Bank of England Announces Voluntary Redundancy Scheme in Funding Overhaul

The Bank of England has signalled potential job losses among its workforce of nearly 6000 as part of cost-cutting measures to finance improvements in its economic forecasting. Governor Andrew Bailey has urged all Bank staff, excluding those based in Leeds, to consider a voluntary resignation scheme as the institution enacts a £45 million savings initiative. These actions follow heavy investment in IT systems and an overhaul of analytical processes, motivated by substantial criticism over the Bank’s previous economic forecasts.

The voluntary plan forms part of an 8 percent reduction in the Bank’s core budget, which currently stands at £562.5 million. In a communication to employees, Mr Bailey characterised the programme as entirely voluntary but acknowledged that compulsory redundancies could not be ruled out in the future. Not all applications will be accepted, with the Bank reserving the right to select participants. Successful applicants will receive severance pay amounting to 10 percent of their annual salary for each year of service, up to a maximum of two years’ salary or £150,000, whichever is lower.

The findings of an independent review by former Federal Reserve chairman Ben Bernanke prompted this move, after highlighting significant inadequacies in the Bank’s forecasting capabilities. In response, the Bank increased hiring and modernised its IT infrastructure; the current cost-saving measures are designed to reallocate funding to these critical areas. Mr Bailey stated the reforms are essential to ensure the Bank remains efficient and fit for future challenges. He emphasised the transformation would create new internal opportunities and enable strategic assessment of the skills required going forward.

The voluntary resignation scheme is open for applications until 16 January 2026, with decisions due to be communicated to staff in February. Departures of approved applicants will take effect from March. Employees based in Leeds are not eligible, reflecting the Bank’s commitment to expanding its presence in that city with a goal of employing one in ten staff there by 2027. The union Unite issued a statement pledging to resist any compulsory job losses in the financial services sector, highlighting anxiety among staff and the broader industry as structural shifts within the Bank continue.

A Bank of England spokesperson said the changes are part of a multi-year operational transformation and are necessary to ensure the institution’s resilience and effectiveness in meeting its statutory objectives to maintain monetary and financial stability. The Bank’s annual report suggests that £45 million equates to the entire yearly operational spend of its research data and analytics department, underscoring the scale of the cost-saving drive.