The Gibraltar Government has reacted forcefully to news that Newcastle Building Society is planning to close the doors of its Gibraltar branch for good in October, following an 18-month review of its branch network.
The announcement of the planned closure was made yesterday, and will affect around 11,400 customers and cause the loss of eight jobs.
The building society’s announcement is the latest in a series of such announcements, in Gibraltar as in other small, mainly offshore financial jurisdictions, as a combination of the global financial crisis, soaring costs of doing business, a global shift to online banking, and plunging revenue from deposits have forced one after another of the mainland banks and building societies to retreat from the offshore market.
Just last week the Dublin-based parent of Permanent Bank International, the Isle of Man bank that was created by the acquisition of Irish Nationwide (IoM) by Irish Life & Permanent in 2011, announced it, too, was to close.
In 2015 the government of Gibraltar took matters into its own hands by opening its own lending institution, the Gibraltar International Bank, to fill what it said even then was a growing need in the marketplace.
As far as building societies in Gibraltar go, the Norwich & Peterborough Building Society closed its branch there in 2014, after 24 years, but the Leeds Building Society remains on Main Street.
In a statement, the Gibraltar Government said “HM GOG [Her Majesty’s Goverment of Gibraltar] regrets the news that Newcastle has, followed a strategic review, [decided to close] a number of branches, including Gibraltar.
“The Government notes that it was not aware this review was taking place, and will look into the circumstances as to why it was not informed of this fact earlier, allowing it an opportunity to influence the outcome.
HM GOG also regrets that a press release was issued without time for the Government to react proactively in any way.”
The Gibraltar Government’s statement goes on to detail what it says are “three pressing priorities that arise” from the situation, including the fact that the given closure date “is insufficient, especially in the context of a 27-year history on the Rock”.
“They [the building society] have an obligation to their loyal and faithful customers to give them significantly more time to, where necessary, make alternative arrangements”.
The government also expresses concern that mortgage clients of the building society not be forced to “have to rely exclusively on either taking a variable rate [mortgage] or finding another provider” when their existing mortgages with the Newcastle Building Society expire; and that the eight staff who work at the branch are given “as much support and assistance as possible”.
‘Focus on its heartland region’
In a statement on its website explaining the decision to close its Gibraltar outpost, Newcastle Building Society said it had decided to “[strengthen] its focus on its heartland region, which incorporates the North East of England and parts of Cumbria”.
In a separate statement, the head office said it “hopes to work closely with the Gibraltar Government to manage the transition for customers”.
Andrew Haigh, the chief executive, added: “We are confident that the Gibraltar economy has a strong future. Our decision to close the branch is purely a matter of geography. Over recent years we have become increasingly focused on our regional heartland – the North East of England.
“The decision to close a branch is never made lightly, the plans we’ve announced today reflect our ongoing strategy to strengthen our regional focus.
“We will be writing to all our customers to inform them of the change and what this means to them and have set up a dedicated telephone information line for our Gibraltar customers.”
Newcastle is the UK’s eighth largest building society, and currently holds assets in excess of £3.6bn.
As reported here last week, Geoff Miller, who last year announced he was looking into the possibility of establishing a new bank in Guernsey, revealed that he and two business partners had sought for several months to acquire Permanent Bank International, the Isle of Man bank which is now to be wound down.
Asked today whether he and his associates might be interested in the Newcastle Building Society, he said: “We haven’t looked at any acquisition opportunities beyond the Crown Dependencies [Jersey, Guernsey and the Isle of Man] at this stage, but we would always be happy to look at something that came along in an offshore jurisdiction that would fit with our plans.
“However, I suspect that the situation with respect to the Newcastle Building Society is too late to do anything.”
‘Committed to our branch’
Gibraltar’s last remaining UK building society issued a statement following the news of the proposed closing of the Newcastle Building Society’s Gib branch in which it emphasised its commitment to the jurisdiction and its clients there, while acknowledging that there could be difficult times ahead.
“Leeds Building Society is committed to our branch in Gibraltar and our members in the territory,” according to the statement.
“We’ll continue to closely monitor the terms of the UK’s departure from the EU and any impact on our business structure, including the nature of any transitional arrangements.”