Alliance & Leicester to cut 1,500 jobs over three years

Alliance & Leicester unveiled plans yesterday to cut 1,500 jobs - a fifth of its staff - as part of an ambitious strategy to revive the former building society's flagging fortunes. In an effort to restore confidence among City investors, the mortgage bank has set itself clear goals to cut its cost base by £100m a year by 2003.

Alliance & Leicester unveiled plans yesterday to cut 1,500 jobs - a fifth of its staff - as part of an ambitious strategy to revive the former building society's flagging fortunes. In an effort to restore confidence among City investors, the mortgage bank has set itself clear goals to cut its cost base by £100m a year by 2003.

It will also aim to boost revenues by 6 per cent annually for the next four years through trebling its share of the small business market to 10 per cent in three years and by an enhanced retail product range.

As a demonstration of their commitment to meet these growth targets, the five executive directors have agreed not to accept any increase in basic pay for two years, although they will benefit from performance related increases if these goals are achieved.

Presenting the targets, which were promised after a management shake-up in July, John Windeler, executive chairman, said: "We are not going to miss those targets."

Alliance & Leicester will, he said, shortly be publishing a more demanding share and option bonus package that will be available to senior staff right across the business.

Mr Windeler insisted, contrary to popular belief that the bank had no long-term alternative to being taken over, that the dynamics of the internet economy gave it an edge over bigger rivals: "In the past the big ate the small; in the future the fast will east the slow. Speed beats size." He added: "We remain committed to an independent future. We have a little bit of excess capital which we have been returning to our shareholders. But we would very much prefer to use the capital to buy something to help us with our growth targets."

Yesterday's statement was received positively in the City where Alliance & Leicester shares jumped 31p to 590p - their highest level for nearly six months. The shares have lagged the sector on concern about the strategic vacuum at the bank since Peter White, the former chief executive, quit last year.

The first of the new products to go the market will be the Premier Account to be launched next week. This will offer higher earning customers discounts worth up to £500 a year if they agree to take other Alliance & Leicester products like credit cards and mortgages.

The bank aims to recruit 150,000 Premier customers by the end of next year and more than 500,000 in three years, each taking four or more products.

There will also be an internet-based portfolio and money management service available by personal computer and WAP-enabled mobile phone. Managing director, Peter McNamara, who joined from Lloyds TSB this year has pledged to deliver one new product a week.

Mr Windeler said: "You cannot stand still. That has been one of our problems in the past. It has been a long-time since we've had a new product offering. That is going to change."