Barclays has announced that it will downsize its workforce significantly over the next two years. The scandal-ridden bank plans to axe more than 7,000 jobs in its investment division after a series of public scandals and risky investments hit the bank’s reputation and bottom line.
In addition to the 7,000 jobs forecast to be lost in Barclays’ investment division, an additional 12,000 staff will lose their jobs with the bank by 2016. About 10,000 of the jobs Barclays plans to axe are based in the UK. The downsizing is part of a plan from new chief executive Antony Jenkins to “clean up” Barclays’ image.
Former chief executive Bob Diamond left the bank after the Libor scandal – a serious public relations disaster for the bank that was one of several scandals to damage its reputation with investors and retail customers. Critics of Barclays called the growth of its investment units under Diamond a “casino” strategy built on deception.
Jenkins has already encountered obstacles in his effort to bring Barclays back into a position of trust with the public. The bank suffered a PR setback earlier this year as it was revealed that high-level staff were paid over £1.5 billion in bonuses last year while profits at the bank declined rapidly.
In addition to the large-scale job cuts, Barclays is expected to significantly scale back its bonuses this year. In a statement, Antony Jenkins said: “With a smaller investment bank, our expectation is that the number of highly paid people, defined as over £1 million, will come down over time.”
The job cuts will affect an estimated 19,000 people worldwide – a significant size of Barclays’ 140,000-strong workforce. Although the bank hasn’t announced any news about branch closures, Antony Jenkins claimed that it was likely the number of bank staff working at retail branches would fall slightly as a result of the cuts.Read more
Over 288,000 new jobs were created in the United States this April, the highest level of employment growth since late 2012. The nationwide unemployment rate also fell to just 6.3%, according to new information released by the Department of Labor.
Despite the encouraging figures, economists have warned that the job growth and decline in unemployment was largely due to a reduction in the total size of the US labour force. The unemployment rate is at its lowest point since 2008, although it’s now measured using different metrics and scales than previously.
Tom Porcelli, a chief US economist at RBC Capital Markets, described the new Labor Department report as a “flat out good report.” Like other economists, he pointed out the decline in the size of the labour force: “The decline in the unemployment rate was a function of the labour force falling by 806,000 – that is a gargantuan decline.”
While economists have praised the decline in unemployment, many have expressed concerns about slow wage growth. Private sector hourly wages didn’t increase at all in April and have only budged by 1.9% in the last year. US GDP growth has also been on the decline, with the first quarter growth rate measuring just 0.1% last month.
In addition to improvements to the unemployment rate, the amount of support for the US economy provided by the Federal Reserve has declined. Earlier this month, the Federal Reserve continued its program of scaling back economic support, with its monthly bond buying programme trimmed to just $45 billion per month.
The reserve bank has been purchasing bonds as a means of keeping interest rates as low as possible in order to fuel borrowing and economic growth. The job growth of the last month was higher than expected; economists had predicted 218,000 new jobs in April instead of 288,000.Read more
Manufacturers across the UK back Chancellor George Osborne’s vision of “a Britain that makes things again”, according to a new article in The Guardian that profiles a West Midlands manufacturer specialising in machine tools for aerospace, oil and defence firms.
BSA Machine Tools is one of many examples of declining British industry. Just over 40 years ago, the company employed a full-time staff of about 14,000 people. Today, its workforce is made up of just 38 full-time workers. Despite the long-term decline in output, its owners are optimistic that British manufacturing is on the rise.
Over the past two years, the company has taken on four apprentices, creating a new atmosphere of confidence in the economy. However, despite the company’s limited recent success, it has been forced to deal with a problem that many other British manufacturers can relate to: a nationwide shortage of apprentices.
As UK manufacturing declined over the past 40 years, the number of young people entering apprenticeships dropped at a massive speed. Although exports have shot upwards in recent months, many UK manufacturers face supply limits due to small workforces that simply can’t produce enough goods for export.
In the case of BSA Machine Tools, the company believes that despite its recent UK-based workforce growth, outsourcing to low-tech markets such as China will be an important part of its business model in the future. Interestingly, many of the firms’ target sales markets include the growing Chinese consumer class.
Despite the shortage of skilled workers, manufacturers in Britain have a lot to be optimistic about. Recent changes to energy tax policy mean that manufacturers in the UK will have a steady carbon tax for the next 12 years, and strong exports are driving growth that – despite labour issues – is pushing up industrial profits.Read more
Employment March 14, 2014
Japanese consumer electronics manufacturer Panasonic has become one of the first companies to offer its employees in China ‘air quality’ pay. The company will give its China-based employees a premium to compensate for the health effects of Mainland China’s massive pollution problem.
While Panasonic isn’t the only company to offer hardship pay to its employees sent overseas, it is one of the only major firms to specify that employees will receive pay bonuses for dealing with China’s pollution. The country’s severe smog problem has been a frustration for many expatriates working in major Chinese cities.
