Corus, Britain's biggest steelmaker, today confirmed its employees' worst fears by announcing a £600 million cost-cutting programme that will cost about 3,500 jobs, including 2,500 in the UK.

The group, owned by Tata, the Indian conglomerate, said the job cuts, part of a package of measures aimed at improving its competitive position, would be achieved where possible through voluntary redundancies, while outplacement support would be made available.

Corus employs 42,000 people, with 24,000 of the group’s global workforce based in the UK.

Today's job cuts are another blow to the UK economy which is now officially in recession and has seen the number of redundancies rise sharply since the beginning of the year.

Unemployment is currently running at 1.92 million in Britain but is increasingly expected to hit three million during 2009.

Corus also said today that it would make a series of asset disposals. In addition to the recently announced sale of its aluminium smelters in Germany and the Netherlands, it was in advanced discussions over the sale of a majority stake in Teesside cast Products.

It will also mothball its Llanwern hot strip mill and restructure its engineering steels division into two businesses - a speciality steels business in Stockbridge and a bar business in Rotherham.

Corus has already mothballed two blast furnaces at its Scunthorpe and Port Talbot plants, but the slump in demand has forced it to consider permanent changes.

The group said that an efficiency and overhead review would include support functions such as IT, finance and human resources, with a target of reducing costs in these areas by 20 per cent.

Corus said the measures should yield about £600 million of cash benefits in the six months to the end of March and bring annual improvements in operating profit of more than £200 million.

It said the British Steel Pension Scheme's defined benefit scheme would be closed to new recruits and steps would be taken to ensure the group's future contributions would remain at 12 per cent.

Philippe Varin, the Corus chief executive, said: “The structural changes we are proposing today have been carefully considered. They are essential for the future of the business.

"The company will keep its focus on priority areas such as training, research and product development, which, together with today’s initiative, will ensure Corus is in the best possible shape to compete strongly in the future.”

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