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April 13, 2021updated 15 Apr 2021 10:02am

Babcock announces 1,000 job cuts, majority in the UK

UK defence giant Babcock today announced it would cut 1,000 jobs this year, the majority of the job losses will affect operations in the UK. Under a review of the business, Babcock is also set to divest sections of the business estimated to be worth £400m.

By Harry Lye

UK defence giant Babcock today announced it would cut 1,000 jobs this year, the majority of the job losses will affect operations in the UK. Under a review of the business, Babcock is also set to divest sections of the business estimated to be worth £400m.

Announcing the job cuts, Babcock said it was changing its operating model ‘to create a business that is more efficient and effective’ and that the company would ‘reduce’ layers of management to form a ‘simpler, flatter structure’.

Around 850 of the 1,000 job cuts will be UK positions. The company said its cost-saving measures would result in £40m of one-off costs but also deliver annual savings of around £40m.

In a business update, Babcock wrote: “The changes will result in approximately 1,000 employees leaving the Group within the next twelve months with an approximate restructuring cost of £40 million, most of which are cash costs.

“This will reduce our overall operating cost base. Some of the savings will be recognised across long term projects, for example where they form part of existing contract efficiency assumptions, and some savings will benefit our customers via the contract structure.”

The company said it was also looking to reduce its UK property portfolio. The changes come as Babcock detailed a £1.7bn write-down following a review of contracts and its balance sheet.

Babcock CEO David Lockwood said: “We announced a series of reviews in January and promised to report back on our strategic direction, a new operating model and a new financial baseline at our full-year results.

“Today we give you an update on all of these areas. The early results from our reviews show significant write-offs and a smaller ongoing reduction in the profitability of the Group.”

Despite the stark figures, Babcock’s share price jumped at the announcement as investors had feared the company was in worse financial shape.

The company said it would focus on being ‘an international aerospace, defence and security company with a leading naval business’.

Under the contract profitability and balance sheet review, the company added that it expected group profits to fall by around £30m a year.

Lockwood added: “Through self-help actions, we aim to return Babcock to strength without the need for an equity issue. We are creating a more effective and efficient company through our new operating model and, in line with our new strategic direction, will rationalise the Group’s portfolio to help strengthen our balance sheet.

“Through our new operating model, the future Babcock will be a better place to work, a better partner to our customers and will be well placed to capture the many opportunities ahead of us”.

Babcock is currently in the process of selling its oil and gas aviation business and said it was ‘reviewing options’ for the future of ‘each of the aerial emergency services businesses’.

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