Clydesdale shrinks, blaming downturn

 
Clydesdale Bank NAB bought Clydesdale Bank in 1987, and Yorkshire Bank in 1990

National Australia Bank has been reviewing what to do with its substantial UK operation, Clydesdale - which also owns Yorkshire Bank and operates mainly in Scotland and the north of England - since January.

Because of an economic downturn in the UK described by NAB's chief executive Cameron Clyne as "longer and slower to recover than experienced in the 1930s following the Great Depression", the bank has decided to cut 1,400 UK jobs, pull out of commercial property lending here and concentrate on retail and small business banking.

Mr Clyne says "heightened weakness in the eurozone" is "in part" to blame.

It also announced that the UK operation has fallen into a small loss, of £25m - and will take a charge of £150m for property loans going bad, blaming a double dip in the commercial property market.

But NAB has apparently rejected the option of selling Clydesdale and pulling out of the UK.

Earlier this year, it received a takeover offer for the business from NBNK, which is also trying to buy 632 branches from Lloyds, and turned it down.

A source at NBNK tells me that if its offer had been accepted, there would have been fewer job losses.

UPDATE 08:33 BST

As I am sure you know, what Cameron Clyne says about the longevity of this UK economic downturn is old news: economists have been pointing out for some time that if a depression is the period during which output remains below the previous peak, the UK is experiencing the longest depression since reliable records were compiled (and a longer depression than in the 1930s).

But what seems to be significant is that he should flag up the weakness of the recovery. Is it Aussie schadenfreude? Or is it, which would be more worrying, how big businesses on the other side of the world increasingly see the UK?

UPDATE 09:34 BST

For what it is worth, Cameron Clyne, chief executive of NAB, has been very dismissive of NBNK's attempt to buy Clydesdale, in a briefing to analysts overnight

He said: "Let me be quite clear, we've never received a formal offer for this bank. We've never rejected a formal offer...We have received informal and speculative expressions of interest, all of which are very low valuations and also highly conditional...so very difficult to execute."

Which is why NAB thinks shrinking Clydesdale (and Yorkshire) is preferable to selling the bank.

 
Robert Peston, economics editor Article written by Robert Peston Robert Peston Economics editor

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Comments

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  • rate this
    +2

    Comment number 1.

    Hmm, surely Britain needs more competition in retail banking ? Why not spin off Yorkshire Bank and the Clydesdale as separate retail businesses ?
    A bit of competition in the 'free' market ....

  • rate this
    +27

    Comment number 2.

    Would it be possible for the BBC to hire another business editor to cover the other types of business going on in the UK. Banking is all very interesting and allegedly important but we do do other things here in the UK. Anyone overseas reading the BBC for a summary of UK business would be quite forgiven for believing there is nothing here but banks and shops. That is not the case.

  • rate this
    +2

    Comment number 3.

    How much more evidence is needed to show that austerity does not work? What will happen to the 1400 jobs to be shed in the next few months? There will be not only additional burdens on the state but substantial losses will appear in the tax income account and all this ignores the 1400 personal losses to be experienced by the staff. This is far from just another isolated incident.

  • rate this
    +14

    Comment number 4.

    Government and household debt at saturation levels, rising food and utilities prices. Global oil prices stubbornly high indicating that the era of cheap oil is over. Since economists insist on annual growth to keep the whole shaky global economy going, where is the necessary aggregate demand going to come from?

  • rate this
    +7

    Comment number 5.

    Everyone knows pay freezes with Inflation equals falling consumer sales.
    New forms of commerce are needed for export purposes and to create new jobs.
    The City isn't helping at the moment.
    Too easy for them to take unearned bonuses than create anything actually real and useful.
    Blaming the Public sector for Britains economic woes is both clearly wrong and futile.
    Lets have some real ideas !

 

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