UK bosses axe jobs to please investors, survey says

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The Independent Online

British bosses cut jobs to please investors even when they know it could damage their companies' long-term prospects, according to research published today.

British bosses cut jobs to please investors even when they know it could damage their companies' long-term prospects, according to research published today.

A survey of almost 600 chief financial officers worldwide shows that while UK bosses pretend to focus on the long term and ignore daily fluctuations in their company's share price, the reverse is true.

Two-thirds of British CFOs, a higher proportion than in other countries, admitted that the costs stripped out by slashing jobs would creep back into the business within two to three years. The same proportion admitted that such moves were about impressing City analysts and shareholders rather than improving the business.

Almost all the British respondents to the anonymous survey, conducted by PricewaterhouseCoopers, agreed that aggressive job cutting strongly damaged staff loyalty and that investment should continue through a downturn. Yet two-thirds had cut staff, and almost half had slashed investment.

The majority of companies also admitted to wielding the axe where it may achieve measurable results, as opposed to where cuts needed to be made.

Jonathan Tate, the PwC partner who led the study, said businesses were behaving irrationally. "UK businesses will make cuts where it will generate headlines. They don't think about cutting costs from their supply chains because no one is going to write about that."

He added that the problems were being exacerbated by the present uncertainty surrounding the economic outlook. "Bosses don't have the confidence to think long term. They will talk about the long-term publicly, but will bow to pressure from shareholders and analysts, which affects them quite strongly. In that respect, the UK came off worse."

One-third of the companies surveyed were British, with the rest coming from Europe, America, Africa and Australasia.

PwC is proposing that companies bracket costs into the good, the bad and the neutral. Good costs include targeted sales and marketing, research and development and training. Bad costs include uncontrolled purchasing, wasted information technology spending and bloated back office support. Neutral costs do not drive growth directly and include customer-facing staff.

The survey also showed that companies are reluctant to invest in internet technologies aimed at making their supply chains more efficient, which were once perceived as among the most valuable aspects of the New Economy. Almost half of companies surveyed believed that it was inevitable that all business would be using the internet to buy supplies within three years. Yet almost two-thirds said the trend was down to hype and peer pressure rather than any perceived benefit is buying online.

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