Direct Line set to axe 2,000 jobs as part of aggressive cost-cutting

INSURANCE group Direct Line, which operates a large call centre operation in Birmingham, has announced it is to axe 2,000 jobs as part of a new cost-cutting plan.

The group announced last year that it was looking to make savings of around £100m in 2014, when compared with the 2011 cost base of £1,134m. The benefits of the plan were expected to offset other anticipated increases in expenses, with the aim of keeping the cost base broadly flat between 2011 and 2014.

Today, Direct Line said it was going a step further with more aggressive cutbacks designed to trim the cost base back to £1,000m.

The plan reflects a net reduction in annual costs of approximately £130m when compared with the 2011 cost base, and the group said this represented gross annual cost savings of more than twice the original £100m target announced last August.

“As part of these further initiatives, it is anticipated that approximately 2,000 roles may become redundant. The group has begun consultation with staff and their representative bodies. Those individuals potentially impacted are largely employed in roles across head office and support functions,” said Direct Line in an announcement to the London Stock Exchange.

It pledged to maintain employee consultation throughout the process, while aiming to mitigate the impact of the redundancies through redeployment and by identifying opportunities with other potential employers.

“The group has first hand experience of successful staff redeployment and will do its utmost to assist those affected in seeking new employment opportunities,” it added.

Following today’s announcement, the cost reductions are now estimated to be £180m. Of this £30m was recognised in 2012 with the remaining £150m expected to be recognised in 2013, or in 2014, with the phasing to be finalised.  The expected costs of migrating the group’s IT infrastructure, is unchanged at £100m.

Paul Geddes, CEO of Direct Line, said: “This is another step in the ongoing transformation of Direct Line Group and an important part of our aim to regain competitive edge. While we continue to invest in the business with the aim of winning in a market which is changing fast, it’s clear that we need to become more efficient to deliver the good service and value our customers expect. We have not made these proposed changes lightly and understand the impact they will have on our people. As we have done in the past, we will deal fairly and carefully with those impacted, and do all we can to support them through these changes.”