trimming costs and boosting its capital strength ahead of the compensation bill, agreeing sales of its Winterflood arm and asset management businesses.