British American Tobacco (BAT) is to cut nearly a fifth of its global workforce as part of a major cost-cutting drive.

The tobacco giant, which makes Lucky Strike and Dunhill cigarettes, is shedding 5,500 roles and outsourcing 3,500 more. It did not say where the cuts would come, but said the US was not affected.

BAT had said earlier this year that it was planning savings to make it "more digital and AI-focused".

Traditional cigarette sales are shrinking as smokers increasingly switch to vapes and nicotine pouches.

BAT is shifting its focus to smoking alternatives such as its Vuse vapes and Velo nicotine pouches to drive growth, but its sales and profit margins have been sluggish in recent years.

'Slow transition'

The company currently employs about 47,000 people globally. It says the cost cuts are expected to save about £600m a year by 2028.

Sales in the US - its biggest market - have also been hit by the cost of living, as smokers swap for cheaper brands.

Additionally, the company is battling rising duties and stricter regulations in some markets.

American regulators have taken a tough stance on approving licences for new products such as vapes, delaying launches. BAT says this has fuelled an influx of illegal Chinese products, weighing on its sales and market share.

"The tobacco industry has found the transition from cigarettes to next-generation products to be a slow one, "said Dan Coatsworth, head of markets at AJ Bell.

"Vaping is now commonplace, yet product manufacturers are battling challenging market conditions caused by a proliferation of illegal products."

BAT said the job cuts, which have already started, are set to be completed by the end of this year.

Chief executive Tadeu Marroco said the cuts would make the company "more agile, cost-disciplined and technology-enabled".

"These changes affect many of our colleagues, and we are focused on supporting them through this transition with care and respect, as we position the business for the future."