Crunch time at Capital One?

First things first - 750 jobs in one business at one time is a sizeable hit for Nottingham’s economy, particularly given the prominence of Capital One.
Though it amounts to only one per cent or so of the total number of people working in the financial and business services industries in Greater Nottingham, no one should under-estimate its impact – either on the city, or on the people who walked home with redundancy notices.
That’s 750 more people competing for jobs at a time when the economy is in a downturn, 750 fewer people wandering into town spending money in local shops, 750 fewer people hopping on trams and trains on Station Street.
Such a major reduction in staff also raises other questions: how much work will a smaller Capital One hand out to local suppliers? Will 1,000 staff need as much office space as 1,750? Will Capital One concentrate everything in one office instead of two?
We don’t know at this stage. What we do know is that staff who wandered away to absorb the news at the bars around Castle Wharf were not completely surprised by the redundancy announcement.
Rumours have been circulating for some time that the company was going to make redundancies here.
They can be traced back to June last year, when Capital One’s US parent company started talking about “downscaling” its business to save money.
Capital One insisted yesterday that this wasn’t about the credit crunch, but I’d be amazed if it wasn’t a contributory factor.
If you look at the financial statements of the US parent, you’ll see an enormous leap in the amount of money the business set aside for bad debt as the year progressed. Even in the second quarter of the year – well before losses on sub-prime loans in the US became headline news – it was already writing off more than $500 million from bad loans.
By the end of the year that figure had rocketed to a whopping $1.3 billion – clear evidence of a rising problem with defaults on loans.
Now, it may well be that Capital One was going to cut costs whatever happened, and outsourcing work to India and the Philippines is hardly ground-breaking in financial services.
The worry among some is that these jobs losses may not be the last. We may see some pointers when Capital One issues figures in the USA later this week detailing its financial performance in the first three months of this year.
One final point. Though Capital One has promised enhanced redundancy terms for people losing their jobs, it may come under pressure to offer more. One associate has already set up a MySpace page asking for people to come together to discuss what they are being offered. It can be found at www.myspace.com/capitalone_redundancies