The Bank of England is embarking on a cost-cutting exercise, potentially impacting its workforce as Christmas approaches. In an effort to save £45 million, the central bank has initiated a voluntary redundancy program, inviting a significant portion of its 5,700 employees to consider leaving the organisation.
The move aims to achieve an 8 per cent reduction in the Bank’s operational budget. While the exact number of job cuts remains unspecified, the scale of the savings target suggests that a considerable number of positions could be affected.
The Bank has communicated with its staff, setting a deadline in January for employees to express their interest in voluntary redundancy. Those who opt to leave are expected to depart by March.
The compensation package offered to departing employees includes a severance payment calculated as 10 per cent of their annual salary, multiplied by their years of service. However, this payout is capped at a maximum of two years’ salary or £150,000, whichever is lower.
Several factors have contributed to the Bank’s decision to implement these cost-saving measures. A recent overhaul, prompted by a review conducted by Ben Bernanke, former head of the US Federal Reserve, has placed a strain on the Bank’s finances. Additionally, the Bank is facing rising costs associated with upgrading its technological infrastructure.
A Bank of England spokesperson stated: “The Bank manages its budget in order to deliver on its statutory objectives to maintain monetary and financial stability.” The spokesperson further added, “We are now implementing a significant, multi-year transformation of our operations and this will condition our decisions.”
The spokesperson emphasised the voluntary nature of the scheme, describing it as a “mutually agreed, time-limited scheme for staff to choose to apply to leave the Bank.” The Bank aims to ensure it remains “efficient, resilient and fit for the future.”
Exemptions and Considerations
Notably, certain employees are exempt from the current round of job cuts. This includes staff at the Bank’s Leeds office, where over 100 people are employed, and which the Bank intends to expand.
Furthermore, the Bank’s governors, including Governor Andrew Bailey (who earns £598,000 annually), his four deputies, and Chief Operating Officer Sarah John, will not be affected by the job cuts.
Internal Pressures and Efficiency Targets
Earlier this year, Chief Operating Officer Sarah John informed the Bank’s directors of the need to meet an “ambitious efficiency target” to control increases in the levy charged to Britain’s financial services firms. Subsequent discussions revealed that achieving these efficiency targets would involve “difficult trade-offs.”
Recent Staffing Growth
The Bank of England has experienced significant staff growth in recent years. The average number of employees in the financial year ending February 2025 was 5,731, a considerable increase from 3,680 a decade earlier. In 2012, the Bank employed fewer than 2,000 people.
Union Response
Unite, the trade union representing employees at the Bank of England, has voiced its opposition to compulsory job losses within the financial services sector. The union has stressed the importance of a transparent and fair process throughout the job-cutting exercise.
Context of a Challenging Jobs Market
These staff cuts occur against a backdrop of a challenging jobs market. Unemployment currently stands at 5 per cent, the highest level since 2021. A recent report by KPMG and the Recruitment and Employment Confederation indicated that hiring activity remained subdued last month due to uncertainty among employers leading up to the Budget.
Key Takeaways from the Bank of England’s Cost-Cutting Measures
- Voluntary Redundancy Scheme: The Bank of England has initiated a voluntary redundancy program targeting a significant portion of its workforce.
- Financial Savings Target: The Bank aims to achieve £45 million in savings, representing an 8 per cent reduction in its operational budget.
- Compensation Package: Departing employees will receive a severance payment capped at two years’ salary or £150,000.
- Exemptions: Certain employees, including those in the Leeds office and the Bank’s governors, are exempt from the job cuts.
- Union Opposition: Unite opposes compulsory job losses and advocates for a fair and transparent process.
- Challenging Economic Context: The job cuts occur amidst a backdrop of rising unemployment and economic uncertainty.
- Technological Upgrades: Part of the cost-cutting measures are due to the need to update the Bank’s tech infrastructure.
- Efficiency Targets: The Bank needs to meet ambitious efficiency targets to keep a lid on the increase in the levy it charges to Britain’s financial services firms.