Jim Armitage: Treasury and EU must not neglect the challenger banks

This time last year, Virgin Money’s Jayne-Anne Gadhia was about to launch her bank into business lending for the first time.

The plan was to buy a small asset finance business to get a foot in the door and expand Virgin from its personal books of mortgages and savings.

Then, the public voted for Brexit.

Like many other chief executives across the UK, Gadhia pulled the deal.

The risks of entering a completely new market, particularly via a takeover — with all the risks that entails — was simply too much amid the uncertainty of Brexit world.

As it happens, thanks to the Bank of England’s cut to interest rates and decent growth in the EU, the economic downturn many feared from the referendum has been rather longer coming than expected.

Lending to businesses, Gadhia said today, is looking less of a risk than it was.

But, with the Article 50 negotiations barely even started, for a conservatively-run business like hers it remains a risk too far, particularly in a country where the oligopoly banks of Lloyds, RBS and HSBC have such a stranglehold.

What could persuade Gadhia to launch into lending to businesses is the Treasury’s suggestion of forcing RBS to give challenger banks like hers a £750 million pot of cash to lend to small businesses.

The idea is part of the Government’s effort to come up with an alternative to the EU’s demand RBS breaks up and sells its Williams & Glyn branches.

The EU started discussing the scheme with the Treasury early this month, to see if it really would compensate for the billions of pounds of state aid RBS received during the financial crisis.

With the general election and Article 50 now in full flow, the fear is it will be filed somewhere on the list of priorities below the plight of newts in Andalucia.

That would be a pity.

Virgin has proved a small but positive force on the lending landscape, taking market share in mortgages, credit cards and savings without running up undue risks. Rival challengers can say the same.

The faster the EU and Treasury can agree on a meaningful fix to RBS’s dominant position, the faster they can accelerate that much-needed competition to banking’s old guard.

Calm down, dears

Whitbread’s share-price rout today seems unwarranted.

Both Premier Inns and Costa Coffee met demanding City forecasts and the company is optimistic, though mildly cautious over consumer confidence.

With plenty of scope for new openings and relatively robust sales, investors should grab a cappuccino and relax.