It would be accurate to say that the Co-op has had a bad year

Reflections on today's news.

It all seemed such a good deal, as recently as last July. I broke off from my holidays to tell BBC radio Five Live, Radio 2, the rolling BBC news channel and just about anyone else that would listen, what a good deal the Co-operative Bank had struck to snap up 632 branches from Lloyds Banking Group.

The Co-op was to pay a mere £350m up-front for the branches with up to a further £400m based on the performance of the branches over the next 15 years. I may even have called it a bargain. Okay, to be strictly accurate, I actually called it something approaching an absolute steal. By contrast, Santander had agreed to acquire 316 branches from Royal Bank of Scotland in a deal worth around £1.65bn. Santander subsequently pulled out of that deal, blaming IT challenges relating to the acquisition.

That argument was rather less than convincing, given Santander’s stellar record in tackling IT issues arising from its earlier purchases of Abbey, Bradford & Bingley and Alliance & Leicester. Had Co-op managed to conclude its agreement with Lloyds, it would have had a UK current account market share of around 7 per cent (up from 3 per cent) and would become the 7th largest UK bank by current account market share and the 6th largest bank as ranked by branches.

Lloyds dominates the current account market share with 31 per cent, ahead of RBS NatWest with 16 per cent and Barclays and HSBC/First Direct each with 14 per and Santander with 11 per cent.

The relatively modest Co-op branch network of 340 units would have almost trebled to more than 970 outlets, once it rebranded 283 Lloyds TSB branches in England and Wales, 164 Cheltenham & Gloucester branches and 185 Lloyds TSB Scotland branches. Today, the Coop/Lloyds deal is in tatters. And today on BBC news I felt a little uncomfortable when I suggested that perhaps, on reflection, the Coop was acting prudently in not stretching itself to finalise the branch purchases. I would be quite happy if everything I had written and said regarding the Lloyds-Coop deal last year could be quietly and immediately deleted.

According to the Co-op, it has chucked in the towel because of the current economic environment. The economy is none too chipper, but arguably not a lot has changed since last July. The Co-op also argues that the increasing regulatory requirements on banks mean that the deal no longer makes sense. Again, pull the other one.

There is an increasing regulatory burden on banks, it is true. There are these tiresome new rules for the banks relating to miss-selling; no more jackpots await such as the bonanza they struck from selling PPI insurance to customers who might want to take out a loan. There are also tighter rules relating to putting away adequate levels of capital for a rainy day. All of these rules were well known last July.

It would be more accurate to say that the Co-op has had a bad year. It lost £600m in fiscal 2012 and has faced bigger challenges to fund the deal than they – and this writer – forecast a mere nine months ago.

It may also be fair to suggest that the rapid transformation in the way the majority of us do our banking is swaying thinking within the Coop?

"The branch is dead" and "the branch has no future" are ridiculously gloomy and inaccurate regular forecasts from digital (internet and mobile) banking evangelists. But, and it is a big but the size of a flagship Apple-type banking store, we are using branches less and less.

Branches need staffing and branches are expensive compared to offering digital banking. That kind of thinking is heard more and more from senior retail bankers.

Perhaps the recent explosion in customer numbers using internet and mobile banking means that the Co-op’s enthusiasm to treble its high street presence is on the wane. In the UK, 55 per cent of internet users accessed an online banking site in December 2012 - ranking the UK as the 4th most enthusiastic internet banking country within the EU27 – against the European average of 39.9 per cent.

Last year, Lloyds for example, has over 10m unique visitors to its internet banking site, up 14 per cent year-on-year; RBS NatWest and Barclays followed with 6.4m and 6.3m visitors respectively. For the record, HSBC (with 3.4m) and Santander (2.6m) rounded off the top 5.

Smartphone penetration in the UK has now reached 64 per cent, again, way ahead of the European average. All UK banks, including now the Co-op, offer some form of mobile banking. Tablet computer use is also going through the roof and banks are slowly but surely starting to offer tablet banking as an additional service. For the Co-op, there remains the untapped potential of using more if its retail supermarkets to offer a dedicated area offering banking services. The background to the sale of the branches (known as Project Verde), was forced by European Union regulations after Lloyds was bailed out by the UK taxpayer to the tune of £20bn during the 2008 financial crisis.

