Huge UK banking group Close Brothers to axe 600 jobs - £85m in cuts
The banking giant was founded in 1878 and is listed on the London Stock Exchange.
Banking group Close Brothers will slash roughly 600 jobs in the UK and Ireland over the next 18 months to cut down on annual costs by £85 million. The firm said nearly a quarter of its 2,600-strong workforce would be affected amid a mounting compensation bill for the motor finance scandal.
Close Brothers aims to reduce costs by about £25 million in its current year to the end of September, and another £60 million in the next financial year. To do this, it will outsource and offshore work, cut back its office network and roll out the use of artificial intelligence "at pace".
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CEO Mike Morgan said: "While the impact on affected colleagues is regrettable, these actions are necessary to structurally lower our cost base, while increasing our agility and ability to serve our customers."
Close Brothers has been embroiled in a scandal regarding the alleged mis-selling of car finance, specifically Personal Contract Purchases (PCPs), through undisclosed commissions that led to unfair interest rates.
It's accused of using "discretionary commission arrangements" (DCAs), where brokers inflated rates for higher pay, creating conflicts of interest, a practice banned by the Financial Conduct Authority (FCA) in 2021 but affecting past deals.
The deals were found to be unlawful by the Court of Appeal in October 2024, but Close Brothers went to the High Court and Justices sided with lenders on two out of three appeals.
Millions of UK drivers could potentially be owed compensation, and the firm set aside significant funds for potential payouts following court rulings
However, Viceroy Research warned the bank will have to "at least" double its existing provisions after it "systematically misrepresented" its exposure to the motor finance scandal.
Shares in Close Brothers, listed on the FTSE 250, plunged as much as 12% during Monday afternoon trading. It responded saying it "strongly disagrees" with Viceroy’s findings.
The statement said: "Our provisioning approach in relation to this matter is in accordance with UK-adopted international accounting standards and follows a robust governance process."
