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The demise of the high street- are banks to blame?

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The demise of the high street- are banks to blame?

By Chris Labrey, Managing Director UK & IRL, Econocom UK

Our high streets have changed dramatically in the last ten years, especially in market towns. Familiar favourites such as Woolworths, Blockbusters, BHS and Poundworld have all fallen into administration and can no longer be found in our town centres. As e-commerce sales continue to grow, stores continue to close. ParcelHero’s Industry Report predicts that by 2030 we will have less than 120,000 physical shops in our high streets compared to 600,000 in the 1950s.

Some blame the banks for our deserted shopping centres; without the high street bank, consumers are less likely to venture into the town centre. Indeed, Labour’s John McDonnell has said he will change the law to stop banks closing high street branches if Labour comes to power.

Gary Womersley, from Nottingham Building Society, recognises that banks play a major role in boosting sales and business, but states that as many as 1,500 towns in the UK no longer have a high street bank. According to Which, NatWest and HSBC alone closed over 1000 high street branches between 2015 and 2018.

A consumer-led revolution

Chris Labrey

Chris Labrey

None of this is surprising. Our banking habits are changing; we no longer need a face-to-face interaction to carry out simple transactions. We can do this from the comfort of our own home; over the internet or using mobile apps on our smart phone. And most of us are happy to do this. Statista ran a survey to assess online banking penetration in the UK. In 2017, 30% of respondents had used an online bank account in the last 3 months. This rose to 56% of respondents in 2018.

Due to the increased choices of how we contact our bank, we are actually interacting with them more than ever before. However, according to the Royal Bank of Scotland, customers are visiting branches 40% less often than we did four years ago.

But mobile and internet bankingis not for everyone. There are occasions when customers will need to,or want to visit a local branch. So, what can banks do to encourage their customers into branch more frequently, thus preserving their physical presence and halting the demise of the high street?

Relevant banking for the future

At a recent conference,Celnet cites that most consumers still value the brick and mortar branch. They may visit it less often, but when they do visit they are expecting meaningful interactions.

Samsung expand on this by describing branches of the future as immersive, advice-driven financial centres that give customers what they can’t access on their own. In addition to incorporating existing technologies such as smartphones, tablets, self-serve kiosks and wearables, these branches will incorporate newer technologies such as virtual reality and virtual desktop infrastructure.

This is all well and good, but the technology cost implications can be huge, especially when there may be thousands of branches to consider. Also, many banks have legacy-based infrastructures, which do not always align well with new platforms and technologies.It can become cost prohibitive and uncompetitive to keep high street branches open, but there is a solution.

Technology as a subscription-based service

Retail banks can learn a lot from the general retail industry. Stores have learnt that customers want the same experience across every channel, whether in-person or online. Customers’expectations are that retailers know and understand them; they can anticipate their needs based on past interactions. Banks are finding their customers want those things too.

This is where subscription models can prove their worth. In much the same way that many of us pay for our mobile phones or cars, there are models available to banking and finance companies, using OPEX rather than CAPEX, to invest in technology and infrastructure for offices and branches.

These subscription models also allow banks to spread costs evenly and regularly and update their technology assets, meaning that customers can have a consistent and compelling customer experience every time they visit a branch.

The future

While digital has become an all-encompassing part of our daily lives, some banks have been slow to adopt new technologies in comparison to other sectors. This has not gone unnoticed by customers where expectations are high.

The high street banks of the future will be more like retail outlets. They may be smaller than the traditional high street banks but expect them to be more efficient; improved by digital transformation where customers have access to highly personalised services.

All of this is underpinned by the technology. It needs to be financed and a subscription-based model can ensure that customers get the experience they expect, sooner rather than later. Get it right and we will all be returning to the high street.

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UK might need negative rates if recovery disappoints – BoE’s Vlieghe

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UK might need negative rates if recovery disappoints - BoE's Vlieghe 1

By David Milliken and William Schomberg

LONDON (Reuters) – The Bank of England might need to cut interest rates below zero later this year or in 2022 if a recovery in the economy disappoints, especially if there is persistent unemployment, policymaker Gertjan Vlieghe said on Friday.

