Tesco Bank’s decision to pull out of the mortgage business may have come as a disappointment to its former chief executive Benny Higgins.
The Glaswegian was instrumental in creating the Edinburgh-based financial arm of Tesco as a joint venture with Royal Bank of Scotland in 1997. Five years ago he made the bold move into mortgages and launched a current account to turn what was a glorified savings business into a proper bank.
While the bank grew as a leading “challenger” to the established lenders, there was always a nagging concern that it was forcing the group to tie up hefty reserves under European banking regulations – capital that some shareholders may have preferred to see invested in the core supermarket business.
Former Ulster Bank CEO Gerry Mallon, who succeeded Mr Higgins in the spring, has noted how the mortgage market generally has stalled and with interest rates stuck in bottom gear there is little room for growth. As he called time on new mortgages and put the business up for sale, Nationwide Building Society was flagging further pressure on margins.
Tighter regulation in the wake of the financial crisis has simply closed off some of the more exotic ways banks looked to make money, and together with a slowdown in parts of the residential property market, it has made the more prosaic task of taking savers’ deposits look like a safer bet.
Tesco has been applauded for reverting its focus on more sustainably profitable activities, though it does have the convenience of a huge supermarket business to fall back on. As Russ Mould, investment director at AJ Bell observes, traditional banks and building societies have less room to manoeuvre when it comes to putting their capital into areas which will deliver a better return.
Restaurants off the menu
Retail gurus have been lining up to tell us that the future of our town centres is to turn them into leisure destinations. Filling empty shops with cafes, games rooms and children’s entertainment centres is suggested as one answer to the decline in the number of shops. That list also included bars and restaurants, seen as a key ingredient in bringing new life to high streets.
However, the closure of Jamie Oliver’s restaurants, including those in Edinburgh and Glasgow, tells us that the strategy is not exactly going to plan.
What the analysts and planners didn’t seem to notice was the rapid growth of the home delivery service. Deliveroo, Just Eat, and the rest, have created a new market for an on-demand restaurant quality dining experience without the need to leave our sofas.
New research shows the number of restaurants in Britain fell by 2.8% in the year to March 2019. The figure equates to net closures of 768 restaurants over 12 months, or around 15 a week. It marks a fifth successive quarter of decline in the sector, bringing to an end a boom period that saw restaurants grow in number by more than 15% between 2013 and 2018.
The data, included the latest edition of the Market Growth Monitor from CGA and AlixPartners, indicates that restaurant levels have reached saturation point in many towns and cities.
This may raise a few more concerns around the new St James development in Edinburgh where 30 eating places are planned. Should they all go ahead, it is bound to put more pressure on those elsewhere in the city.
I hear the backers of the nascent Scottish Stock Exchange are close to announcing its new Edinburgh headquarters. An office in the city centre has been identified, allowing for its small team in South Charlotte Street to expand… and expect an announcement that the Principal in George Street is to become an Intercontinental in the latest re-branding in the sector. The Roxburghe in Charlotte Square, which was also a Principal, is now a Kimpton.