Direct Line, the insurance group with business activities in the UK, Germany and Italy has found that, since leaving the comfort of the government-supported RBS, it will need to re-think its current business model. This will mean shedding 2000 jobs.
Although job cuts are bad news for employees, the markets normally react well when companies make proactive moves to tackle profitability. With just over an hour of the trading day gone by, the shares are trading over 5.5% up on the day. As the company had stated that it was looking to create £130 million of annual savings from expenses of £1.13 billion in 2011, some aggressive measures were always on the cards.
We have seen over the last five years that reducing staff numbers is one of the quickest ways to lower costs. It looks likely that the majority of these cuts will be made at the company’s English base in Bromley. With so many firms looking at cost reduction, it has been an increasingly difficult market in which to sell off assets.