This email was sent to all staff by the Director General today

From: Mark Thompson
Sent: 12 November 2008 17:23
Subject: Current Financial Situation

This email is going to everyone

Dear All,

Today the Government and Bank of England have published the latest set of economic indicators. It's easy to think that an economic downturn is something that only impacts commercial organisations, but it isn't. The BBC is not immune either. But we are in a stronger place than most as a result of action we've taken over the last few years to reduce our costs. We have taken out more costs than any other broadcaster, reducing our annual costs by £350 million and taking out 7,000 posts in the last four years. Our ongoing efficiency targets mean we need to continue to cut costs by 3% every year, that amounts to savings of £535 million a year. The fact that we've made these savings, while at the same time continuing to deliver high quality output like Little Dorrit, Oceans, the US election coverage and Radio 3's brilliant drama, All Quiet on the Western Front, is all the more impressive. But despite the good work we've done, the financial crisis is forcing us to look again at our plans for the future.

There are two major factors that impact our finances: a sharp decline in the commercial property market, and the consequences of inflation on a fixed revenue business like ours. Following the licence fee settlement last year, we embarked on a review of our property strategy to raise additional income. We decided that we should sell some of our property holdings in the London W12 area, including Television Centre and Woodlands, and planned to do this by 2013. You only need to look at the empty offices across the UK to see that we'll need to review this timetable. Delay will have a knock-on effect on our spending plans, a point made starkly yesterday by Chris Kane, the BBC's Head of Corporate Real Estate, who reported that we face as much as a £140m shortfall over the next five years if we are unable to dispose of these assets.

Inflation is an issue too. Recently I wrote to you about the £8 million year-on-year rise that we're seeing in our utility bills. We have already undertaken some day-to-day housekeeping including new policies on the use of taxis, limits on entertaining, attendance at award ceremonies and conferences. For all large organisations, corporate hospitality is an important part of doing business. However this year we will significantly reduce our spend in this area and we will have targets to achieve further reductions over the course of the current licence fee period. While the newspapers have fixated on the ban we announced on champagne, this is a wide ranging programme to save money where we can.

But the scale of the challenge means that we are having to look deeper at where we can reduce our costs. A team led by Strategy and Finance is now talking to the divisions about where savings can be found. Our guiding principles are to maintain the high quality output that you have all played a part in delivering, and given the very deep headcount reductions we have already made to minimise any further large-scale job losses. Given that we have already made tremendous efforts to achieve savings, finding additional areas to save money will be challenging. But we need to do it – and to do it in ways which do not damage the quality of the services we offer the public.

Next month I will report back to you on our initial plans for addressing this issue.

All the best,

Mark Thompson
Director-General