Barclays to axe 5,000 jobs by end of year after banking on AI savings

Barclays plans to cut 5,000 jobs globally by the end of the year as it focuses on cost-cutting measures and utilizes artificial intelligence. The reductions will make up five percent of the company's worldwide workforce, primarily affecting support functions such as developers. Barclays CEO CS Venkatakrishnan, also known as Venkat, stated that the job cuts are a consequence of the investments made in technology over the years, which the company plans to continue.

Out of the 5,000 layoffs, approximately 1,000 positions were eliminated in the first half of the year, with the remaining cuts scheduled for the final two quarters of the year. Venkat emphasized that the use of AI is a "icing on the cake," not the foundation of the bank's strategy. The financial institution aims to achieve over £2 billion in total cost efficiency savings between 2026 and 2028.

Despite missing profit expectations in the third quarter due to its investment bank falling short of forecasts, Barclays reported a £2.3 billion pre-tax profit for the three months ending September, a 12 percent increase year-on-year. The investment bank's total income reached £3.1 billion, slightly below the £3.3 billion forecast.

Barclays' equities division, however, saw a 47 percent increase to £1 billion, attributed to market volatility stemming from the US-Iran war. Conversely, fixed income declined by 19 percent year-on-year to just over £1 billion due to reduced client activity in rates and credit, as well as macroeconomic challenges. Venkat has been implementing a comprehensive overhaul of the group's investment bank as part of his multi-year strategy, with the goal of aligning the division's return on tangible equity (RoTE) with the broader group target of 12 percent by the year's end.

RoTE measures a company's net income relative to the average value of its common equity. The investment bank has currently recorded a 13.5 percent RoTE year-to-date, up 60 basis points from the same period last year. The group's RoTE has also risen to 13.8 percent year-to-date, compared to 12.3 percent the previous year. Barclays announced a £500 million share buyback following the results.

Operating expenses for the period amounted to £4.6 billion, with £201 million in Structural Cost Actions (SCAs), up from £93 million. Additional SCAs of £300 million are planned for the fourth quarter of 2026 to further drive structural efficiency savings. In Barclays' UK retail banking division, earnings grew by five percent in the latest quarter to £1.8 billion, fueled by structural hedge earnings and robust mortgage balance growth.

This information comes as the bank prepares to release its latest financial report just before Chancellor John Healey delivers his first Budget, where banks may face increased taxes. Healey has faced pressure from left-wing Labour party members and trade unions to impose higher taxes on the sector following the industry's substantial profits this year.

One potential lever for Healey to consider is raising the banking surcharge on top of corporation tax, currently set at three percent after being reduced from eight percent under former Chancellor Jeremy Hunt in 2023. A reduction in the surcharge could generate around £2 billion annually.