The Chinese government has committed to waging a “war on pollution” in order to improve public health and better market China as a tourist destination. Premier Li Keqiang stated that China would commit to improving its air quality during his speech at this year’s National People’s Congress.
Air pollution in cities such as Beijing often reaches 15 times the maximum safe level advised by the World Health Organization. Expatriates based in China have voiced their complaints regarding the country’s questionable air quality online, and many employees selected for positions in China have been reluctant to relocate due to the air quality.
The country’s large manufacturing sector, a dependence on fossil fuels for energy, and a significant increase in the number of Chinese people owning their own cars have all contributed to China’s worrying pollution problem. Car sales continue to increase in China as the country’s middle class population expands.
Panasonic is not the only Japanese firm to offer additional pay to its employee this month. Three of Japan’s largest automotive companies – Honda, Nissan and Toyota – all announced rises to employee base pay. Their actions may have been motivated by Prime Minister Shinzo Abe’s calls to raise compensation in order to fight Japan’s deflation problem and contribute to economic growth.Read more
The government plans to increase the minimum wage to £6.50 per hour, according to a recent statement from Business Secretary Vince Cable. The new wage will start to take effect in October of this year, with upwards of one million workers likely to benefit from the increased price floor.
The current minimum wage is £6.31 per hour – a rate that over one million workers throughout the UK are subject to. The change in the minimum wage was motivated by a recommendation from the Low Pay Commission, which suggested a three per cent rise in pay rates in order to match inflation.
Workers subject to youth wages will also receive a pay rise. 18 to 20-year-olds, who currently earn a minimum wage of £5.03 per hour, will receive a new minimum pay level of £5..13 per hour. Workers aged 16 and 17 will earn £3.79 per hour, a raise of 7p per hour from the current minimum wage of £3.72 per hour.
The increased minimum wage will also affect apprentices, who currently earn just £2.68 per hour. Their minimum pay rate will increase to £2.73 per hour. The wage changes are based on the rising consumer prices index (CPI), which is currently at 1.9% annually.
Mr Cable stated that the changes to compensation will give minimum wage workers their “biggest cash increase since 2008.” The business secretary also suggested that companies benefiting from the recent period of economic growth should “consider how all their staff – not just those on the minimum wage – can enjoy the benefits of recovery.”
Calls to raise the minimum wage to a “living wage” have been criticised by analysts and economists. Founding chair of the Low Pay Commission, Professor Sir George Bain, claims that establishing a £7.65 living wage would cause mass unemployment in critical industries such as retail and social care.Read more
New figures from the Office for National Statistics reveal that public sector workers are paid approximately 15 per cent more than their private sector counterparts in the UK. The interesting pay gap has shocked economists, as the government placed caps on public sector pay rates just four years ago.
While the capping of public sector pay rates has reduced the compensation gap for many UK workers, there is still a significant wage difference between the public and private sectors. Public sector workers earned an average of £16.28 per hour in 2013 – a 14.5 per cent increase from the private average hourly wage of just £14.16.
The 14.5 per cent increase in average wages pales, however, in comparison to the gap in median wages. When median pay is compared, public sector workers get a staggering 35 per cent more than their private sector counterparts, or £3.67 per hour more in real terms.
Commenting on the data revealed by the study, the Office for National Statistics said: “The average pay difference in favour of the public sector has narrowed since the year 2010, which in part reflects the restraints on public sector pay over this period.”
Analysts have noted that the greatest pay gap occurred in large employers with at least 500 staff. When large employers are removed, private sector employees earn approximately 2.4 per cent more than their public sector counterparts. The gap in earnings is thus largely determined by large employers with greater funding.
Despite their comparatively better pay offerings, public sector workers are facing an increased level of job insecurity. As government cuts continue to take place, many in the public sector may face the real possibility of having their positions axed in order to reduce public sector spending.Read more
UK companies are hiring staff at a record pace as the economy recovers. New data from the latest Markit/CIPS purchasing managers’ index (PMI) showed that despite small declines in overall industrial production, UK firms are hiring more people than at any point in the last 16 years.
Companies across the country have reported strong sales growth in the last quarter despite severe weather conditions across much of Britain. The latest PMI index was 58.2, indicating a strong – albeit slightly lower than average – level of growth across the UK’s manufacturers.
Optimism about the country’s economic future is at its highest level in almost five years, with more manufacturers reporting strong sales projects than at any point in recent history. The rate of jobs growth is the highest in the PMI’s history. The index has been collecting data on job and manufacturing growth since January 1998.
Chris Williamson, Markit’s chief economist, says that there’s “no end in sight” and that the economic good news could continue for some time. He believes that recent economic performance is even more impressive given the difficult weather across the country that caused heavy flooding throughout much of February.
Williamson said: “With business confidence in the services economy rising, growth should pick up again in March, adding conviction to the growing consensus that the economy is set for its best year of growth since 2007, with the rate easily surpassing the 1.8 per cent expansion seen last year.”
