Unions and analysts are gearing up for thousands of job cuts at BT after a radical shake-up of the telecoms giant.

The company is expected to reveal a significant reduction in its headcount at its second-quarter results next week. It comes after an announcement in April about a restructuring aimed at making the company more efficient and helping it to compete better in Britain’s telecoms and broadband market.

At that time BT said that the reorganisation would result in “restructuring costs” of about £450 million. Analysts at Citigroup expected the group to announce in its results next Thursday a “significant reduction” in employees, accounting for £230 million of that £450 million.

Sources said that the cuts would hit middle management and would take the form of voluntary redundancy packages. The plans are thought to have been discussed by BT with Connect, the union.

The telecoms group is expected to say that overall staff numbers could be maintained through the recruitment of more lower-ranking staff.

A BT spokesman said: “We will be updating the City on our transformation plans at our results next week.”

BT is one of the country’s biggest employers, with a 106,000-strong workforce employed at an annual cost of about £5 billion. The group’s total wage bill increased last year by £243 million as it recruited additional staff to service its network.

Many analysts believe that BT could benefit from streamlining. One said that a move to cut jobs would be welcomed to release “latent efficiency growth potential”.

Several senior staff, including Andy Green, head of strategy and operations, have recently quit BT. Mr Green, who was thought to be a future chief executive, will become head of Logica, the troubled Anglo-Dutch computer services company.

The shake-up at BT is part of its efforts to transform itself from a calls and line business into a modern communications player serving big multi-nationals as well as consumers. The move involves the transferring of 20,000 employees into business units called BT Design and BT Operate.

BT has said that it expects a pay-back on the total £450 million restructuring charge within three years.

Competition for telephone and broadband customers in the UK, where BT is competing with big-name rivals such as Virgin Media and Carphone Warehouse, has already triggered cuts elsewhere in the sector.

Last year Cable & Wireless, BT’s main competitor in the business market, announced 3,000 job losses at its UK business. Tiscali, the Italian broadband and pay-television group, is also in talks about up to 800 cuts after its acquisition of Pipex, its smaller rival.

News of the expected staff reductions came amid an escalating row between Ofcom, the telecoms watchdog, and Brussels over the introduction of a “super-regulator”. Ed Richards, the head of Ofcom, has condemned the plans as likely to undermine his organisation, but yesterday Viviane Reding, the European Information Society and Media Commissioner, said that “no one plans to question the existence of Ofcom”. The commission was seeking to ensure that national telecoms regulators “work more in harmony”, she said.

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