BT to cut jobs in Ignite rescue bid

BT is to make another 2,200 people redundant in an effort to turn round the fortunes of its loss-making IT services division, Ignite.

The job cuts will focus on administrative staff but are to be accompanied by a programme to hire up to 1,200 staff in sales and marketing.

It is understood that BT has hired the human resources consultancy Reach to help with the cuts, which will all be on a voluntary basis. Around half of the redundancies will be in the UK. They come on top of the 5,000 already announced across the group.

Ignite, which employs 17,000 and has offices in the UK, continental Europe and the US, was singled out by chief executive Ben Verwaayen last month as a business that needed to pull its socks up.

Mr Verwaayen said that if any of Ignite's businesses were losing money by 31 March 2003, they would be closed down.

Run by Andy Green and focused on high-growth web hosting, Ignite was once seen as the jewel in BT's crown. During the internet boom of 2000 there was talk of spinning off Ignite as a separately quoted company with a market capitalisation of up to £15bn. But last year the business lost £380m as demand for many of its e-commerce and internet services declined.

Today, following its failed US joint venture, Concert, with AT&T, BT is under pressure from the City to retrench completely to the UK.

On Thursday BT will present its full-year results and is expected to reveal a £1.3bn profit. However, the City is likely to grill Mr Verwaayen and his new finance director Ian Livingstone on Ignite's progress.

Mike Williams, telecoms analyst at Deutsche Bank, said: "We believe that the recovery and restructuring story at BT is intact, and the new management team has staked its reputation on delivering a sustained improvement in the financial performance of the group."

The City is also expected to scrutinise the progress of BT's loss-making internet division, Openworld. The business, run by Alison Ritchie, is viewed as having established a head start in offering broadband internet services. But there are worries that it overlaps with Ignite in providing corporate internet services and with BT Retail, which plans to launch its own broadband package in September.