3i to close offices and cut staff as net asset value slips

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The blue-chip venture capital company 3i is shedding 17 per cent of its staff as part of plans to close seven regional offices in preparation for continued weakness in the stock market. The disclosure came as 3i posted a 23 per cent drop in its net asset value yesterday.

The cuts, totalling 185 individuals, will be made across the board as the company consolidates its activities into fewer, larger operations. Four offices in the UK and three in continental Europe will close, leaving 36 offices remaining worldwide. The moves, costing £18m, are 3i's first cutbacks since 1990.

Brian Larcombe, chief executive, said: "If you set out to build a global private equity firm today you wouldn't start with 20 offices in the UK. There's a lot of uncertainty in the world and it's hard to say that a broad-based recovery isn't a year away."

3i pulled the plug on 40 companies in the first half, leading to an 80 per cent rise in provisions to £252m against an investment portfolio of 2,735 companies valued at £5bn.

Shares in the group fell from 60p to 730p after it reported net asset value at 30 September down 22.6 per cent in the first half to 631p a share. The decline followed the downturn in the value of smaller companies and technology firms following the 11 September terrorist attacks in the US.

3i's shares have been on the slide since September last year, when they hit an all-time high of 1,770p.

Since the end of March, the company's investment portfolio has fallen in value by £761m, to 5.04bn. About £1.9bn, or 37 per cent, of the company's portfolio contains technology, telecoms and biotech companies, which have been hardest hit in the stock market downturn.

The company plans to spend £600m on investments in the second half of the year.