View from City Road: This time the small businesses got it right
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Your support makes all the difference.It is easy to criticise extravagance with hindsight, especially when someone has dropped a pounds 243m clanger. But Abbey National's final abandonment of its Cornerstone estate agency chain provides yet another reminder of how the wild and racy 1980s turned the head of even the most conservative of institutions.
Only two years ago that other bastion of fusty reliability, the Pru, dropped an even heftier pounds 400m when it ditched its own ill-fated attempt to 'build the biggest estate agency chain in Britain'. Why did these people do it?
The answer lies in a statement Peter Birch, Abbey National's chief executive, made in 1987 when announcing its target of 1,000 estate agency branches: 'We forecast that within five years one in five of all mortgages will be sold by estate agents. This is, for us, a crucial consideration.'
It was a crucial consideration for the rest of the mortgage lenders, and life companies as well. A climate of fear gripped these institutions following financial deregulation. The theory went that now estate agents were allowed to sell mortgages and endowment policies, why would people bother going anywhere else for their housing finance? If you didn't own estate agents, you were dead.
Sadly for Mr Birch and his colleagues, Abbey National has never sold more than 5 per cent of its mortgages through its estate agency chain since its launch in 1987. Contrary to the predictions of the Cassandras of the 1980s, people have continued to go to estate agents for houses and financial institutions for mortgages. One-stop shopping may work for food, but not for moving house.
And the winners? One group has made hundreds of millions of pounds out of this experiment, and can even have the satisfaction of saying 'I told you so.' For it was the small-time owners of the independent high street estate agencies who in the mid-1980s derided the very idea of big corporations running such a business even as they sold out to Abbey and the rest.
Now that the big chains can no longer carry the losses that the worst housing market in living memory has inflicted on them, they are selling the branches back to the same small businessmen - for a song. And just in time for the next housing upturn. Who says the little people get it wrong?
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