Vlieghe said he thought the likeliest scenario was that the economy would recover strongly as forecast by the central bank earlier this month, meaning a further loosening of monetary policy would not be needed.

Data published on Friday suggested the economy had stabilised after a new COVID-19 lockdown hit retailers last month, while businesses and consumers are hopeful a fast vaccination campaign will spur a recovery.

Vlieghe said in a speech published by the BoE that there was a risk of lasting job market weakness hurting wages and prices.

“In such a scenario, I judge more monetary stimulus would be appropriate, and I would favour a negative Bank Rate as the tool to implement the stimulus,” he said.

“The time to implement it would be whenever the data, or the balance of risks around it, suggest that the recovery is falling short of fully eliminating economic slack, which might be later this year or into next year,” he added.

Vlieghe’s comments are similar to those of fellow policymaker Michael Saunders, who said on Thursday negative rates could be the BoE’s best tool in future.

Earlier this month the BoE gave British financial institutions six months to get ready for the possible introduction of negative interest rates, though it stressed that no decision had been taken on whether to implement them.

Investors saw the move as reducing the likelihood of the BoE following other central banks and adopting negative rates.

Some senior BoE policymakers, such as Deputy Governor Dave Ramsden, believe that adding to the central bank’s 875 billion pounds ($1.22 trillion) of government bond purchases remains the best way of boosting the economy if needed.

Vlieghe underscored the scale of the hit to Britain’s economy and said it was clear the country was not experiencing a V-shaped recovery, adding it was more like “something between a swoosh-shaped recovery and a W-shaped recovery.”

“I want to emphasise how far we still have to travel in this recovery,” he said, adding that it was “highly uncertain” how much of the pent-up savings amassed by households during the lockdowns would be spent.

By contrast, last week the BoE’s chief economist, Andy Haldane, likened the economy to a “coiled spring.”

Vlieghe also warned against raising interest rates if the economy appeared to be outperforming expectations.

“It is perfectly possible that we have a short period of pent up demand, after which demand eases back again,” he said.

Higher interest rates were unlikely to be appropriate until 2023 or 2024, he said.

($1 = 0.7146 pounds)

(Reporting by David Milliken; Editing by William Schomberg)

 

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UK economy shows signs of stabilisation after new lockdown hit

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UK economy shows signs of stabilisation after new lockdown hit 2

By William Schomberg and David Milliken

LONDON (Reuters) – Britain’s economy has stabilised after a new COVID-19 lockdown last month hit retailers, and business and consumers are hopeful the vaccination campaign will spur a recovery, data showed on Friday.

The IHS Markit/CIPS flash composite Purchasing Managers’ Index, a survey of businesses, suggested the economy was barely shrinking in the first half of February as companies adjusted to the latest restrictions.

A separate survey of households showed consumers at their most confident since the pandemic began.

Britain’s economy had its biggest slump in 300 years in 2020, when it contracted by 10%, and will shrink by 4% in the first three months of 2021, the Bank of England predicts.

The central bank expects a strong subsequent recovery because of the COVID-19 vaccination programme – though policymaker Gertjan Vlieghe said in a speech on Friday that the BoE could need to cut interest rates below zero later this year if unemployment stayed high.

Prime Minister Boris Johnson is due on Monday to announce the next steps in England’s lockdown but has said any easing of restrictions will be gradual.

Official data for January underscored the impact of the latest lockdown on retailers.

Retail sales volumes slumped by 8.2% from December, a much bigger fall than the 2.5% decrease forecast in a Reuters poll of economists, and the second largest on record.

“The only good thing about the current lockdown is that it’s no way near as bad for the economy as the first one,” Paul Dales, an economist at Capital Economics, said.

The smaller fall in retail sales than last April’s 18% plunge reflected growth in online shopping.

BORROWING SURGE SLOWED IN JANUARY

There was some better news for finance minister Rishi Sunak as he prepares to announce Britain’s next annual budget on March 3.

Though public sector borrowing of 8.8 billion pounds ($12.3 billion) was the first January deficit in a decade, it was much less than the 24.5 billion pounds forecast in a Reuters poll.

