March 17 (Reuters) - British lender Close Brothers said on Tuesday it expects to cut 600 roles by fiscal 2027 as part of its ongoing cost-reduction efforts, citing rising costs linked to the motor
Britain's Close Brothers to cut 20% of staff as compensation costs bite
Close Brothers Faces Staff Cuts Amid Motor Finance Scandal Fallout
By Rishab Shaju
March 17 (Reuters) - Close Brothers, grappling with costs stemming from one of the UK's most expensive mis-selling scandals, will cut around a fifth of its workforce by 2027, it said on Tuesday as short-seller pressure helped send its shares plummeting.
Stock Performance and Short Seller Impact
The British specialist lender's stock plunged around 10% to their lowest level since June 2025 in morning trade, extending a 14% drop on Monday when short seller Viceroy Research said it had taken a short position.
Viceroy alleged Close Brothers "systematically misrepresented" its exposure to the Financial Conduct Authority's planned redress scheme for millions of consumers given unfair motor loans between 2007 and 2024.
Viceroy's report alleged the bank could breach its regulatory capital limits when it accounts for the full cost of reimbursing customers affected by the motor finance scandal.
Close Brothers' Response to Allegations
"We strongly, strongly disagree with it," Close Brothers Chief Executive Mike Morgan said of the report in an interview with Reuters. "We have robust governance, and clearly there's oversight from both internal and external organisations. We operate to the highest standards."
Benjamin Toms, an analyst at RBC Capital Markets who has covered the motor finance scandal extensively, said the Viceroy report was "sensationalist, due to the impact study being built on five modelling inaccuracies".
Financial Performance and Strategic Actions
Getting Returns Back in Double Digits
Close Brothers' shares have fallen 58% since January 2024, when the FCA launched its review into past motor finance commissions arrangements.
The bank's outstanding bonds, due 2030, have fallen from 86 to 83 pence since February 27 but did not change meaningfully in price on Tuesday.
Measures to Strengthen Capital Position
To shore up its capital position, the FTSE 250-listed company has curtailed lending, sold its wealth business, suspended dividends and reduced operating expenses in recent years.
"We are not just going to stop at this. We want to get our returns back up into double digits, and that's what we are guiding to by 2028," Morgan told Reuters.
Workforce Reductions and Future Outlook
Close Brothers, which employs about 3,000 people across the UK and Ireland, said it plans to cut 200 jobs this year and further reduce headcount by 400 next year.
The FCA is expected to update the market by the end of this month on the final rules of its compensation scheme.
CEO Morgan added that the lender needs additional clarity on the redress scheme before reinstating its dividend.
Recent Financial Results
Close Brothers on Tuesday reported a statutory loss before tax of 65.5 million pounds ($87.19 million) in the six months to January 31, reflecting the additional 135-million-pound motor finance provision it took in October.
($1 = 0.7513 pounds)
(Reporting by Rishab Shaju in Bengaluru; Additional reporting by Lawrence White; Editing by Sumana Nandy and Joe Bavier)
