INVESTORS in the UK’s biggest supermarket appear to have been given cause for celebration today.
Tesco announced to the stock market that its financial services arm, Tesco Bank, had reached a deal worth an initial £600 million to sell its credit cards, loans, and savings business to Barclays.
There are lots of reasons why this makes lots of sense to both parties. For Tesco, the deal raises hundreds of millions of pounds that it can return to shareholders, while removing billions of pounds of liabilities from its balance sheet.
READ MORE: Hundreds of Scots affected as Tesco Bank sells to Barclays
Analysts observed that the narrower focus of its remaining financial services activities on insurance, ATMs, travel money, and gift cards (Tesco Bank has previously withdrawn from the mortgage and current account markets) will free more management time to the benefit of its core retail offer, a pressing matter given the intense competition in the supermarket sector amid the ongoing cost-of-living crisis.
Barclays meanwhile has opened a useful path to winning more customers in the UK, particularly as the terms of the deal allow it to target Tesco Clubcard holders under an initial 10-year partnership.
But, as ever, it is people who will be at the sharp end of the deal. Tesco said that around 2,800 Tesco Bank staff, the majority of whom are based at offices in Glasgow and Edinburgh, will be moving across to Barclays. A spokeswoman also said that there will be no changes to current office arrangements at this stage.
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However, in the longer term, there are no guarantees, as countless takeover deals in the past have shown. Usdaw, the shop workers’ union, was right to say that it is an “incredibly unsettling time for members in Tesco Bank”.
“The union will, therefore, be seeking assurances on jobs, members’ terms and conditions as well as intended future plans throughout the consultation period,” added national officer Daniel Adams.
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