HURRAH! There is to be another review into the banking industry. Yeah, like we needed one more fat report to throw on the pile of previous ones. How many is it now? Seven in 15 years? I am losing count as well as the will to take much more of this constant navel-gazing that usually ends up making no difference to competition whatsoever.
The Competition and Markets Authority (CMA), a replacement for the Competition Commission (which replaced the Monopolies Commission), is gearing up for what is bound to be a long and forensic examination of the Big Four, who must be quaking in their boots. Mmmm… they’ve survived other grenades, so nothing short of an all-out assault will force big changes this time around.
Fourteen years ago Don Cruickshank published a “damning report” in which he accused the high street banks of overcharging, anti-competitive practices and creating confusion about fees and terms. The government, the Financial Services Authority (FSA) and the Consumers’ Association were optimistic the report would force banks to improve and start treating their customers more fairly.
“There are real problems with the way banks control the networks which allow money to flow around the economy, whether it be cheques, credit or debit cards, or electronic transfers, big and small,” said Cruickshank, former chairman of Glasgow-based SMG, now STV.
The late Sheila McKechnie, who was director of the Consumers’ Association, wanted banks to make it easier for consumers to switch accounts. She said the report presented the government with an “excellent opportunity to strike a blow for more effective competition and customer choice in the UK banking market”, adding that it was “time for action from the government, banks and the competition authorities to sort out the problem”.
So, did Cruickshank force change? You know the answer already. If it had, the CMA would not be ordering yet another review.
A decade after Cruickshank we can switch accounts and there is a little more transparency. But between Cruickshank and the CMA we have also had the mother of all banking crises, which shows how much notice the banking industry took of Cruickshank, the government, the FSA and the consumer groups.
So why should they take any notice of the next set of recommendations?
Alex Chisholm obviously wants to make an impression as the head of the fledgling CMA. But he may be biting off a little more than he can chew having also ordered a similar inquiry into the energy industry.
The cost of entry for new banks has been reduced, there is a new supervisory regime, and the Treasury and the Bank of England have tried to improve lending for small businesses. Yet the same problems persist.
Do we need a more radical restructuring (break-up) of the banks? There have to be doubts about this too given the hassle and cost of the enforced carving out of a few branches from Lloyds and RBS, which they both failed to sell. And what will result from creating TSB and Williams & Glyn as competitors? They will operate as smaller retail banks, maybe until the big banks swallow them up.
Supermarket war likely on the home front
The big supermarkets already sell everything from frocks to financial services. Now shoppers are being invited to buy a Tesco house.
This, however, is not just about diversification. Structural changes in the market mean the vast acres of undeveloped land and other sites the company owns are no longer required for more stores.
Competition in the market, saturation coverage, the growth of online shopping and a move to smaller-format convenience stores have combined to make Tesco look at alternative uses for the land – and the most obvious is to build houses on it. The company has enough land for 4,000 homes and will either sell it to housebuilders or else the company will build them.
It is something of an irony that communities that have fought the creation of so-called Tesco Towns are now welcoming the company’s plans to help ease the chronic shortage of housing.
As for Tesco itself, the move will help turn assets into cash as well as respond to frequent criticism that it is hoarding land. It announced last year that it would be scaling back on store openings, which immediately led to speculation about what it would do with the land it owned.
Building houses will also see the company broaden its portfolio of assets, which in recent years has included coffee shops, banking, garden centres and tyre-fitting.
To that extent it fits well with chief executive Philip Clarke’s ambition to build a “family of brands”, which has yet to win the full support of analysts who want to see a greater focus on turning around the core supermarket business. However, to coin a phrase, every little helps.
As all industries tend to emulate each other’s ideas, it is likely that Tesco’s rivals will be looking at their own land banks and whether or not to open up another front in their battle for customers.«