UK: Capita to replace 2,000 staff with robots

Capita to replace staff with robots to save money

Outsourcing giant to axe 2,000 jobs and use ‘proprietary robotic solutions’ after clients cut spending following Brexit vote

Capita believes costs can be cut by using robots, to help eliminate human error and make decisions faster.

By Rob Davies Thursday 8 December 2016 14.29 EST

A British outsourcing company whose contracts include collecting the BBC licence fee is to replace staff with robots as it slashes costs.

Capita, a FTSE 100-listed firm that also runs the London congestion charge, said it needed to axe 2,000 jobs as part of a cost-cutting drive in response to poor trading.

It said it would use the money it saved from sacking thousands of staff to fund investment in automated technology across all of the company’s divisions. The announcement will fuel growing fears that human workers will have to make way for robots, as companies turn to technology to boost profits.

The Apple and Samsung supplier Foxconn was reported to have replaced 60,000 workers with robots earlier this year, while the former chief executive of McDonald’s suggested a similar tactic in response to low-paid workers’ demands for better pay and conditions.

In a gloomy statement that sent its shares to a 10-year low at one stage, Capita said it had been hit by “headwinds” as its corporate clients reined in their spending. The company unveiled plans to shore up its finances, saving £50m a year via austerity measures, including greater use of “proprietary robotic solutions” and moving around 200 jobs to India.

The chief executive, Andy Parker, said Capita, which made a pre-tax profit of £186m in the first six months of this year, would use robots to help eliminate human error and make decisions faster. The company employs 78,000 people.

“It doesn’t remove the need for an individual but it speeds up how they work, which means you need less [sic] people to do it.”

He said a human assisted by automated robotic technology could do a 40-minute job in much less time.

“They [human staff members] can then do 10 times the amount they used to, so you need less [sic] people to do the same amount of work.”

Parker said this would make the company more efficient by “taking away some of the decision-making and cutting down potential errors”.

Capita, which provides services ranging from electronic tagging for offenders to store card services for retailers, will also move some of its IT operation abroad. Parker said this would involve “a couple of hundred” jobs being shifted to India.

The company’s decisions on staffing are part of an attempt to reduce costs without causing shareholders any financial pain. Parker said the cost cuts – coupled with asset sales – would allow Capita to avoid reducing its annual dividend, which was worth £200m last year and £180m the year before.

But despite the effort to protect investors, shares in the company finished down more than 4%, having fallen more than 14% during the day, as investors were left stunned by the company’s pessimistic outlook.

Parker said he “would have thought there’d be a more positive reaction”.

Rehana Azam, the national secretary for public services at the GMB union, said: “Public services are predominantly delivered by people so it’s hard to see how they’re going to provide a cost-efficient service from call centres in another country.

“We’d want to sit down with Capita and make sure people are treated fairly in any process that ends with them losing jobs.”

Azam cast doubt on whether using robots to automate some of its systems would work. “We’ve never had a good track record with private providers delivering computerised systems. I’d like to see where there have been good examples of that kind of automation.”

Capita has struggled as its clients, which include O2, M&S, John Lewis and Dixons Carphone, have looked to cut costs in areas such as corporate travel and recruitment.

The company refused to blame the Brexit vote for the disappointing update but said earlier this year that uncertainty over the UK’s relationship with the European Union had hit its business, delaying key contracts.

Capita is predominantly UK-based, unlike bigger rivals, such as G4S and Serco, which have been sheltered to a large degree from the Brexit-related fallout by their bigger geographical footprint.


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