LONDON - The BBC said on Thursday it was set to become "significantly smaller" after Britain's cash-strapped government imposed deep spending cuts on the world-renowned, publicly funded broadcaster.

The world's biggest broadcaster set out the changes in response to a 20 percent cut to its annual 3.5 billion pound ($5.4 billion) budget imposed by the government a year ago as it planned the deepest public spending cuts in decades.

"By 2016, the BBC will be significantly smaller than it is today," it said.

With eight national TV channels, 50 radio stations and an extensive website, the BBC's size and resources had already attracted envy and criticism from rivals, led by James Murdoch at BSkyB .

That had also increased in recent years as advertising-funded rivals like ITV suffered in the recession.

Under the new plans, the corporation will cut 2,000 jobs, reduce the budget for buying sports and other rights, slash the number of senior managers and share more content between its different services and show more repeats. Property in west London will also be sold.

The changes will result in savings of around 670 million pounds a year by 2016/17.

Last year, the BBC agreed to freeze the annual licence fee of 145.50 pounds, payable by every TV-owning British household. It is also taking on extra costs from the government including funding BBC World Service radio, which is broadcast overseas.

"We can achieve this plan only by embarking on the most far-reaching transformation in our history," it said in the proposals. "This involves painful choices for the BBC, including significant job losses at every level of the organisation."

The agreement between the Director General of the BBC and the government was hammered out in haste, stripping out the months of negotiation normally involved, as the coalition government scrambled to cut its spending after taking power.

Chris Patten, former governor of Hong Kong and chairman of the body that oversees the corporation, made the announcement to staff on Thursday, and said it was not unreasonable that the BBC was having to play its part in public spending cuts, given the state of the global economy.

Steven Barnett, professor of communications at London's Westminster University, said: "The BBC were in no position to argue, given the rhetoric about the state of the economy and the need for everyone to pull their horns in."

The BBC towers over Britain's media landscape with a rich offering of drama, comedy and children's programming, a huge newsgathering operation and some of the UK's most popular websites.

In a lecture more than two years ago, News Corp executive and BSkyB Chairman James Murdoch lashed out at the BBC, accusing it of making a land grab for power and calling for a radical overhaul of British television regulation.

The pendulum has since swung back in favour of looser regulation more favourable to commercial rivals and lower public spending, especially since the recession and the installation of a centre-right coalition government in 2010.

Mark Thompson, the Director General of the BBC, warned, however, that the corporation could not take much more.

"It's my judgement that this is the last time the BBC will be able to make this level of savings without a substantial loss of services or quality or both," he said, noting that the changes would be unpalatable to many people.

Alex DeGroote, media analyst at London brokerage Panmure Gordon, said the slimming down of the BBC would help level the playing field in Britain, where commercial media companies were up against a far stronger public rival than their peers abroad.

"There's always been a BBC discount for commercial media in this country. It got particularly high in 2002-05. That's when you had a massive expansion of the BBC's inventory -- more digital radio, BBC3 and BBC4, lots of Internet sites," he said.

"Arguably, you had a sponsor government as well. Tony Blair's New Labour was in favour of expansion of the public sector. But slowly the roles have reversed." ? ?

BSkyB should be well placed to benefit. It is increasing the budget it spends on programming and has recently signed a deal to share the broadcast of Formula One with the corporation. It is also already very aggressive in acquiring sports rights and drama from the United States.