That took borrowing since the start of the financial year in April to 270.6 billion pounds, reflecting a surge in spending and tax cuts ordered by Sunak.

The figure does not count losses on government-backed loans which could add 30 billion pounds to the shortfall this year, but the deficit is likely to be smaller than official forecasts, the Institute for Fiscal Studies think tank said.

Sunak is expected to extend a costly wage subsidy programme, at least for the hardest-hit sectors, but he said the time for a reckoning would come.

“It’s right that once our economy begins to recover, we should look to return the public finances to a more sustainable footing and I’ll always be honest with the British people about how we will do this,” he said.

Some economists expect higher taxes sooner rather than later.

“Big tax rises eventually will have to be announced, with 2022 likely to be the worst year, so that they will be far from voters’ minds by the time of the next general election in May 2024,” Samuel Tombs, at Pantheon Macroeconomics, said.

Public debt rose to 2.115 trillion pounds, or 97.9% of gross domestic product – a percentage not seen since the early 1960s.

The PMI survey and a separate measure of manufacturing from the Confederation of British Industry, showing factory orders suffering the smallest hit in a year, gave Sunak some cause for optimism.

IHS Markit’s chief business economist, Chris Williamson, said the improvement in business expectations suggested the economy was “poised for recovery.”

However the PMI survey showed factory output in February grew at its slowest rate in nine months. Many firms reported extra costs and disruption to supply chains from new post-Brexit barriers to trade with the European Union since Jan. 1.

Vlieghe warned against over-interpreting any early signs of growth. “It is perfectly possible that we have a short period of pent up demand, after which demand eases back again,” he said.

“We are experiencing something between a swoosh-shaped recovery and a W-shaped recovery. We are clearly not experiencing a V-shaped recovery.”

($1 = 0.7160 pounds)

(Editing by Angus MacSwan and Timothy Heritage)

 

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Oil extends losses as Texas prepares to ramp up output

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Oil extends losses as Texas prepares to ramp up output 3

By Devika Krishna Kumar

NEW YORK (Reuters) – Oil prices fell for a second day on Friday, retreating further from recent highs as Texas energy companies began preparations to restart oil and gas fields shuttered by freezing weather.

Brent crude futures were down 33 cents, or 0.5%, at $63.60 a barrel by 11:06 a.m. (1606 GMT) U.S. West Texas Intermediate (WTI) crude futures fell 60 cents, or 1%, to $59.92.

This week, both benchmarks had climbed to the highest in more than a year.

“Price pullback thus far appears corrective and is slight within the context of this month’s major upside price acceleration,” said Jim Ritterbusch, president of Ritterbusch and Associates.

Unusually cold weather in Texas and the Plains states curtailed up to 4 million barrels per day (bpd) of crude production and 21 billion cubic feet of natural gas, analysts estimated.

Texas refiners halted about a fifth of the nation’s oil processing amid power outages and severe cold.

Companies were expected to prepare for production restarts on Friday as electric power and water services slowly resume, sources said.

“While much of the selling relates to a gradual resumption of power in the Gulf coast region ahead of a significant temperature warmup, the magnitude of this week’s loss of supply may require further discounting given much uncertainty regarding the extent and possible duration of lost output,” Ritterbusch said.

Oil fell despite a surprise drop in U.S. crude stockpiles in the week to Feb. 12, before the big freeze. Inventories fell by 7.3 million barrels to 461.8 million barrels, their lowest since March, the Energy Information Administration reported on Thursday. [EIA/S]

The United States on Thursday said it was ready to talk to Iran about returning to a 2015 agreement that aimed to prevent Tehran from acquiring nuclear weapons. Still, analysts did not expect near-term reversal of sanctions on Iran that were imposed by the previous U.S. administration.

“This breakthrough increases the probability that we may see Iran returning to the oil market soon, although there is much to be discussed and a new deal will not be a carbon-copy of the 2015 nuclear deal,” said StoneX analyst Kevin Solomon.

(Additional reporting by Ahmad Ghaddar in London and Roslan Khasawneh in Singapore and Sonali Paul in Melbourne; Editing by Jason Neely, David Goodman and David Gregorio)

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