Market News

BY  Szu Ping Chan

The Bank of England has warned its near 6,000-strong workforce of job cuts as it seeks to fund an overhaul of its flawed economic forecasts.

Andrew Bailey has invited all staff to apply for a voluntary resignation scheme as part of a £45m cost-cutting drive, prompted by the central bank spending millions of pounds on IT upgrades and changes to the way it analyses the economy.

While the Bank’s Governor stressed the scheme was “entirely voluntary”, he also warned: “We cannot rule out compulsory redundancies later down the line.”

It comes after an independent review led by Ben Bernanke, the former Federal Reserve chairman, warned that the Bank’s ability to control inflation had been undermined by “significant shortcomings” in its economic forecasts.

An internal message sent by Mr Bailey to the Bank’s 5,700 staff last week said Threadneedle Street had set up the “mutually agreed resignation scheme” as part of a push to trim 8pc from the Bank’s day-to-day budget of £562.5m.

The squeeze comes after Mr Bernanke recommended an overhaul of its economic forecasting process, which resulted in a hiring spree to beef up resources and more investment in the Bank’s ageing IT systems.

Mr Bailey’s message, seen by The Telegraph, said the Bank was making the cuts in order to ensure the institution was “fit for the future”.

Mr Bailey did not specify a target for job cuts and stressed “not every application will be approved”.

Successful staff will be offered 10pc of their salary for each year they have worked at the Bank, capped at a maximum of two years’ salary or £150,000, whichever is lower.

Applications started being accepted last week and the scheme will remain open until Jan 16 2026. Employees will be informed of the outcome in February, with those affected set to start leaving by next March.

‘Unsettling’ time for staff

Mr Bailey said all staff apart from those based in Leeds – where the Bank has set itself a target of employing one in 10 staff by 2027 – would be eligible to apply.

He conceded in an accompanying seven-minute video message that it was an “unsettling” time for staff. The Bank’s annual report suggests that £45m is roughly equivalent to spending on its entire research data and analytics department this year.

However, Mr Bailey said: “Doing this provides us with an opportunity to make the Bank a better place to work, to change how we operate, learn and develop and to grow talent and new skills.”

He explained that job cuts would allow the organisation “to deliver some of the savings we need to find”.

“With colleagues choosing to leave the Bank, opportunities can then be created for others to move or progress internally,” he said.

“At an organisation level, it will create space for us to look at the roles and skills we have, against those we need in the future.”

However, he added: “While we are launching a voluntary resignation programme today, we cannot rule out compulsory redundancies later down the line, subject to consultation.”

Unite, the union that represents employees at the Bank, vowed to fight any compulsory redundancies. “We will always oppose any compulsory job losses across the financial services sector,” it said in a statement.

A Bank spokesman said: “The Bank manages its budget in order to deliver on its statutory objectives to maintain monetary and financial stability. We are now implementing a significant, multi-year transformation of our operations and this will condition our decisions.

“We are therefore running a mutually agreed, time-limited scheme for staff to choose to apply to leave the Bank. We are committed to ensuring the Bank is efficient, resilient and fit for the future.”