BT is cutting approximately 13,000 jobs and abandon the central London headquarters of the company in a cost-cutting plan amounting to £1.5bn. It will be used to preserve its dividend as it experiences a major expansion of its pensions black hole amounting to £11.3bn.
The jobs will be cut mainly in back-office and administrative functions. BT said that it will be by approximately 6,000 new positions in customer service. and front-line engineering.
The cost-cutting plan is created to modernise BT and allow financial capacity to invest more in the networks of the company, while also maintaining its payouts to its investors. Capital spending on mobile infrastructure and ultrafast broadband is set to rise to by £3.7bn for the next two years, as compared with £3.5bn in 2017.
The shares of BT dropped by 7.8 percent during early trade to 220 percent.
The job reductions and property shake-up are the outcome of a review that is carried out by the consultants McKinsey under the banner Project Novator.
The chief executive of BT, Gavin Patterson has faced City speculation over his own role as the company has had a difficult time over the past 18 months. He said: “I am really excited to be delivering the next stage of BT’s transformation and have put in place the team that will support me in achieving these objectives.”
The pension scheme of BT is considered to be one of the largest private schemes in the United Kingdom.
The triennial review of the pension scheme of BT is the largest private scheme in the United Kingdom. It discovered that the shortfall in funding that was increased from £7bn to £11.3bn as interest rates remained to be historically low. The investors are concerned about a sharp rise in the top-up payments. The trustees agreed to keep the draw on the cash of BT at its previously agreed level for the next three years.
However, BT is set to borrow £2bn by issuing bonds and paying it straight into the pension deficit. The said bonds will be acquired by the pension scheme itself. An earlier plan to revenge that network assets to trustees to lessen the need for more cash was abandoned.
From 2020 onwards, the top-up payments of BT will increase to around £900m per year with the target of closing the deficit by 2030. The figures compare with the previously planned maximum amounting to £724m.