British billionaire Richard Branson said he may open bank branches at train stations on the main rail route between London and Scotland after his Virgin Money Holdings U.K. Ltd. agreed to buy Northern Rock Plc.
Branson is considering drawing on his expanding finance business as he seeks to retain the West Coast franchise that transports 30 million passengers a year between the U.K. capital and the cities of Birmingham, Glasgow, Liverpool and Manchester.
“Virgin Money I’m sure would be interested in opening up banks along the line,” Branson said yesterday in an interview following a briefing on his rail strategy at London’s Euston station. “That’s quite likely.”
Branson agreed to buy Northern Rock last month for 747 million pounds ($1.17 billion), marking the first sale of a bank bailed out by the British government since the 2008 financial crisis. The deal, scheduled for completion on Jan. 1, will bring the online and phone-only Virgin Money its first retail branches and 1 million more customers, lifting the total to 4 million.
“Opening in stations where people are waiting for trains and can go and hang out in their branch if they want is quite a clever concept,” said Christopher Wheeler, an analyst at Mediobanca SpA in London. “Rebranding as Virgin Money should create a user-friendly environment and gain market share.”
The West Coast contract, operated by Virgin for 14 years, should go to the bid offering the greatest innovation and highest quality, not simply the most money, Branson said, adding that he has “radical ideas for the new franchise.”
Virgin Trains is anxious not to lose to an unsustainably high competing offer, he said, citing a failed pitch for the rival East Coast route, from which winning bidder National Express Group Plc (NEX) withdrew after revenue fell in the recession.
State companies such as SNCF of France and Dutch operator NV Nederlandse Spoorwegen, also competing for the West Coast route, typically “do not do that great a job,” Branson said. Aberdeen, Scotland-based FirstGroup Plc (FGP) is the fourth bidder.
The 61-year-old entrepreneur said Virgin could ultimately withdraw from the U.K. railway industry if it fails to keep the London-Glasgow franchise, having lost its only other contract -- the long-distance CrossCountry network -- in 2007, though a bid for a re-tendered East Coast business remains a possibility.
End of the Line
“We’d much rather be going forward than going backwards,” he said in the interview. “If we weren’t successful in getting this, would we carry on investing in rail in the U.K.? I think perhaps less likely than likely.”
Network Rail Ltd. spokesman Russell Spink said there are no banks at the 18 major U.K. stations managed by the government- backed company, which runs Britain’s rail infrastructure.
Charges at the stations, which include six on the West Coast route, are based on sales at individual shops, something that might be tough to calculate for a bank, so Virgin would more likely focus branches on those stops it directly manages, such as Rugby, Crewe and Coventry in central England, he said.
“There’s no reason why a bank couldn’t today operate at one of the many stations managed by the train operators as part of their franchise,” Spink said. “If Richard Branson wants to stick Virgin Money or Northern Rock at a Virgin-managed station there are no railway rules or regulations against that.”
Virgin has also been approached about “building networks” in countries including Australia and the U.S., Branson said, without elaborating on what that would entail.
While West Coast stations such as Crewe and Preston serve limited local populations they’re also major interchanges with extensive buildings, many of them unoccupied, offering scope to accommodate expanded retail sites, as well as more novel facilities such as business centers and gyms. Branson Virgin Group includes the Virgin Active health club chain.
SNCF last month signed a deal with Regus Plc to open six “drop-in” business centers at railway stations in France, offering workspace equipped with printers, scanners and video- communication facilities for as little as 10 minutes a session.
The companies didn’t specify if a similar arrangement might be offered in the U.K.
Virgin Money said following the agreement to buy Northern Rock -- which had a first-half loss of 68.5 million pounds -- that it wouldn’t impose job cuts for three years and would maintain at least the same number of branches.
To contact the reporter on this story: Katie Linsell in London at firstname.lastname@example.org