Twenty thousand workers at General Electric (GE) in the UK were put on notice yesterday of job cuts when the US conglomerate said that it must shrink to cope with the deepening economic doldrums.

GE said that its fourth-quarter profit would be at the lower end of expectations and outlined plans to pull back from some of its higher-risk businesses such as consumer mortgages and some equipment finance operations.

Keith Sherin, GE's chief financial officer, said that the group was considering job cuts in its financial and industrial units but did not give further details about where the staff losses may fall.

"This will really help us position for a tough 2009," he said. "Obviously the macro environment remains very challenging … We know that we have to reduce our cost structure in this environment."

GE has 20,000 staff in the UK, including 6,000 at GE Capital, its financial arm. The company provides sub-prime finance such as car loans to Britons through its GE Money brand.

GE held a conference call for analysts in the US yesterday to help shore up confident in GE Capital, which provides about 40 per cent of the group's earnings. GE Capital's performance has dragged down the company's results, causing it to miss two previous earnings forecasts. The market holds GE Capital largely responsible for GE’s 12 per cent profit drop so far this year.

Mr Sherin, however, reiterated the group's support for GE Capital as an "invaluable part of GE's portfolio".

"We've averaged 15 per cent earnings growth over the last 20 years in these businesses," Mr Sherin said. "We're operating in an extremely difficult environment but we're outperforming iour peers and we have strong franchises to build upon for long-term growth."

Analysts had been nervous about Mr Sherin's appearance on the conference call, as he has previously been used by the company as the bearer of bad news to the market. Last year he made a surprise appearance at an analysts' meeting to lower the company's quarterly profit guidance and announce a $1.4 billion sub-prime writedown.

Yesterday the company said that fourth-quarter profits would be worth between 50 cents and 52 cents per share, down from previous guidance of 50 cents to 65 cents. GE will also take a $1 billion to $1.4 billion after-tax hit from restructuring costs.

GE has already started to make some changes to GE Capital’s structure such as merging its former commercial finance and consumer finance businesses and announcing plans to cut costs by $2 billion next year.

Yesterday the group said that it would lower GE Capital's leverage ratio by moving $5 billion into the business from the $15 billion that the company raised earlier this year from shareholders. It will also reduce its reliance on the commercial paper market for funding, with plans to cut its outstanding paper from $88 billion at the end of the third quarter to $50 billion next year.

Michael Neal, GE Capital's chief executive, said that the business would make about $5 billion next year, down from $8 billion expected this year, before returning to double-digit profit growth in 2010.

The group expects to earn more than $18 billion this year.

GE's shares jumped by almost 11 per cent to $17.10 in early trading on the New York Stock Exchange, making it one of the index’s top performers as investors were comforted by the company’s promise to pay a $1.24 annual dividend next year. The shares were up almost 9 per cent to $16.88 in early afternoon trading.

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