Jeremy Warner: C&G pays the price for Lloyds banking merger


Outlook So farewell then Cheltenham & Gloucester, whose high street brand dates back to the mid-19th century but, like so much else, is now falling victim to the relentless march of "progress" – in this case the cost-cutting integration of Lloyds TSB with Halifax Bank of Scotland.

All 164 C&G branches are to be closed because of the overlap with HBOS and Lloyds TSB outlets. The brand will live on as a telephone, intermediary and postal service, but that's obviously not the same thing and is in any case small consolation to the 1,600 C&G employees who will lose their jobs.

C&G has been owned by Lloyds Bank since the mid-1990s, when it was acquired as one of the first building society demutualisations. It might therefore be argued that the brand would have disappeared eventually in any case, regardless of the HBOS merger. C&G customers are to be redirected not so much to Halifax branches, but to those of Lloyds TSB, where services are already shared.

All the same, minds have been concentrated by the merger and apart from anything else, it has served to convince the newly named Lloyds Banking Group that it now has too many mortgage brands sheltering under one umbrella. There are at least six of them and possibly more. Even in a bank that still claims to champion a multi-brand strategy, this is bound to look excessive.

Lloyds Banking Group is already closing down HBOS's Clerical Medical Insurance Group because of its overlap with the existing Lloyds insurance brand, Scottish Widows. More brands and operational centres are certain to go too before the "integration" is considered complete.

Brands that were once household names wither and die all the time, and if what Lloyds is doing were just part of that process, I wouldn't be so concerned. But this is different. To justify a takeover that, in most respects, has turned out to be a disaster, Lloyds TSB has to deliver billions of pounds a year in cost cuts.

A fundamentally anti-competitive purpose lies at the heart of the brand cull now taking place. Lloyds is crunching together once competing businesses in the hope of hanging on to their combined market share and then exploiting the resulting dominance to drive up spreads and customer charges.

I hate to heap yet more blame for the sins of the world on Gordon Brown's doorstep, but the now all-too-apparent adverse consequences of the Lloyds/HBOS merger – the disappearance of otherwise viable brands, job losses and all too likely exploitation of the customer base – carry the Prime Minister's official blessing.

Normal competition rules were suspended to allow this monstrously monopolistic merger to take place. Even at the time, this seemed to serve no obvious public good other than saving Mr Brown the political embarrassment of having to nationalise HBOS.

Even that judgement has turned out to be flawed. So dire was the state of HBOS's books that the deal very nearly destroyed Lloyds TSB too. In the end, the Government was forced to bail out both banks. A damaging and unnecessary consolidation has been forced on the British public, which has failed to serve even the sectarian political purpose of enhancing the PM's chances of survival.

Mr Brown allowed the merger because he thought it offered a solution to the banking crisis. This turned out to be largely wrong. Instead, it's resulted only in a conspiracy against the public. The Tories have promised to use the Government's shareholding in Lloyds Banking Group to explore a possible breakup. Whatever they do, it is regrettably going to come too late for C&G.

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