Davies warns over downsizing

Howard Davies, deputy governor of the Bank of England, yesterday added his voice to the growing criticism of "downsizing".

Mr Davies, a former director general of the Confederation of British Industry, told the Institute of Management's annual companions lunch in London that in following US companies down this road, "we may have backed ourselves into a corner". In particular, there was a "danger of communicating mixed and confusing statements".

Every company said its employees were its greatest asset, "but when the chips were down" it readily reduced the size of those resources, he added. That confusion was not likely to create the state of mind that would bring the improved performance being sought.

The problem stemmed from what he believed were several generally accepted but conflicting principles. Among these was the realisation that the changing business environment had created a need for different skills and the end of the cradle-to-grave employment contract, and the idea that meeting the obligation to train employees gave most companies a loyal and more productive workforce.

Stephen Roach, the Wall Street economist whose change of mind over downsizing initiated the current debate, had asked whether the resurgence in productivity had put too great a strain on employees and could lead to a labour backlash. That could happen here, he said.

Pointing out that legislative interference in such matters did not generally work, he said companies should be looking to develop their employees to give them "lifelong employability if not employment". Certain companies, such as Unipart, with its internal "university", were moving in this direction.