Wonga, that oh-so-controversial of businesses, has announced it will cut its UK-focused workforce in half and close two of its international offices in an attempt to find savings of £25m over the next two years.
The payday lender appears to be feeling the pain of new regulations designed to rein in the market for expensive short-term credit, which were announced in October. Lenders can no longer charge more than 0.8% interest per day and borrowers will never have to pay back more than twice what they borrowed.
‘Wonga can no longer sustain its high cost base which must be significantly reduced to reflect our evolving business and market,’ said its chairman Andy Haste, who was brought on board last July. ‘Regrettably, this means we’ve had to take tough but necessary decisions about the size of our workforce.’
The company currently employs around 650 staff that work on its UK arm – 285 of them in this country and the rest in South Africa, Ireland and Israel. Within 12 months this will be slashed to just 325, and its offices in Tel Aviv and Dublin will both be closed by mid-2016.
It also announced the sale of its small business-lending arm, Everline, to rival digital lender Orange Money, which trades as Ezbob. The tie-up looks like a good fit for Orange, which is thought to have solid technology in place but is definitely behind Everline in the branding stakes.
It’s certainly a lucky escape for Everline’s managing director, Russell Gould, who will become COO of Orange Money. Now he can enjoy being part of the rapidly growing and trendy financial technology (fintech) scene without having to field awkward questions about his company’s links with the mothership.
There will be those who will see today's news as evidence that regulation is working. Many delight in the struggles of Wonga, which to some has become a symbol of Britain's debt problems and growing inequality. But the 325 people about to find themselves out of work are unlikely to feel the same way.