Around 1,000 jobs are being slashed across the Co-operative Group's financial arm, with Manchester-based staff expected to be badly hit.

The cuts, announced this morning, are part of a restructuring and cost-cutting operation at Co-operative Financial Services (CFS) that is aimed at saving £100m a year.

The group said it is already consulting with unions, and admitted that some job losses will be compulsory.

"CFS will aim to achieve some of these changes through voluntary means, however the scale of the reorganisation will mean that compulsory redundancies are inevitable," said CFS chief executive David Anderson.

Customer-facing roles such as telephone sales people and financial advisors will not be affected. This suggests that middle managers and staff in Manchester, the site of CFS's head office, may bear the brunt of the cuts.

The group, which includes the Co-operative Bank and online bank Smile, has 6.5 million customers, and is committed to ethical investments.

It made 2,500 staff redundant in 2004. Last year, operating profits fell from £159.3m to £146.2m.

CFS also said this morning it would spend £250m to grow its retail and corporate banking and insurance operations. This will include a new website selling general insurance products, and a doubling in the number of its corporate banking centres.

"To ensure this growth is both sustainable and profitable, it is essential that we continue to improve our operational effectiveness and remove any business processes, which do not add value for our customers and members," Mr Anderson explained.

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