Head office staff to be reduced by a fifth at M&S

Marks & Spencer yesterday unveiled plans to axe up to 1,000 jobs in an attempt to kickstart its faltering recovery.

The first wave of job cuts - which will affect one in five administrative and financial employees - will hit staff in its historic Baker Street head office ahead of its move this summer to a new site in Paddington Basin. About 500 posts will go this year, with a further 500 expected to follow in 2005 as it improves its technological skills.

Roger Holmes, the chief executive, said the redundancy programme - the retailer's first for five years - had been sparked by the group's poor performance last year. "It does reflect that during the course of last year haven't been satisfied with our progress," he admitted, adding: "We need to step up the pace of change within the business."

M&S posted some of the worst Christmas trading figures on the high street. Its 2.5 per cent fall in like-for-likes sales of general merchandise masked double-digit falls in some areas of its core womenswear clothing.

Mr Holmes, who became chief executive 18 months ago, said he had launched the review of the retailer's head office and financial services operations as part of a "broader transformation programme for the business". A management consultant by training, Mr Holmes had so far resisted cutting jobs to save money, opting instead to take costs out of the group's supply chain and logistics operations. He said the initial round of job losses could save some £25m, but declined to say whether the group would reinvest the savings.

His aim is to make M&S, still charged by its critics as being stifled by too many layers of management, "more fleet of foot, more customer-focused and more efficient". But observers questioned whether yesterday's move even began to go far enough.

"Why not do it [the job cuts] all at once? Why do it over two years? It looks limp-wristed to me," one former retail executive said.

Analysts backed the move, but queried what effect it would have. "There is clearly an issue about communication and speed of process in M&S at the moment, but whether that will be sorted out by this will be down to the detail, which we don't have," one retail analyst said.

Yesterday's announcement marked only the second time that M&S has sacked staff during the past 12 years.

In 1999, as it was approaching the nadir of its fortunes, it cut 400 jobs from its head office and 300 from its stores.

The company plans to start talking to those staff likely to be affected next month. Mr Holmes said it was "too soon" to say which jobs would go, although analysts said the level of anticipated cost savings suggested some senior middle management posts would go. "We are still at an early stage in the review," he said.

The group intends to have completed its move from Baker Street, where it employs 3,000, to its new site in Paddington Basin by July. It expects to sack staff at its other head office sites at Stockley Park, near Heathrow, and Manchester's Salford Quays. Further jobs will go from its financial services base in Chester, where it employs 1,500. It will take a one-off cost to cover the redundancies, but did not specify how big this would be. Its shares gained 0.75p to 284p.