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Klarna to cut 10% of staff as it warns of recession Klarna to cut 10% of staff as it warns of recession
(about 1 hour later)
Buy now pay later firm Klarna has announced plans to cut around 700 staff as it warned of a "likely recession".Buy now pay later firm Klarna has announced plans to cut around 700 staff as it warned of a "likely recession".
The Swedish firm blamed a combination of rising prices, a change in consumer sentiment and the war in Ukraine for the move.The Swedish firm blamed a combination of rising prices, a change in consumer sentiment and the war in Ukraine for the move.
"What we are seeing now in the world is not temporary or short-lived, and hence we need to act," said chief executive Sebastian Siemiatkowski."What we are seeing now in the world is not temporary or short-lived, and hence we need to act," said chief executive Sebastian Siemiatkowski.
The cuts equate to around 10% of Klarna's 7,000-strong workforce.The cuts equate to around 10% of Klarna's 7,000-strong workforce.
"When we set our business plans for 2022 in the autumn of last year, it was a very different world than the one we are in today," said Mr Siemiatkowski."When we set our business plans for 2022 in the autumn of last year, it was a very different world than the one we are in today," said Mr Siemiatkowski.
"Since then, we have seen a tragic and unnecessary war in Ukraine unfold, a shift in consumer sentiment, a steep increase in inflation, a highly volatile stock market and a likely recession.""Since then, we have seen a tragic and unnecessary war in Ukraine unfold, a shift in consumer sentiment, a steep increase in inflation, a highly volatile stock market and a likely recession."
In a blog, Mr Siemiatkowski advised staff - who the company refers to "Klarnauts" - to "take care of yourselves and each other".
There are fears the UK could fall into recession - defined as the economy getting smaller for two consecutive quarters - after official figures revealed the economy shrank in March.There are fears the UK could fall into recession - defined as the economy getting smaller for two consecutive quarters - after official figures revealed the economy shrank in March.
Klarna boss Sebastian Siemiatkowski says it has been "a very tumultuous year"
Higher prices are beginning to bite into household budgets and people have started spending less and cutting down on car journeys due to high fuel costs.Higher prices are beginning to bite into household budgets and people have started spending less and cutting down on car journeys due to high fuel costs.
Soaring energy bills and food prices are also having an impact and inflation - the rate at which prices rise - jumped to 9% in April and is expected to reach more than 10% by the end of the year.Soaring energy bills and food prices are also having an impact and inflation - the rate at which prices rise - jumped to 9% in April and is expected to reach more than 10% by the end of the year.
Recession fears grow as rising prices hit spending
Klarna shopping habits will affect credit report
Commenting on the cuts, Klarna said its affected employees in Europe will be offered "to leave Klarna with an associated compensation", but added outside of the continent, "the process for impacted employees will look different depending on where you work".Commenting on the cuts, Klarna said its affected employees in Europe will be offered "to leave Klarna with an associated compensation", but added outside of the continent, "the process for impacted employees will look different depending on where you work".
Buy now, pay later services were used by five million people in the UK for total sales of £2.7bn in 2020, but one in 10 people using them already had debt arrears elsewhere, a review by the Financial Conduct Authority last year found. Klarna staff were asked to work from home this week "in consideration of the privacy of the people affected by these changes".
Such schemes have been widely criticised for encouraging shoppers to buy more than they can afford. Mr Siemiatkowski said it had been "a very tumultuous year" so far.
It contrasts with 2021 when, thanks to the shift in consumer spending to online during Covid restrictions, Klarna saw the value of the company soar to$46bn when it raised millions of dollars from investors.
Since then, however, The Wall Street Journal has reported it is seeking a new round of investment and its valuation could sink by as much as $16bn to $30bn. Klarna dismissed the report as "pure speculation".
Over its last financial year, Klarna's operating losses swelled to 6.58bn Swedish krona (£540m) from 1.62bn Swedish krona.
In its annual report, the company said losses were growing but that was "entirely explained by Klarna's growth, expansion to new markets and massive inflow of new customers".
Buy-now-pay-later is now a popular payment method across many stores, especially for people in their 20s.
However, one in 10 people using them already had debt arrears elsewhere, a review by the Financial Conduct Authority last year found.
It has led to criticism the schemes encourage shoppers to buy more than they can afford.
Earlier this month, Klarna announced it would start telling credit agencies who pays on time and who falls behind.
From June, banks and credit card firms will be able to see people's Klarna habits when making credit checks.