BT has warned that jobs are likely to be lost after raising its cost savings target from £2.5bn to £3bn by the end of 2025.
The company confirmed a story by Sky News on Thursday morning when it revealed that the additional £500m would be needed to maintain the cash flow required to support its network investments, particularly in the current high inflationary environment.
Philip Jansen, BT’s chief executive, told a conference call with analysts that it would reduce costs through supply chain efficiencies mostly but also by trimming staff numbers.
He did not put a figure on the job losses but said cuts would be done in a controlled way, using natural losses rather than redundancies where possible.
The announcement could stoke union tensions.
BT has already been hit by a wave of strike action involving frontline staff in recent months, one of a number of companies facing staff unrest over below-inflation pay offers.
BT reported an 18% drop in half year pre-tax profits to £831m.
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It said the figure reflected the costs of expanding its fibre broadband network.
The company also said it was reviewing the sums its Openreach arm charges customers as it seeks to accelerate fibre roll-out.
Mr Jansen confirmed that household prices would rise next year as planned as BT, like the rest of corporate Britain, faces a hit from soaring energy costs.
Analysts at Redburn wrote last week that the group’s energy bill had risen by £200m during the year, underlining the impetus to find additional cost savings.
Shares fell by up to 8%.
Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown, said of the company’s update: “It’s never a good look to have to cull your cost base in the name of cash flow conservation.
“That takes sensible efficiency-planning into the realms of worry.
“The biggest question mark left by the announcement is precisely where the cuts are going to come from. Supply chain efficiencies and improvements to the product offering are being pegged as primary sources of the savings, but how much excess juice there is to be squeezed from these areas remains to be seen.”
