Guardian to slash costs by a fifth as losses mount
The Guardian is seeking to slash £54m in costs after a review of its finances found that at its current rate of spending it could burn though its £758m trust fund in less than a decade.
Kath Viner, the left-leaning newspaper’s editor, and David Pemsel, its chief executive, told staff that the fund had declined by £100m since July amid a steep fall in print advertising. The financial position is "fragile", they warned.
Announcing deep cuts, they said they will shave 20pc off annual running costs of £268m, in an attempt to match spending with revenue growth and staunch operating losses within three years. Costs are up 23pc in the last five years, compared with only a 10pc rise in turnover.
At the first of two ‘town hall’ meetings at the Guardian’s King’s Cross headquarters, Mr Pemsel declined to comment on potential cuts to its 1,960 staff. Heads of department have been asked to find savings wherever possible, with the number of job losses due to be revealed in March.
Mr Pemsel, appointed in June, added that the Guardian could even consider moving out of its offices in the King’s Place building. He has already halted work on a nearby events venue in the historic Midland Goods Shed and is considering pulling out of the plans completely.
Plans for the Midland Goods Shed are already on hold Photo: Bennetts Associates
The venue was to be a hub for the Guardian’s membership scheme, which asks readers to pay up to £600 per year for access to debates and other live events. However, there are doubts as to whether the building is a good investment given it will not be able to host large events.
The membership scheme will in any case be relaunched with the goal of doubling revenues in three years, staff were told. Mr Pemsel ruled out a 'paywall' to charge for access to the Guardian’s website or mobile apps, but suggested some content could be available to paying members only.
The loss-making operation is supported by a £735m investment fund. It was boosted last year by the flotation of the used car classifieds publisher Auto Trader, which the Guardian owned in a joint venture with the private equity firm Apax Partners.
The pair are lining up their other shared asset, the conference organiser Ascential, for a stock market debut next month. It should provide a further boost to the Guardian’s dwindling trust fund, which is charged with ensuring the newspaper’s survival.
But Mr Pemsel said its current spending could not continue.
He said: “Against the backdrop of a volatile market, we are taking immediate action to boost revenues and reduce our cost-base in order to safeguard Guardian journalism in perpetuity.
“This plan will ensure our business is increasingly adaptable and better able to respond quickly to the pace of change in the digital world.”
The Guardian has invested heavily in newsrooms in the United States and Australia but has yet to see significant commercial returns from the international operations. Staff were told there would be increased focus on “increasing their contribution to the overall business”.
The newspaper will also seek to replace print advertising sales by increasing its efforts on 'branded content’, whereby advertisers sponsor online articles and videos.
The planned cost cuts are likely to cause particular concern at the Observer, Guardian Media Group’s Sunday title, which is not protected “in perpetuity” in the same way as the Guardian.
A source familiar with the cost-cutting plans said: “This should not be taken as a sign that the Observer is at risk.”