Supermarket chain Iceland Frozen Foods has announced a plan to cut 400 head office staff.

Iceland said it had begun a consultation with head office employees on staff reductions. It currently has some 1,200 employees at its head office, out of a total workforce of 20,000.

“I deeply regret that one of the first actions of the new management team has to be to seek a radical reduction in head office staffing, but this is absolutely essential if the business as a whole is to move forward,” said chief executive Malcolm Walker.

“Since I left Iceland four years ago, there has been a huge increase in the number of people employed at head office, and overheads have increased by around £40 million.   This reflects the massive growth of complexity and bureaucracy throughout the business under the previous management team,” he said. “Far from delivering results, this has produced a situation in which our annual turnover is now some £400 million lower than it was in the year 2000, like-for-like sales are currently down 10%, and the business will record a loss for the financial year to March 2005.”

Walker founded Iceland, but left four years ago. He returned after Iceland was taken over by a consortium led by Icelandic Group Baugur.

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“This has to be tackled quickly and decisively, by radically simplifying the business and rebuilding our relationship with our customers,” he said. “The headcount
reduction we are seeking will save money, but will also create a more efficient and responsive operation for the future.  Sadly we can only do this by removing the unnecessary layers of administration that accrued under the previous management.”

“I sincerely regret that the financial situation we have inherited means that we will only be able to offer those employees facing redundancy the statutory minimum payments,” he said. “This makes a sorry contrast with the substantial severance packages received under their contracts by the former management, who are responsible for the current state of affairs.”

“This is only the beginning of a recovery process designed to restore Iceland to sales growth and profitability by focusing on its core products, strengths and values.  The challenges we face are immense, the changes we need to make will be painful, and it will take time for them to produce results.  However, I have no doubt that what we are proposing is the only way to ensure a future for Iceland and the vast majority of its hard-working people,” he said.