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OPINION

Could sharing bank branches help save the high street?

Could sharing bank branches help save the high street?
Could sharing bank branches help save the high street?

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Take a stroll down your local high street this weekend, and chances are, you’ll find that Covid-19 has hastened the demise of any remaining bank branches.

Banks have been vanishing from UK towns and cities at the rate of around 50 a month since 2015. The rise of digital banking under lockdown and precipitous decline of cash payments has made it even easier for banks to justify further closures.

The government, with all the urgency of a procrastinating snail, finally launched a consultation this month on laws that would oblige banks to provide personal and small business customers with a “reasonable” level of access to cash, although the definition of “reasonable” has yet to be hammered out. So what’s the solution?

This week I travelled to Rochford, a small market town in Essex, to see if a brand new bank on its high street could be the answer.

The Bank Hub opened its doors in April. One of two UK pilot schemes, five major banks effectively share a branch, offering walk-in appointments for existing customers. The Post Office provides a dedicated counter service for small businesses and personal banking — just like you’d get in a normal post office but much faster, as there are no queues of people returning their online shopping.

If any readers doubt the demand for cash and basic banking services in the community, I challenge you to go and spend an hour in the Rochford hub.

Community service: Cal McCall, manager of Bank Hub, and Tanya Davis, community banker with Lloyds Bank, say Rochford’s customers appreciate a face-to-face service
Community service: Cal McCall, manager of Bank Hub, and Tanya Davis, community banker with Lloyds Bank, say Rochford’s customers appreciate a face-to-face service © Claer Barrett/FT

It’s been enthusiastically received by shoppers and retailers who still lament the closure of Barclays, the last bank in town, around five years ago.

“People regularly come in and say they’ve banked with Barclays since the 1950s,” says Bank Hub manager Cal McCall. “They’re delighted that they no longer have to go to Rayleigh or Southend.”

The same goes for small business customers, who come in to get change and use the hub’s self-service cash deposit facility.

Bill, the Turkish barber across the street, boasts he can cash up without even locking his shop. Previously, he had to close early and drive to the next town.

All of this has made it much easier for Rochford’s retailers to keep taking cash payments. I couldn’t find a single shop displaying a “card payments only” sign, which is a far cry from my own neighbourhood.

Local butcher Jason Macaree is the owner of J Mac Meats, famed for its tomahawk steaks. He’s doing a roaring trade during the heatwave, and calls into the Hub most days to get change or deposit his takings.

Jason tells me about 25 per cent of his customers now pay in cash, down from over 60 per cent before lockdown, blaming unfounded fears of the virus being transmitted via banknotes. He’s previously been handed wet notes and coins that customers have washed in soapy water — a novel twist on money laundering.

Rochford’s local butcher Jason Macaree says 25 per cent of customers pay in cash, compared to around 60 per cent before Covid-19. Some have even paid him with freshly washed banknotes
Rochford’s local butcher Jason Macaree says 25 per cent of customers pay in cash, compared to around 60 per cent before Covid-19. Some have even paid him with freshly washed banknotes © Claer Barrett/FT

He and other traders are convinced the Bank Hub has boosted custom, noting that shoppers forced to travel elsewhere for face-to-face banking will inevitably spend their money there too.

Most people popping in on the day I visited were personal banking customers — the majority aged over 50, but not exclusively so — using the counter service to withdraw cash and pay bills.

Where the Bank Hub deviates from the existing Post Office tie-up is that the five banks supporting the pilot — NatWest, Lloyds, Barclays, HSBC and Santander — each host drop-in appointments in its private meeting room on a designated weekday.

Lloyds community banker Tanya Davis is on duty every Tuesday; a rare example of consistency in the modern banking world that her visitors clearly appreciate (“Hello again, Tanya!”).

“Customers love that they can come in and talk to somebody from their bank face to face,” she says.

The most common requests are help making payments or transferring money. As bank fraud spirals, many are not confident doing this online. Some don’t have smartphones; others say it takes too long to get through to telephone banking.

As well as ordering replacement debit cards and cheque books, many come in with queries on statements, which Tanya can usually resolve rapidly.

UK has one of the lowest rates of bank branches per head in Europe, Chasrts showing number of UK bank branches and bank branches per million inhabitants

While customers cannot apply for a mortgage or carry out more complex transactions, there are also clear fraud prevention benefits. Cal says people frequently pop in asking if texts purporting to be from their bank or the Royal Mail are actually real (they never are).

Natalie Ceeney, chair of the Access to Cash review and the community access pilots, hopes the shared banking model will be replicated nationwide.

The group’s research shows some 8m people in the UK are entirely dependent on cash, and Ceeney says this is highly correlated to vulnerability, age and poverty.

“If you earn less than £10,000 a year, you are 14 times more likely to be dependent on cash than if you earn more than £30,000,” she says.

Plenty of families are “managing to the penny” — especially those on zero-hours contracts with irregular incomes. Even if they have access to a free cash point, they often need to withdraw less than £10.

On the day I visited the Bank Hub, a woman came in and withdrew the last 80p in her account to buy a loaf of bread.

Similarly, many on low incomes shun monthly direct debits as they want to control when money leaves their account — evidenced by the number of customers in Rochford asking to pay bills over the counter.

‘Cash is becoming a dirty word now,’ complains market trader Jeff, who runs a stall selling greetings cards. He only takes cash as most of his wares cost £1 or less. 
‘Cash is becoming a dirty word now,’ complains market trader Jeff, who runs a stall selling greetings cards. He only takes cash as most of his wares cost £1 or less.  © Claer Barrett/FT

For small businesses, being able to deposit cash takings quickly and easily is a boon, but many are angry with the banks for upping charges under lockdown.

