the institute for employment studies

Restructuring in the UK finance sector

Stefanie LedermaierWarsaw, 30 September 2013

Role of the sector and impact of the crisis

London is Europe’s most important financial centre and important contributor to the UK economy (around 9% of GDP)

Banking sector hit hard by the crisis:●banks facing bankruptcy●nationalisation of major banks●government capital injections●changes to the regulatory and supervisory

system of the UK financial sector

Impact of the crisis on employment in the sector

The crisis has resulted in the estimated loss of around 187,000 jobs in the UK finance sector, or 25% of the sector’s workforce

All major UK banks have implemented large-scale redundancies – still ongoing

Consultation on redundancies follows legal provisions.

There are statutory minimum levels for redundancy payments, but a majority of employers offer higher payments

Alternatives to redundancy include “natural wastage”, retraining, redeployment, shorter working week

Managing restructuring in the finance sector

Collective bargaining takes place at company level in the sector (25% rate of unionisation and 20% collective bargaining coverage in the sector)

No specific role for the state Restructuring measures include:

● Wage reductions● Offshoring and outsourcing● Voluntary redundancies

Increased incidence of social dialogue in the banking sector in recent years, due to a need to engage in response to the crisis

Positive and negative aspects of restructuring

Positive aspects Negative aspects

Good overall relationship and communication process between management and employee representatives

No employee representatives/bad relationship between employee representatives and management

Advance notice of potential restructuring No notice of restructuring

Timely and inclusive information of employee representatives

Minimal information on restructuring

Timely consultation of employee representatives, in good faith (ie consultation takes on board employee representative views)

Minimal consultation on restructuring

Negotiation over restructuring process No negotiation over restructuring process

Active skills development policy No or limited skills development

Restructuring package negotiated with the involvement of employee representatives, including aspects such as internal redeployment, reskilling, working time flexibility and other measures designed to avoid redundancy

No negotiated package and no measures put in place to avoid redundancies

Where redundancies are inevitable, help is given to redundant employees to help them increase their employability and find alternative work: eg outplacement services.

No help given to redundant workers to help them find alternative employment: overreliance on severance packages

Difficulties around restructuring

Trade unions protest against:●Job losses●Lack of redeployment opportunities, due

to geographical location, or skills mismatch

●Reductions in terms and conditions such as holiday entitlement and sick pay

●Closure of final salary pension schemes●Increased use of temporary workers

Positive examples of restructuring: Cambridge Building Society (1) Major change programme to improve

performance announced in 2007 and implemented in 2008-2009

Number of new positions and a small number of redundancies

Formal announcement of the detail of the plan and regular communication through a Change Programme Director and steering committee

Measure to limit redundancies included: ● reviewing temporary work● natural wastage● early retirement● voluntary redundancy on enhanced terms

Cambridge Building Society (2)

Closure of 4 branches in 2009 – most staff were redeployed to new positions in other branches nearby

Travel costs paid and positions trialled on a six-week basis

Small number of redundancies on better than statutory terms and with full consultation

Redundant staff also offered outplacement Engagement and performance programme put

into place following the restructuring, in order to maintain staff motivation

Final thoughts

UK banking sector has been severely affected by the crisis – substantial job losses and restructuring

Within the legal framework, the management of restructuring takes place at company level – there are many good practice examples of employer engagement and meaningful collaboration between the social partners

The crisis is not yet over – there are now fears about the future of the Cooperative Bank

… thank you

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