UK's Sainsbury's to cut over 3,000 jobs to counter 'challenging cost environment'

By James Davey

LONDON (Reuters) - British supermarket group Sainsbury's said on Thursday it was proposing to reduce its headcount by over 3,000 roles as it seeks savings to counter a "particularly challenging cost environment".

The group, which with a UK grocery market share of 16% trails only Tesco, said a head office reorganisation would see a 20% reduction in senior management roles.

UK companies, and particularly large employers, are facing increased costs this year after the new Labour government's first budget in October hiked employer social security payments and the national minimum wage.

Sainsbury's said in November that the rise in employer National Insurance contributions alone would cost it an additional 140 million pounds ($172 million) a year.

Seeking additional space in stores to sell more of its fresh food ranges, the retailer is also proposing to close its remaining patisserie, hot food and pizza counters, as well as its remaining 61 Sainsbury's Cafes.

The restructuring of Sainsbury's bakery offer will include "new self-serve bread slicing".

The group, which currently employs 148,000, said it would look to redeploy staff where it could.

"We are facing into a particularly challenging cost environment which means we have had to make tough choices about where we can afford to invest and where we need to do things differently to make our business more efficient and effective," CEO Simon Roberts said.

Shares in Sainsbury's were down 0.3%, extending losses over the last year to 9.5%.

Sainsbury's is approaching the end of the first year of Roberts' latest strategy, which is seeking 1 billion pounds of operating cost savings over three years.

Earlier this month, the group said it was on track to deliver full-year profit growth of around 7%, after robust food sales over the Christmas quarter offset weakness in general merchandise.

($1 = 0.8124 pounds)

(This story has been refiled to add a dropped word in paragraph 1)

(Reporting by James Davey; Editing by Catarina Demony and David Evans)