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Banks' owner blames cuts on economy

The owner of Clydesdale and Yorkshire banks has blamed the UK's faltering economy for a "brutal" restructuring that will axe more than 1,400 jobs.

National Australia Bank's two UK brands will cut about 17% of their workforce by 2015, as they mainly pull out of the south of England and concentrate on their heartlands in Scotland and the north of England.

The banks, which have 337 branches, will close 29 of their 73 Financial Solution Centres, which offer services to businesses and better-off individual investors, while nine will be merged with local retail branches, following a strategic review. In addition, six back office locations will be shut.

The decision was blamed on a deterioration in the UK economy, which recently slipped back into recession, with commercial property markets particularly badly hit.

The announcement comes as the banks racked up a £25 million loss in the six months to the end of March, compared with a £77 million profit in the previous year, reflecting a higher charge on bad debts and higher funding costs. The results reveal a £141 million write-down to the value of Clydesdale and an additional £120 million set aside to cover mis-sold payment protection insurance.

But Unite national officer David Fleming said the announcement was "nothing short of brutal" for the UK workforce. He said: "Unite finds it disgusting that the company decided to release a statement from Australia in the middle of the night so UK staff across Yorkshire and Clydesdale banks would wake up to hear that their jobs are being cut through the morning news reports."

The bulk of the job losses - 670 - will come from the closure of the financial services centres in the south, 300 jobs are set to go in Yorkshire, 60 in Scotland, on top of 200 that have already been announced. A further 200 will be moved to NAB.

NAB chief executive Cameron Clyne said: "In the last half year there has been a significant downgrade in the growth prospects of the UK economy, in part reflecting the drag on its recovery from heightened weakness in the eurozone. In addition, the commercial property market, which had previously seen signs of recovery, has recently experienced a "double dip" as the recovery stalls and other banks accelerate the reduction in their commercial real estate exposures.

"This has contributed to the current downturn in the UK being longer and slower to recover than experienced in the 1930s following the Great Depression, and has led us to take these actions at this time."

He added that the UK retail operations had delivered reasonable returns and grew mortgage lending and deposits despite challenging conditions. But the losses were driven by charges for doubtful debts in its commercial property market. The restructuring will cost £195 million but will deliver cost savings of £74 million by 2015.

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