Tuesday, Royal Bank of Scotland Group plc (RBS, RBS.L) said it has begun consulting Unite and other employee representatives about a business plan for its back office operations that would involve job losses of up to 9,000 group manufacturing roles globally, including 4,500 in the UK, over the next two years. Separately, the company said non-government shareholders subscribed to only 0.70% of shares issued in its open offer announced in January.
Group Manufacturing comprises the Group's worldwide manufacturing operations, providing support for its customer facing businesses, including back office operations, purchasing, IT services, and property management.
As of December 31, 2008, RBS employed over 170,000 people worldwide, including 106,000 in the UK. Group Manufacturing employed 45,000 people worldwide, including 27,000 in the UK.
RBS said that the business plan, which involves a number of other cost-saving initiatives including moving to a common technology platform, will help it achieve the target of reducing annual costs by GBP 2.5 billion within the next three years.
The bank added that the actual number of jobs lost is expected to be sharply lower than the estimated figures. The company said a redeployment program has identified 650 new job opportunities in the UK and the impact will also be reduced through natural turnover and less use of agency staff.
RBS also said it would make voluntary redundancy arrangements available which might suit some of the staff affected by this announcement, and added that compulsory redundancies would be a last resort.
Stephen Hester, Chief Executive of RBS, said, We have set a new strategy for RBS to restore the Bank to standalone strength as soon as practicable. From this we want the Government to be able to realise value from its investment in RBS. To do so we need to cut our costs, as in all businesses, given the current recession.
Last week, the bank had said that more job cuts are expected in the UK and internationally. As so many of our customers make tough decisions in the face of the worst global recession in decades we have no option but to do the same. We can't yet know how many will lose their jobs or where, the bank's Chairman Philip Hampton said on April 3. In the UK, the bank has announced headcount reductions of 2,700 so far this year.
Meanwhile, RBS separately said non-government shareholders subscribed to only 0.70% of shares issued in its open offer announced on January 19 and the company received valid acceptances in respect of 118.68 million new RBS ordinary shares only. HM Treasury will subscribe to the remaining 16.79 billion new RBS ordinary shares, thus taking its stake in the bank to 70.3% from 57.9%.
On January 19, the bank said it reached an agreement with HM Treasury and UK Financial Investments to convert the Treasury's GBP 5 billion of preference share investment in RBS to new ordinary shares. Eligible RBS shareholders could apply to subscribe for about GBP 5 billion of new ordinary shares pro rata to their existing shareholdings at a fixed price of 31.75 pence per share. The ordinary shares offer was fully underwritten by HM Treasury and the proceeds were to be used to fully redeem the preference shares held by HM Treasury.
RBS is currently trading at $8.14, down $0.74 or 8.33%.
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