Ebay is to cut more than 1,000 jobs – which equates to around 10 per cent of its global work force.

The online auction site is reacting to a slowdown in growth as the credit crunch tightens and it fights competition from other online auction sites and Amazon.

However, Ebay has also announced plans to spend about $1.3bn to buy a payment provider and two classified ads websites.

In a statement released by its San Jose, California headquarters, Ebay said 1,000 permanent employees would lose their jobs, along with several hundred temporary workers in a bid to streamline its organisation.

The job cuts are intended to simplify the organisation, improve its cost structure and strengthen the overall competitiveness of existing businesses.

John Donahoe, Ebay's chief executive said: "While never an easy decision to make, these reductions will help improve our operations and strengthen our ability to continue investing in growth."

However, its purchase of online payment provider, Bill Me Later, which enables US shoppers to make purchases online or by phone without the need for a credit card, is aimed at strengthening its Paypal payment platform. It has also invested in Danish online classifieds site, dba.dk, and a vehicles website, bilbasen.dk.