Consignia faces crisis over universal bank
CONSIGNIA, the beleaguered former Post Office, is heading for a fresh cash crisis due to fears that it will not have the Universal Bank up and running by its target date of April 2003.
The Universal Bank is intended to have the dual purpose of providing basic financial services for up to 6 million customers who do not currently have a bank account and also to boost the ever-diminishing revenue of Britain’s 18,000 Post Offices.
The national post network, already estimated to be losing millions of pounds a year, will be in even greater crisis from next Spring. That is when the Government plans to stop paying benefits over Post Office counters and automate the process instead, reducing the Post Office’s revenue by pounds 600m a year.
The Universal Bank was dreamed up by the Department of Trade and Industry as a way to attract an extra pounds 50m to Consignia. Some Government funds will be injected and the DTI has also pressurised Britain’s biggest banks to invest pounds 180m in the project.
As well as providing financing, the banks have agreed to make accounts with basic facilities available through Post Office outlets as a way to further boost consumer footfall in branches. Running alongside the banks’ basic accounts will be one run by the Post Office itself, which will be known as a “card account”.
But senior individuals involved in the project say the setting up of the card account and the bank’s entire infrastructure has been seriously delayed, due mainly to a turf war between Government ministries. The Treasury wants the cost of the Universal bank to be kept to a minimum, with the number of customers limited to about 3 million people, while the DTI wants to carve out as large a revenue stream as possible for the Post Office.
The DTI has been forced to cede control of the project to the Department of Work and Pensions, which has made it clear it will not provide a temporary subsidy to Consignia in the meantime.
One person close to the negotiations said: “The banks have not been given any blueprint whatsoever for how the bank will be set up. It is not the [high street] banks’ concern because they have fulfilled their part of the bargain, but they think Consignia and the DTI will miss their deadline because they have never set up what will effectively be one of Britain’s largest banks.”
Meanwhile, a number of rivals to Consignia’s Royal Mail service welcomed the announcement that Britain’s post delivery service is to be opened up to competition.
Shares in Hays, the business services group which runs a delivery service, climbed 3 per cent to 193p while Business Post rose 2 per cent to 393.5p as both companies were seen as the chief beneficiaries. Last year the postal regulator Postcomm awarded one-year licences to both companies to operate in confined areas of the country.
Business Post had expected to make pounds 5m in turnover from its 12-month licence but Mr Carvell said that would now be “much bigger”.
