David Prosser: One small bank does not a revolution make

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The Independent Online

Outlook Even if the sale of Northern Rock is to be celebrated, however, let us not make the mistake of thinking this is some sort of red-letter day for competition on the high street. Virgin Money will be a minnow in a pond full of banking sharks – its beneficial impact on an industry that has never quite seemed to have the best interests of its customers at heart is going to be minimal.

Much is made of the advantages Virgin should enjoy from taking a well-liked brand into a market where most customers have a low opinion of the incumbents. But turning that advantage into new business will be harder than many people think – the experience of Virgin's launch into savings and pensions in the 1990s, with all the weight of Sir Richard Branson's considerable personal sale skills behind it, suggests financial services is not an industry where the mass market shifts quickly.

Nor is Virgin Money going to find it easy to compete on price or value. The margins available to any bank when base rates sit at 0.5 per cent provide too little room for manoeuvre.

That's not to say, by the way, that Virgin's management will struggle to make a return on the investment of their backers – far from it. Just that portraying Virgin Money as the great white hope for consumers of banking services is hyperbole best left to the company's own marketing department.

Right at the bottom of Virgin's press release yesterday on this deal, the company pointed out that it is the sponsor of the London Marathon. The race to shake up competition in Britain's banking sector has barely begun – anyone who thinks Virgin's entry into the market represents a quick sprint to victory is likely to end up with a most uncomfortable stitch.