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BT to axe 13,000 jobs and quit London HQ in cost-cutting drive

The cost-cutting plan is designed to modernise BT after the company has struggled over the last 18 months - Reuters
The cost-cutting plan is designed to modernise BT after the company has struggled over the last 18 months - Reuters

BT chief executive Gavin Patterson has axed 13,000 jobs and its City headquarters in an attempt to cut links with the former national monopoly’s public sector past.

He revealed a £1.5bn cost-cutting plan designed to modernise BT and buttress its shaky finances. BT allayed investor fears of a sharp cut to returns with a pledge to maintain its dividend for the next two years.

It sparked new concern, however, with a gloomy outlook that highlighted mounting pressure on revenues and pegged earnings 10pc lower than analyst forecasts.

BT shares sank 7.4pc to a level last seen six years ago.

Questions over BT’s performance drew a robust reply from chairman Jan du Plessis. The shares are down more than 40pc since early last year as a string of blunders, strategic worries and rows with regulators have wiped out all the progress made under Mr Patterson.

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Mr du Plessis said: “You do not change an organisation like BT on the basis of this morning’s share price.

“I’ve taken £1m of my personal money and invested it in BT. I care about the share price. Do I care about today’s share price? No.”

BT Group share price
BT Group share price

The triennial review of BT’s pension scheme, the largest private scheme in Britain, found that the funding shortfall increased from £7bn to £11.3bn as interest rates remained historically low.

Trustees agreed to keep the draw on BT’s cash at its previously agreed level for the next three years but it faces an increase from 2020 to £900m a year with the aim of closing the deficit by 2030. That compares with the previously planned maximum of £724m.

BT will also borrow £2bn by issuing bonds and pay it straight into the pension deficit. The bonds will be bought by the pension scheme itself.

Job cuts will come from an overall workforce of around 108,000. Mr Patterson said BT was too inefficient compared with rivals in the sector. Roles will be shed mainly in administrative and back office functions and will be offset by around 6,000 new roles in front-line engineering and customer service.

BT key facts
BT key facts

Mr Patterson said: “We will redeploy as much as possible and there will be a component of natural attrition. While I recognise the pain ultimately it is the right thing to do for the business.”

The plan is designed to modernise BT and create financial capacity to invest more in its networks, while also maintaining payouts to investors. Capital spending including on ultrafast broadband and mobile infrastructure is due to rise to £3.7bn for the next two years, compared with £3.5bn last year.

BT reported a 3pc decline in fourth quarter revenue to £6bn and a 1pc dip for the year to £23.7bn. Mr Patterson said cost cutting will help the company cope with sustained pressure on sales in the next few years.

He said: ‘The growth markets we operate in are slowing, competitive intensity is increasing and all players are focused on share gains.”

BT said its results were in line with forecasts but a tough outlook rattled investors. BT said underlying revenue will drop 2pc this year and adjusted earnings will be 1.3pc lower.