Ericsson is to move all its UK-based research and development activities to other countries, the company announced on Tuesday.
Around 700 jobs are expected to be lost when Ericsson's facility at the Ansty Park development in Coventry is closed by the middle of 2010. The withdrawal of Ericsson's R&D from the UK is part of a major cost-cutting drive that the networking infrastructure firm announced in January.
Ericsson only moved into the Ansty Park facility during the summer of this year. The site hosts global R&D for part of the company's network infrastructure portfolio, and a global service delivery centre for services spanning "a number of products", Ericsson said in a statement on Tuesday.
"These proposals represent sad news we have for our employees in Ansty Park, Coventry, today," Ericsson's north-western Europe chief Mats Granryd said in the statement. "We have to work continuously to increase efficiency and lower our cost base whilst ensuring we deliver solutions designed to meet our global customers' needs." As part of lowering costs, he said, "new product R&D is planned to move to lower-cost-base countries".
Ericsson said the withdrawal would not affect its customer relationships in the UK, adding that growth in services, particularly managed services, had been "significant" over the past three years. Ericsson provides managed services to operators including 3, Vodafone, O2 and T-Mobile.
However, Granryd told ZDNet UK on Tuesday that Ericsson's decision to abandon UK-based R&D could be partly attributed to the fact that the UK no longer had a "high-growth" mobile telephony market.
"We do need to be close to our customers in high-growth or emerging markets," Granryd said, pointing out that the UK has around 130 percent mobile penetration.
Granryd said the functions currently carried out in Coventry would be "rebalanced" to sites where Ericsson already has "significant scale and synergies", namely China, India, Croatia, Hungary, Italy, Ireland and Canada.
After the withdrawal of those activities from Coventry, an event the company said would make it "likely that this facility would no longer be viable for Ericsson", the firm will still employ around 3,500 people in the UK, Granryd said.
Ericsson will now begin a consultation with union and employee representatives. A spokesperson for the Connect union, which represents telecoms professionals and which will merge with the larger Prospect union next year, said Connect was talking to Ericsson about the cuts.