Close Brothers to cut 20% of workforce as motor finance costs mount

Summary

• Close Brothers plans to eliminate 600 roles by 2027 to stabilize its cost base.
• Escalating compensation provisions for the UK motor finance scandal have driven a significant earnings slump.
• The lender reported a £65.5 million statutory pretax loss following a massive £135 million provision increase.

LONDON, March 17, 2026 — Close Brothers has announced plans to cut approximately 600 jobs—roughly a fifth of its total workforce—as the specialist lender struggles to offset the financial weight of a mounting motor finance mis-selling scandal.

The restructuring, which is expected to be completed by 2027, marks an aggressive attempt by the merchant bank to protect its capital position. Close Brothers currently employs about 3,000 staff across the UK and Ireland. The planned headcount reduction comes as the bank accelerates its cost-saving program, now targeting £60 million in annualised savings by the end of next year.

The move follows a challenging period for the firm, which reported a statutory pretax loss of £65.5 million for the six months ending January 31. This deficit was primarily fueled by an additional £135 million provision taken in October 2025 to cover customer redress related to historical car loan commissions.

Chief executive Mike Morgan described the layoffs as a "regrettable but necessary" step to ensure the bank remains agile in a shifting regulatory environment. Despite the job cuts, the bank noted it expects to incur between £30 million and £40 million in restructuring costs through fiscal 2027 to facilitate the transition to a more automated, AI-driven operating model.

Regulatory headwinds and market volatility

The job cuts are the clearest signal yet of the pressure facing the UK motor finance sector. The Financial Conduct Authority (FCA) is currently finalizing a massive compensation framework for millions of consumers who were sold loans with non-disclosed commission structures between 2007 and 2024.

While the industry-wide compensation estimate sits at £11 billion, some market analysts fear the final tally could be significantly higher. These fears were compounded on Monday when Viceroy Research disclosed a short position in Close Brothers. The short-seller alleged that the bank has systematically underestimated its exposure to the redress scheme—a claim the bank’s board has "strongly" rejected.

Shares in Close Brothers fell 15% following the Viceroy report, reflecting deep-seated investor anxiety over the bank’s ability to absorb further regulatory shocks without a major capital raise.

Why this matters

• Sector Strains: Illustrates the deepening crisis in the UK motor finance market, which is now mirroring the scale of the historical PPI scandal.
• Operational Shift: Indicates a broader trend of mid-tier lenders moving toward offshoring and AI to maintain margins amid regulatory pressure.
• Investor Sensitivity: The sharp reaction to short-seller claims highlights how fragile sentiment remains for banks with high consumer-redress exposure.
• Capital Preservation: The decision to skip the dividend and cut staff shows the bank is in "defensive mode" to keep its CET1 capital ratio within a healthy 14.3% range.

FAQs

Q1: What is behind the job cuts at Close Brothers?

The bank is reducing its headcount by 20% to manage the soaring costs associated with customer compensation and legal fees related to historical car finance commissions.

Q2: How deep are the losses?

Close Brothers posted a £65.5 million pretax loss for the first half of the 2026 financial year, largely due to a £135 million charge for potential redress payouts.

Q3: How has the market reacted to these developments?

Investor confidence has been shaken, with shares falling 15% this week after a short-seller report suggested the bank’s liabilities could be double its current provisions.

Q4: What is the "motor finance scandal"?

It involves a decade-long industry practice where car dealers were allegedly allowed to hike interest rates for customers to earn higher commissions from lenders without proper disclosure.