Barclays to cut 5,000 jobs this year in push towards AI

Barclays will cut 5,000 jobs by the end of this year as it pushes to replace staff with artificial intelligence. 

The lender, which reported another profit surge last quarter, said there had already been 1,000 roles axed, with a further 4,000 planned by the end of the fourth quarter. 

The job losses form part of a growing shift in the banking sector towards the technology in a bid to cut costs. 

Earlier this month, HSBC was reported to have been readying for a ‘brutal’ jobs cull in its wealth management division. 

Barclays, which is nearing the end of a three-year cost-cutting drive, said the cuts would prune 5 per cent of its workforce. 

‘We employ AI at scale but AI is the icing on the cake, it is not the cake,’ Barclays chief executive CS Venkatakrishnan, who is known as Venkat, told analysts.

Barclays expects to make ‘efficiency savings’ of at least £1.1billion next year with Venkat vowing he would ‘drive hard’ at realising more gains from adopting AI.

It is unclear how many of the 5,000 full-time job cuts will be in the UK, but 3,000 of them will be in ‘support’ roles, including software developers.

Venkat highlighted how technology had reduced online mortgage application times from 45 minutes to 15 minutes and meant ten percent fewer staff were needed in each bank branch.

‘These little things go a long way,’ he added.

It came as the lender reported another boost in profits in the third quarter, with plans to hand out more cash to investors ahead of a tax raid on banks in next week’s Budget.

Barclays posted a 12 per cent rise in pre-tax profits to £2.3billion for the three months to September 30, compared to £2.1billion a year earlier.

But the results were overshadowed by the looming windfall tax on bank profits in John Healey’s first Budget as Chancellor on Wednesday.

The biggest banks, including Barclays, pay a 3 per cent surcharge above the 25 per cent corporation tax rate. 

This is expected to increase to 8 per cent under Healey’s plans to bring in an extra £2billion a year to the Treasury.

Industry figures have warned it will hit investment and growth, pushing up mortgage rates in the process.

Barclays boss CS Venkatakrishnan has previously pleaded with the Treasury to leave the bank levy at its current level, telling reporters that ‘for every £1 of capital we have, we lend £8 to £10’ to businesses and households that supports economic growth.

This morning, Barclays also revealed plans for a new £500million share buyback, bringing distributions so far this year to £2.8billion, up 46 per cent year-on-year.

Paul Nowak, general secretary of the Trade Union Congress, said: ‘Barclays’ bumper profits aren’t an anomaly. 

‘All the big banks are doing exceptionally well at the same time – but their windfall profits have been underpinned by mortgage misery for millions. That’s why it’s time for banks to pay a fairer share.

‘At a time when the chancellor needs to raise more revenue to support households and businesses through a looming energy bill crunch, Britain’s big four banks have made £200bn in profit since 2021. They can – and should – pay more tax.’

Banks’ profits have been boosted in recent years because of higher-for-longer interest rates, which have widened the gap between what they pay savers on deposits and charge borrowers for lending.

This gap – net interest income – is a key measure of profitability for lenders. For Barclays UK, it rose 6 per cent year-on-year to £2billion in the third quarter as the fallout from the Middle East war pushed interest rate expectations higher.

Income from both its UK retail and corporate banks increased, as well as from the wealth management arm and investment arm. 

The investment bank, which makes up around 48 per cent of revenues, generated £3.1billion, boosted by trading volatility.  

Income from equities soared 47 per cent to £689million as traders continued to take advantage of market volatility caused by the war in the Middle East as well as the latest moves in AI stocks.

Barclays’ share price, which has suffered since news of the Chancellor’s tax plans, fell 2 per cent in early trading.

Venkatakrishnan said he was ‘pleased with the ongoing momentum of Barclays’ operational and financial performance’.

How will the bank tax affect customers? 

John Healey declared banks a ‘jewel in the crown of the British economy’ and now he’s looking to tap them for additional revenue.

Targeting the financial sector with higher levies comes with trade-offs, with concerns over the UK’s competitiveness and its knock-on impact on economic growth. 

Any increase to the banking surcharge could be passed on to consumers through higher mortgage rates and other loans, trade body UK Finance warned last month. 

To protect their profit margins, domestic banks could raise their mortgage prices or offer less competitive rates on new deals. 

A higher surcharge may limit flexibility and therefore lead to tighter lending criteria, making it more difficult for prospective buyers to secure a mortgage approval.

Savers could also be punished. Lenders may cut interest rates on savings accounts to try to recoup the lost revenue caused by higher taxes. Lower rates while inflation is rising means reduced real returns for savers.

Meanwhile, those who rely on dividend income from UK banks may also take a hit after the Budget if banks reduce shareholder payouts to cover the tax bill.