AI-driven layoff: One of the world's biggest cigarette makers is cutting 5,500 jobs

British American Tobacco (BAT), one of the world's largest tobacco companies, is undertaking one of its biggest workforce restructurings in recent years, cutting around 5,500 jobs and transferring about 3,500 roles to third-party providers as part of an AI-driven overhaul aimed at reducing costs and improving profitability.

According to Reuters, the restructuring will affect around 9,000 employees globally, excluding the United States, BAT's largest market. The company said the programme is designed to make the business more agile, technology-enabled and cost-disciplined as it responds to slowing growth in traditional tobacco products and increasing regulatory pressures.

AI and outsourcing at the centre of the overhaul

BAT said the restructuring combines workforce reductions with a broader redesign of its operating model, including the transfer of thousands of roles to external partners such as Accenture.

The company expects the programme to generate:

• £600 million in additional annualised savings by 2028
• £500 million in savings by 2027
• Workforce changes affecting around 9,000 roles
• 5,500 direct job cuts
• 3,500 roles transferred to third-party service providers

The company did not disclose where the job cuts will take place.

Why BAT is restructuring now

The overhaul comes as BAT faces mounting pressure on multiple fronts.

According to Reuters, the company's traditional tobacco business continues to decline as consumers increasingly shift towards alternative nicotine products. At the same time, BAT is navigating tighter regulations, delayed approvals for next-generation products and changing consumer behaviour across several markets.

The company expects industry sales volumes for traditional tobacco products to decline by 2.5% this year.

BAT has been investing in reduced-risk products such as Vuse vaping products and Velo nicotine pouches, which require less labour to manufacture than conventional cigarettes.

The company has also been streamlining its manufacturing footprint over the past 18 to 24 months, including the previously announced closure of a factory in South Africa.

CEO says business will become more agile

Tadeu Marroco, Chief Executive Officer of BAT, said the restructuring is intended to create a more agile and technology-enabled organisation.

He acknowledged the impact on employees, saying the company is focused on supporting affected colleagues throughout the transition.

Reuters reported that BAT had already indicated earlier this year that its productivity programme could result in workforce reductions. However, analysts said the scale of the restructuring was larger than expected.

Following the announcement, BAT shares fell around 2%, underperforming the broader FTSE 100 index.

Global service hubs among affected operations

BAT said many of the roles moving to third-party providers are located within its Global Service Hubs.

According to the company, transferred positions include functions in:

• Costa Rica
• Mexico
• Poland
• Romania
• Malaysia
• Certain roles in Pakistan
• Some digital and technology roles in Poland and Romania

The company said most affected employees have already been informed, while consultations continue in jurisdictions where required under local regulations.