The faltering economy impacts heavily on banks
by Rupert Hodgson, sourcingfocus.com
In the past week the banking sector has been hit by a series of jobs cuts. The turbulent global economy, compounded by the news that the UK has entered once more into recession, has resulted in widespread banking redundancies as the financial sector reels from the faltering economy.
The recent news of job layoffs from HSBC, Clydesdale and Yorkshire banks come as economic pressures have led to cost cutting measures from within the finance sector. Banking and insurance firms have been hit by insolvencies and write-offs on corporate loans. Investment banking has been hit by setbacks as renewed focus is placed on industry practice. These recent job-losses follow on from 1,300 job losses from Lloyds and 464 losses from RBS.
National Australia Bank (NAB) owner of Clydesdale and Yorkshire banks has blamed the weakened UK economy for the cutting of 1,400 jobs from the two brands and closing of more than 30 offices. The two Banks have been hit by £25 million of debt between October 2011 and March 2012, in stark contrast with £77 million in profit from the same time last year as banks are hit by higher charges on bad debt and increased funding costs.
Banks are facing significant damages from bad debt, research published today by Ernst & Young ITEM Club show that corporate loan write-offs have reached their highest levels since the 1990s recession. Write-offs are predicted to rise to 1.9 percent of loans this year, ITEM senior economic adviser, Neil Blake, commented: “the more loans banks have to write off, the less money they will have to lend.”
HSBC announced earlier this month that 3,167 staff would lose their jobs in part of the company’s global initiative to reduce £2.3 billion in costs, in part from cutting 30,000 from its workforce. HSBC have stated that 950 employees would be redeployed to other departments within the business. The Unite union have stated that since the financial crisis RBS have cut approximately 28,600 workers and RBS 26,000.
Increasing regulation and the economic downturn have been blamed for the pressure on the financial sector and the resulting job losses. Cameron Clyne, NAB chief executive, said: “In the last half year there has been a significant downgrade in the growth prospects of the UK economy, in part reflecting the drag on its recovery from heightened weakness in the eurozone.
While the banking sector has been clear to blame the economic downturn and increased regulation for forcing restructuring, pointed criticism has been levelled at business for using the rescission as an opportunity to enforce redundancies and employing cheap labour through offshoring.
The union Unite source claimed that there were no jobs for the 950 HSBC workers to be redeployed too, “They say there is alternative employment for people, but there isn’t.” The justification of a weakened economy given for redundancies by HSBC has been met by derision from within Unite, pointing to HSBC profits that totalled £13.8 billion last year.