The services sector has experienced strong growth, with companies likely to hire more staff in the coming year. Just five per cent of the businesses polled think that 2014 will be a worse year than 2013, with an astonishing 54 per cent predicting an increase in activity during the year.
A Reuters poll also revealed that economists believe the UK economy will grow 0.6 per cent each quarter in 2014, further cementing the confidence of economic growth throughout the UK.Read more
According to a new report by the United States Congressional Budget Office, Barack Obama’s choice for raising the United States’ minimum wage could cost the country over 500,000 jobs by the end of June 2016.
The CBO, a governmental agency, believes that raising the federal minimum wage – a nationwide minimum hourly wage that determines the price floor for all states – is unlikely to result in a significant change to the gap between rich and poor people in the United States.
In the recent report, the CBO stated that as many as 16.5 million American workers would see their wages increase under the new regulations. This could lead to a large increase in consumer spending and an improvement of economic conditions.
But the office agency also warned that many Americans could lose their jobs due to unaffordability. Projections indicate that employers would “shed workers” as costs increased, or replace staff with technology.
In a recent press release, the CBO stated that: “The large majority would have higher wages and family income, but a much smaller group would be jobless and have much lower family income.”
The report on potential job losses is the second time this year that the CBO has dealt a blow to the White House’s plans. The agency previously calculated that the cost of the subsidies in the President’s health care reforms could create incentives for many US workers to leave their jobs instead of using employer-provided health care.
White House plans have hinted at an eventual federal minimum wage rise to $10.10 – a significant increase from the existing $7.25 minimum wage. The CBP suggested a smaller increase, to $9 per hour by June 2016, that would have a smaller impact on the economy.
Republicans have staunchly opposed increasing the minimum wage due to its cost on employment. Several Republicans claim that raising the minimum wage is not a smart policy during a period of slow economy growth and high unemployment.Read more
Sluggish economic growth has affected several Eurozone economies over the past three years. In this brief economic comparison, we look at two of Europe’s largest markets – France and Germany – and compare their recent performance using two nearby but very different cities.
The BBC recently profiled the French city of Chalons – an interesting city in which circus trainees take part in government-subsidised trapeze training as part of an amazing French effort to keep the circus alike.
As bizarre as it may seem, the subsidised programme has its benefits – the circus is an important French tradition and, in the form of tourism benefits, it pays for itself over time while employing young French workers.
France’s reputation for administration is well known and many commentators have expressed their concerns about the state-heavy country’s economic future. Across the border in the German twin town of Neuss, attitudes are a little different.
TI Automotive managing director Oliver Schmeer – a German – believes that France faces numerous challenges in reaching its economic potential; a task Germany has largely accomplished over the past decade.
France’s “ultra-complex” labour code and high taxes – not to mention the country’s famously difficult unions – limit its potential and make it harder for industry to get ahead. Schmeer believes that the French Socialist government “doesn’t understand industry” and can’t comprehend that businesses rely on customer to place orders.
The French leadership has made several attempts in recent months to improve its economic situation. President Hollande recently promised to reduce social charges for French companies if they employed more workers.
Schmeer believes that it’s an empty stunt that showcases the government’s lack of understanding for industry. He said: “We can’t offer jobs to people to build things that no-one wants.”
Many in France believe that change is required, and that the country’s significant unemployment benefits and unions should be the first to change. However, with a record unemployment rate and few job opportunities, France’s economic woes are unlikely to be fixed with sudden cuts to unemployment benefits.
Thousands of Royal Bank of Scotland staff could lose their jobs as the Edinburgh-based bank plans another round of cuts. Approximately 40,000 RBS workers have already been made redundant as the bank, which was bailed out by taxpayers in 2008, plans a £1 billion cost cutting programme to return to profitability.
Royal Bank of Scotland was bailed out during the 2008 financial crisis using over £45 billion in taxpayers’ money. The bank’s current cost-to-income ratio is 65 per cent – a figure that chief executive Ross McEwan wants to reduce to 50 per cent as the bank aims to reduce its operating costs to increase profits.
RBS’s current operating costs are £10.06 billion. The planned cost cutting measures could save the bank as much as £1.25 billion per year. Salaries currently account for more than half of RBS’s annual costs. Staff at the Edinburgh-based financial services company are preparing for what could be a swift dismissal.
Chief executive Ross McEwan presided over significant cuts to expenditures during his leadership role with the Commonwealth Bank of Australia. Analysts believe his goals include reducing RBS’s overseas commitments and automating large amounts of its retail banking business within the UK.
Royal Bank of Scotland avoided a government division last year, when lawmakers and political leaders sought to divide the bank into two – a “good bank” and a “bad bank” – to improve its ability to lend to British businesses. The bank plans to split off £38 billion in high-risk loans to a new division.
Analysts believe that RBS will produce a significant loss during 2014 due to its new plan to split off its ‘toxic investments’. RBS plans to write off around £4.5 billion in high-risk loans, releasing as much as £11 billion in capital. The bank has not made any comments on the speculated job cuts.Read more