Barclays hit by £2bn downturn loss

The bank expects market conditions to remain tough and focuses on rationalising IT spend

Barclays will cut down on IT contractors to generate savings as profit plunges

Barclays Bank has announced a profit slump of 33 per cent drop for its half-year results as a consequence of £2bn worth of losses directly related to the credit crunch.

The actual profit at the bank reached £2.75bn, compared with £4.1bn for the same period last year. And writedowns totalling £2.8bn are another feature of the "acutely disappointing" bank’s results.

Barclays said it expects the market conditions over the foreseeable future to remain tough and that it will be carrying out a strategic plan to tightly control resources, which will include a sharper focus on IT spending.

“We must remain very vigilant to managing risk,” said the group’s chief executive John Varley. “The focus of our work in the area of ‘operational excellence’ is directed at the management of risk, cost and capital.”

Part of the bank’s cost control strategy involves reduction in the number of IT contractors and temps it employs. The bank will also will offshore 1,800 technology jobs over the next two years and has confirmed that 700 will be transferred by this September.

Barclays will also need to tackle rising energy costs and supply shortages in London’s Canary Wharf,­ where its subsidiary Barclays Capital is based.

The energy-related issues have prompted the launch of a green computing project, but the lack of clear measuring methods and technology available has hampered progress.

And the bank's card business, Barclaycard, will issue more than one million contactless cards this year as part of its migration programme to the new technology.

Other divisions of the bank such as Barclays Wealth had positive results in the first half of the year and profit before tax grew five per cent to £182m, mainly due to “tight cost control” which allowed for the upgrade of technology and operating platforms.