Thursday, 30 June 2011

Never have so many jobs been shed by a single bank in British history. It's possible no UK company of any sort has ever reduced job numbers by so much.

Because when Lloyds reduces staff numbers by the further 15,000 announced today - scheduled to happen before the end of 2014 - it will have reduced employee numbers by 45,000, compared to where they were at the end of 2008.

Some will see those job losses as the biggest cost of the government's decision at the end of 2008 to allow Lloyds to acquire HBOS, to prevent HBOS collapsing and being fully nationalised.

That said, Lloyds' new chief executive, Antonio Horta-Orsorio, would argue that the latest 15,000 job reductions are not the elimination of duplicated functions but represent streamlining and simplification that any sensible bank would do.

The latest job reductions - some of which will happen through redundancies, though Lloyds hopes to take out as many jobs as possible by natural attrition and redeployment - will mainly affect those employed in middle management and back offices.

There's also worrying news for Lloyds' suppliers, since - as part of the new chief executive's plan to take £1.5bn of annual costs out of the bank - it is reducing the number of businesses that provide goods and services to it from 17,000 to less than 10,000.

The aim, which would be good news for all of us as taxpayers and owners of 41% of Lloyds, is to return Lloyds to profitability on a sustainable basis.

'Big incentive'
And there is a bit of actual good news for taxpayers today in that the amount Lloyds in effect borrows from taxpayers has fallen by £60bn in the last six months.

What this means is that Lloyds has repaid everything it owes to the Bank of England under the Special Liquidity Scheme, which was created by the Bank of England during the great crash of 2007-8 to prevent banks like Lloyds from collapsing after assorted securities markets shut down, depriving banks of vital finance.

Under Mr Horta-Orsorio's new strategy, Lloyds will become a much more UK-focussed bank - whose recovery will to a large extent be dependent on the UK's economic recovery.

Which means that Lloyds will have a big incentive to contribute to that recovery by providing adequate access to credit to small businesses and households that need it.

Lloyds is withdrawing from more than half of the 30 countries overseas where it currently operates. And it will attempt to reinvigorate the Halifax brand, to compete with the Lloyds brand.

In spite of plenty of speculation to the contrary, Mr Horta Orsoria has decided to keep Scottish Widows, Lloyds insurance business.

In fact a central element in his plans to rehabilitate Lloyds is an aim to sell a wider range of products and services to the banks' many millions of customers, with the hope of generating substantial growth in income from retail finance other than just borrowing and lending.



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