City & Business: Chinese whispers

The rumours circulating this autumn that NatWest and Barclays are about to merge have done wonders for the two banks' share prices but that is about it at the moment. NatWest has been quick to deny any talks between the two companies ever took place. So where did the rumours come from? One theory is that Barclays deliberately started a game of Chinese whispers to smokescreen something else it was up to. Another acquisition perhaps? Or maybe the bank was just trying to offset criticism about the disastrous sale of its investment arm BZW.

In any case, experts are united in their belief that the Monopolies and Mergers Commission will not allow the merger of two of the country's biggest financial institutions. Barclays and NatWest each command a big slice of the business in lending to small and medium sized businesses, and their strong regional presence and years of experience make it difficult for new market entrants.

Proof of this is that none of the new de-mutualised building societies- now-turned-banks has taken up this business in competition with Barclays and NatWest.

In the area of consumer banking the picture is rather different. After all, you don't need a branch in the high street to sell a mortgage or a credit card. Perhaps Barclay's is gunning to buy another consumer-orientated UK bank?