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 cutting 5,500 roles and outsourcing 3,500 more.

The company had said earlier this year that it was planning savings to make it “more digital and AI-focused”.

BAT did not say which locations would be hit by the job cuts, but said the US was not affected.

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

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.

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.

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.”