BT cuts 6,000 IT contractor jobs

BT has announced it will cut 6,000 IT contractor jobs by March next year, as part of a wider cost-cutting strategy to eliminate 10,000 workers from its ranks.

Most of the cuts affect indirect staff, such as consultants and contractors, working in a variety of roles including network engineers, management experts and IT consultants.

Four thousand BT workers, mainly indirect hires, went in the first half of this year, leaving 6,000 IT contractors, or 12% of its contractor workforce, still to let go.

Around half of those contractors face termination before the Christmas holiday, and the remaining 3,000 will be axed by the end of the first quarter 2009.

Their work for Global Services, BT's corporate ICT unit, will be transferred to BT employees, although a spokesman declined to confirm any migration plan exists.

But BT boss Ian Livingston yesterday said he would rather retrain and redeploy full-time employees for IT roles, than outsource those posts to contractors.

He told analysts that BT's 50,000 indirect hires – agency and offshore staff, consultants and contractors, were targeted for being too expensive for a unit behind on cost-cutting.

After the briefing, Ovum analyst David Molony said Mr Livingston's comments could only suggest direct employees offer BT "better value for money" than indirect, contract staff.

The analyst's verdict may dismay IT contractors, and not just those at BT today, given they voted BT as being the UK's 'best client company' in CUK's two latest annual surveys.

Yet, while acknowledging BT's announcement was "not good news" for any worker affected, the Professional Contractors Group said it showed "real flexible labour at work in a downturn."

Managing director John Brazier said that when workers chose to freelance, they signed up to the "pitfalls" of less security and certainty, to get the perks of variety, freedom and better pay.

For being quicker, cheaper and therefore easier to dismiss, businesses are increasingly using temporary workers as a lightening rod to absorb their financial pressures in the recession.

Estimates suggest tens of thousands of temporary workers, including contractors, face dismissal across Europe, from clients including BMW, Argos, Daimler and DSG International.

But business commentators say BT cannot blame the downturn for its job losses, partly as Mr Livingston has admitted Global Services' managers failed to hit their cost reduction targets.

Speaking yesterday, he stressed that BT's other three operating divisions were trading ahead or in line with group forecasts, but reiterated GS's performance was "disappointing." Overall, however, group revenues rose 4% to £5,303m.

"Profits in BT Global Services are simply not good enough and we are taking decisive action to put matters right," Mr Livingston said, pointing to the unit's quarterly decline in profits of £52m on the same period last year.

"Demand for our BT Global Services proposition remains strong, revenue grew strongly in the quarter and the pipeline is healthy. What we have to do now is translate revenue growth into better profitability."

BT said it had already replaced the head of the division, Francois Barrault, with financial director Hanif Lalani, who would "continue to grow the business while reducing the cost base."

Much less publicly, BT has argued it can afford to shed its freelance staff because it is improving customer processes and service performance, Mr Molony said.

"There maybe something in this because if you have reduced [IT] repairs on hand from 50,000 to 15,000 in the last year, as BT claims, then you don't need so many people in the field."

And despite fears the company will upset investors by having to cut its dividend, London's stock market reacted positively to the job cuts, surging BT shares 8% to close at 123 pence.

However, they remain below the 142 pence they closed at on October 30, the day before BT issued a profit warning, which sank its valuation to its lowest since privatisation in 1984.

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