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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Find the EU renegotiation demands dull? Me too – but they are important

It's an old trick: smother anything in enough jargon and you can avoid being held accountable for it.

I don’t know about you, but I found the details of Britain’s European Union renegotiation demands quite hard to read. Literally. My eye kept gliding past them, in an endless quest for something more interesting in the paragraph ahead. It was as if the word “subsidiarity” had been smeared in grease. I haven’t felt tedium quite like this since I read The Lord of the Rings and found I slid straight past anything written in italics, reasoning that it was probably another interminable Elvish poem. (“The wind was in his flowing hair/The foam about him shone;/Afar they saw him strong and fair/Go riding like a swan.”)

Anyone who writes about politics encounters this; I call it Subclause Syndrome. Smother anything in enough jargon, whirr enough footnotes into the air, and you have a very effective shield for protecting yourself from accountability – better even than gutting the Freedom of Information laws, although the government seems quite keen on that, too. No wonder so much of our political conversation ends up being about personality: if we can’t hope to master all the technicalities, the next best thing is to trust the person to whom we have delegated that job.

Anyway, after 15 cups of coffee, three ice-bucket challenges and a bottle of poppers I borrowed from a Tory MP, I finally made it through. I didn’t feel much more enlightened, though, because there were notable omissions – no mention, thankfully, of rolling back employment protections – and elsewhere there was a touching faith in the power of adding “language” to official documents.

One thing did stand out, however. For months, we have been told that it is a terrible problem that migrants from Europe are sending child benefit to their families back home. In future, the amount that can be claimed will start at zero and it will reach full whack only after four years of working in Britain. Even better, to reduce the alleged “pull factor” of our generous in-work benefits regime, the child benefit rate will be paid on a ratio calculated according to average wages in the home country.

What a waste of time. At the moment, only £30m in child benefit is sent out of the country each year: quite a large sum if you’re doing a whip round for a retirement gift for a colleague, but basically a rounding error in the Department for Work and Pensions budget.

Only 20,000 workers, and 34,000 children, are involved. And yet, apparently, this makes it worth introducing 28 different rates of child benefit to be administered by the DWP. We are given to understand that Iain Duncan Smith thinks this is barmy – and this is a man optimistic enough about his department’s computer systems to predict in 2013 that 4.46 million people would be claiming Universal Credit by now*.

David Cameron’s renegotiation package was comprised exclusively of what Doctor Who fans call handwavium – a magic substance with no obvious physical attributes, which nonetheless helpfully advances the plot. In this case, the renegotiation covers up the fact that the Prime Minister always wanted to argue to stay in Europe, but needed a handy fig leaf to do so.

Brace yourself for a sentence you might not read again in the New Statesman, but this makes me feel sorry for Chris Grayling. He and other Outers in the cabinet have to wait at least two weeks for Cameron to get the demands signed off; all the while, Cameron can subtly make the case for staying in Europe, while they are bound to keep quiet because of collective responsibility.

When that stricture lifts, the high-ranking Eurosceptics will at last be free to make the case they have been sitting on for years. I have three strong beliefs about what will happen next. First, that everyone confidently predicting a paralysing civil war in the Tory ranks is doing so more in hope than expectation. Some on the left feel that if Labour is going to be divided over Trident, it is only fair that the Tories be split down the middle, too. They forget that power, and patronage, are strong solvents: there has already been much muttering about low-level blackmail from the high command, with MPs warned about the dire influence of disloyalty on their career prospects.

Second, the Europe campaign will feature large doses of both sides solemnly advising the other that they need to make “a positive case”. This will be roundly ignored. The Remain team will run a fear campaign based on job losses, access to the single market and “losing our seat at the table”; Leave will run a fear campaign based on the steady advance of whatever collective noun for migrants sounds just the right side of racist. (Current favourite: “hordes”.)

Third, the number of Britons making a decision based on a complete understanding of the renegotiation, and the future terms of our membership, will be vanishingly small. It is simply impossible to read about subsidiarity for more than an hour without lapsing into a coma.

Yet, funnily enough, this isn’t necessarily a bad thing. Just as the absurd complexity of policy frees us to talk instead about character, so the onset of Subclause Syndrome in the EU debate will allow us to ask ourselves a more profound, defining question: what kind of country do we want Britain to be? Polling suggests that very few of us see ourselves as “European” rather than Scottish, or British, but are we a country that feels open and looks outwards, or one that thinks this is the best it’s going to get, and we need to protect what we have? That’s more vital than any subclause. l

* For those of you keeping score at home, Universal Credit is now allegedly going to be implemented by 2021. Incidentally, George Osborne has recently discovered that it’s a great source of handwavium; tax credit cuts have been postponed because UC will render such huge savings that they aren’t needed.

Helen Lewis is deputy editor of the New Statesman. She has presented BBC Radio 4’s Week in Westminster and is a regular panellist on BBC1’s Sunday Politics.

This article first appeared in the 11 February 2016 issue of the New Statesman, The legacy of Europe's worst battle