So what now?

Estimates suggest that Lloyds has already spent almost £1bn during the Verde project in an effort to dispose of the branches. The abortive deal will also have cost the Coop an eye-watering sum. Lloyds will go back to the drawing board and will dust off its plans for an IPO: in other words, try and sell the branches in the market. The timing is not great. Next year will be a busy time for branch sales. RBS is still to dispose of the 318 outlets it failed to sell to Santander and needs to get a move on before it incurs the wrath of the EU. Neither RBS nor Lloyds are likely to be thrilled with the eventual sales proceeds.

One last thought arises from the branches sales saga. Banks, including Co-op and Santander, may well be proved correct if they believe that they can meet their expansion targets without the need to bulk up their branch networks. Reliance on the digital banking channels will however mean that they have no option but to offer reliable mobile and internet banking services offering a compelling customer experience. Due emphasis requires to be placed on the word ‘reliable’, as RBS knows to its embarrassment following its two high profile service collapses in the past year.

Photograph: Getty Images

Douglas Blakey is the editor of Retail Banker International

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Why it's far too early to declare Ukip dead

The party could yet thrive if Brexit disappoints those who voted Leave.

"Nothing except a battle lost can be half as melancholy as a battle won," wrote the Duke of Wellington after Waterloo. Ukip can testify to this. Since achieving its founding aim - a British vote to leave the EU - the party has descended into a rolling crisis.

Theresa May's vow to pursue Brexit, and to achieve control of immigration, robbed Ukip of its political distinctiveness. But the party's greatest enemy has been itself. Its leader Paul Nuttall did not merely lose the Stoke by-election (despite the city recording the highest Leave vote), he self-destructed in the process. Contrary to his assertions, Nuttall did not achieve a PhD, was never a professional footballer and did not lose "close personal friends" at Hillsborough. Ukip's deputy Peter Whittle pleaded last weekend that voters needed more time to get to know Nuttall. No, the problem was that they got to know him all too well. A mere three months after becoming leader, Nuttall has endured a level of mockery from which far stronger men would struggle to recover (and he may soon be relieved of the task).

Since then, Ukip's millionaire sugar daddy Arron Banks has threatened to leave the party unless he is made chairman and Nigel Farage is awarded a new role (seemingly that of de facto leader). For good measure, Farage (a man who has failed seven times to enter parliament) has demanded that Ukip's only MP Douglas Carswell is expelled for the crime of failing to aid his knighthood bid. Not wanting to be outdone, Banks has vowed to stand against Carswell at the next election if the dissenter is not purged. Any suggestion that the party's bloodlust was sated by the flooring of Steve Woolfe and Diane James's 18-day leadership has been entirely dispelled.

For all this, it is too early to pronounce Ukip's death (as many have). Despite May's ascension and its myriad woes, it has maintained an average poll rating of 12 per cent this year. This is far from its 2014 zenith, when it polled as high as 25 per cent, but also far from irrelevancy. Incapable of winning Labour seats itself, Ukip could yet gift them to the Conservatives by attracting anti-Tory, anti-Corbyn voters (in marginals, the margins matter).

Though Theresa May appears invulnerable, Brexit could provide fertile political territory for Ukip. Those who voted Leave in the hope of a radical reduction in immigration will likely be dismayed if only a moderate fall results. Cabinet ministers who boasted during the referendum of their desire to reduce immigration have already been forced to concede that newcomers will be required to fill vacancies for years to come. Ukip will be the natural vehicle for those aggrieved by Brexit "betrayal". Some Leave voters are already dismayed by the slowness of the process (questioning why withdrawal wasn't triggered immediately) and will revolt at the "transitional period" and budget contributions now regarded as inevitable.

The declarations of Ukip's death by both conservatives and liberals have all the hallmarks of wishful thinking. Even if the party collapses in its present form, something comparable to it would emerge. Indeed, the complacency of its opponents could provide the very conditions it needs to thrive.

George Eaton is political editor of the New Statesman.