BT's Workforce: It's Not Shrinking as Fast as You Might Think

The UK incumbent remains one of Europe's most bloated telecom operators, and that is unlikely to change under current cost-cutting plans.

Iain Morris, International Editor

May 10, 2019

3 Min Read
BT's Workforce: It's Not Shrinking as Fast as You Might Think

Philip Jansen, BT's new boss, is trying hard to get the UK's flabby phone incumbent into a leaner and more "digital" shape. While he has denied reports that one quarter of all jobs could disappear under a more aggressive cost-cutting scheme, Jansen is slashing about 13,000 roles -- a figure that represents about 12% of the workforce as it looked in March 2018 -- under plans drawn up by Gavin Patterson, his predecessor and chum.

BT needs to realize those savings to fund a more extensive rollout of fiber broadband services to UK homes and businesses. Four million properties is now the coverage target by March 2021, compared with a previous goal of 3 million, and BT is eyeing 15 million premises by the mid-2020s -- if regulators play nicely -- up from 10 million originally.

The job cuts program should ultimately bolster margins and improve BT's appearance next to its peers. Right now, it generates lower revenues per employee than any of Europe's big telecom incumbents, and is a long way behind the major US operators on this measure.

But the operator's overall headcount looks stubbornly resistant to any pruning. BT slashed as many as 4,000 jobs last year under its savings scheme, mainly at its global services and corporate divisions, said Jansen. That meant annualized savings of £875 million ($1.14 billion) at a cost of £386 million ($502 million). Despite this, BT's workforce grew by nearly 1,000 employees, to exactly 106,742, according to its own data.

The problem is partly that new hires are offsetting any reductions. Openreach, the company's infrastructure unit, hired 3,500 trainee engineers last year and plans to recruit another 2,700 in the current fiscal year. Openreach had 33,156 employees in March, up from 31,187 a year earlier. And if BT is to build all-fiber networks to 15 million premises by the mid-2020s, it may need to retain those engineers for a long time, and even recruit additional ones. Currently, BT's all-fiber network is hooked up to just 1.2 million homes.

The part of the business that saw the biggest fall in employee numbers is what BT calls "other," which seems likely to include many of the back-office and managerial roles no longer required. In March 2018, there were 26,224 employees in this area. That number had fallen to 23,893 one year later. Yet the company's other divisions all witnessed growth. The consumer business grew by 1,534 roles, to 19,378, while enterprise added another 125 employees, giving it 13,352 overall.

Even global services seems to be growing again. Employee numbers here dropped by 671 between March and September 2018, but then grew by 329 in the subsequent six-month period -- to 16,603 -- at the end of March 2019.

Net labor costs at BT, accordingly, fell by just £100 million ($130 million), or 2%, in the last fiscal year, to about £4.8 billion ($6.3 billion). And BT's adjusted earnings (before interest, tax, depreciation and amortization) shrank 2%, to about £7.4 billion ($9.6 billion).

Of course, BT would look even more bloated if it had not made cuts. And if its workforce is more aligned with the needs of an increasingly digital and automated world, then its pruning makes good business sense. But the company may still look out of shape after its current program is finished. Cutting 9,000 more jobs and recruiting another 2,700 engineers would leave BT with 100,442 employees, and make little difference to its per-employee revenues unless sales increase markedly. Without revenue growth, BT would need to cut about 40,000 jobs to compare favorably with Spain's Telefónica, one of Europe's most efficient operators on this basis. No wonder there is so much interest in the size of Jansen's axe.

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— Iain Morris, International Editor, Light Reading

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About the Author(s)

Iain Morris

International Editor, Light Reading

Iain Morris joined Light Reading as News Editor at the start of 2015 -- and we mean, right at the start. His friends and family were still singing Auld Lang Syne as Iain started sourcing New Year's Eve UK mobile network congestion statistics. Prior to boosting Light Reading's UK-based editorial team numbers (he is based in London, south of the river), Iain was a successful freelance writer and editor who had been covering the telecoms sector for the past 15 years. His work has appeared in publications including The Economist (classy!) and The Observer, besides a variety of trade and business journals. He was previously the lead telecoms analyst for the Economist Intelligence Unit, and before that worked as a features editor at Telecommunications magazine. Iain started out in telecoms as an editor at consulting and market-research company Analysys (now Analysys Mason).

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