IBM axes 800 jobs in the UK and sees profits slump
Professional services firm IBM reduced its UK headcount by one in every 15 jobs throughout 2018, according to documents submitted to Companies House. Despite this major reduction in wage costs, however, IBM recorded a reduced profit for the financial year, even as the consulting wing of the IT giant enjoyed a revenue improvement of 7.45%.
2017 compounded a sustained rough-patch for IBM in the British market. Big Blue was found to have failed to grow its top and bottom lines for 21 continuous quarters, prompting a change of leadership in the firm’s UK wing. Bill Kelleher inherited the UK & Ireland Chief Executive office from David Stokes, under whom IBM sales in the UK fell to £3.657 billion in 2015. In the same period, operating profit more than halved from £290 million to £138 million.
While operating profit bounced back to £182.1 million for 2017, IBM has since continued to resort to the tactic of redundancy cycles in order to return to growth and improve profitability. As a result, in December it was reported that almost 1,900 front line services personnel at IBM UK were at risk of redundancy, with more than 500 of those scheduled to leave the company as part of its latest cost purge.
This included 1,118 heads at risk in IS Delivery (ISD), where IBM aimed to cut down on 362 positions. A further 780 people in Technical Services Support (TSS) were also deemed "in scope", with 152 of the latter to be laid off. The anticipated number of 500 staff has been more than surpassed, however.
In the end, some 800 UK jobs vanished from IBM’s British operations, with profit and loss accounts filed at Companies House confirming around 11,297 workers were on the payroll at the end of the year, contrasting with 12,124 the year before. According to reports from IT news site The Register, however, while the process has let IBM cut costs by offshoring a chunk of its workforce, it did not allow the firm to capitalise on improving top-line numbers. Sticking with the tactic of lay-offs to improve its results has ultimately failed to pay dividends for Big Blue.
Turnover rose by 3% year-on-year to £3.823 billion, thanks to gains made across the board in hardware, software and services areas, meaning IBM recorded a gross profit of £241.3 million from £191.1 million in the previous term. This growth included a 7.45% spike in revenue for IBM’s global business services wing, outpacing the expansion of the broader UK consulting market. In spite of this, heightened admin expenses, coupled with impairment losses on financial and contract assets, saw operating profit fall spectacularly from the £182.1 million of 2017 down to £67 million.