Jeff, who runs a market stall selling greeting cards, only takes cash as most of his wares cost £1 or less. “Cash is becoming a dirty word now,” he complains. Some of his suppliers no longer take cash payments from him, blaming increasing bank fees.

“A lot of members tell us that cash deposit and withdrawal fees are high and rising,” adds Martin McTague, vice-chair of the Federation of Small Businesses, saying this is pushing more and more retailers to go cashless.

Even if the pilot hubs are more widely adopted, it may be too late to reverse this trend. Nevertheless, adopting a shared model is the obvious way of maintaining what’s left of the UK’s cash infrastructure at a cost that the banks can jointly afford.

Rochford’s locals are aware the pilot Bank Hub could be gone by October if banks decide to abandon the experiment. “Have you heard if you can stay yet?” is a commonly asked question, Cal says. Hopefully it’s one he will soon be able to answer.

Claer Barrett is the FT’s consumer editor: claer.barrett@ft.com; Twitter @Claerb; Instagram @Claerb

Click here to find out more about the FT’s Financial Literacy and Inclusion Campaign, or email financial.literacy@ft.com



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OPINION

Unleash the ladybirds of war — controlling garden pests the natural way

Unleash the ladybirds of war — controlling garden pests the natural way
Unleash the ladybirds of war — controlling garden pests the natural way

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House & Home updates

It’s a war zone out there. Aphid forces broke out from their stronghold among the rose bushes this spring. By the end of May they had overrun territory stretching from the flower border to the furthest shores of the pond. After years of squirting bug sprays, sprinkling ant powder and scattering slug pellets, I have quit using chemical pesticides.

The tide turned at the beginning of June. Allied forces, gallantly spearheaded by seven-spot ladybirds and supported from the air by squadrons of hoverflies, won battle after battle. The aphids are now a spent force, their armies scattered to the winds. Only a few thousand blackfly remain, hanging on to their last bastions amid the fragrant valerian.

I’d like to say I foreswore chemical warfare against garden pests following an epiphany — that Mother Earth or organic gardening evangelist Bob Flowerdew came to me in a vision, asking, “What’s with the pesticides?”
In reality, I got bored with them. Chemical pesticides are time-consuming, expensive and accidentally kill or harm animals we cherish.

“Once you start using them, it’s hard to stop,” says Andrew Whitehouse of Buglife, a charity. “You get stuck in a loop.” Wipe out the greenfly on the rose bush and you have also exterminated their predators. You have to keep on spraying.

You need to be as steely-nerved — or merely as lazy — as I am to suspend your hostilities. Aphids are the original fast-breeder reactors. When the sap starts rising, a female greenfly can pop out four duplicates a day. Baby greenflies already have their daughters and granddaughters growing inside them, says Helen Roy, president of the Royal Entomological Society.

Aphids reproduce fast because predation is so high. You can even order reinforcements online in the form of native ladybirds. Roy doubts the usefulness of this. The old rhyme “Ladybird, ladybird, fly away home” reflects how readily these insects take to the wing in unwelcome surroundings, whether the hot hands of children or the wrong garden. It is better, she says, to encourage resident insect predators with log piles and wild patches.

There are almost 50 species of ladybirds in the British Isles. The most familiar is the seven-spot, though it is facing competition from the harlequin, an Asian import.

Most gardeners appreciate ladybirds. The pretty red wing cases catch your eye when you’re weeding or deadheading. In children’s book illustrations, these typically become the red cape of a motherly insect. The archetype is The Ladybug in James and the Giant Peach. Francis, the grumpy, card-sharping ladybug in the Disney animation A Bug’s Life, was irked by strangers always assuming he was a girl.

He was not a bug either. Ladybirds are beetles. That makes them members of a very successful order of animals. Scientist JBS Haldane was supposedly once asked what characteristics of the Almighty his studies had revealed. “An inordinate fondness for beetles,” he replied. There are more than 300,000 species.

There are not, however, enough of the right sort in my London garden.
I need more of the ground beetles that feed on slugs and snails. I found
a big, tough northern ground beetle of a kind that doesn’t bother with a coat on a night out running around on the chilly summit of Helvellyn, in the Lake District, recently. Garden fences appear to restrict the spread of its soft southern cousins. Most ground beetles cannot fly.

Stag beetles can. Sort of. One of these heavyweights careered into our garden last year, wings whirring frantically, legs thrown out and braced for impact.

If you live within their range you can encourage stag beetles to breed with a “stumpery”: a vertical log pile part-buried in the ground. I once met a naturalist who reared the huge, white larvae in tubs of rotten wood in his cellar. They looked like props from an Alien movie.

Beetle mania does not get much more niche than this, except in an enthusiasm for carrion beetles.

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Roy braves the embarrassment of relatives by looking for these on family walks. “It’s amazing what you can find under a dead deer!” she enthuses. Sexton beetles, named after graveyard caretakers, are apparently wonderful parents. To me, they simply smell bad.

We all have our limits. I do not expect most readers will want to embrace laissez-faire gardening to the extent I have. But I would encourage you to experiment with low-impact pest control. You can flick lily beetle larvae off host plants with a paintbrush. Soap solution can be effective against aphids.

Where they are accessible, you can dig out and scatter the nests of black ants. These farm greenfly for their honeydew, repelling ladybirds in
the process. I am planning to dig out the city of thousands that has mushroomed on the rockery. But first I will let it spew forth its seasonal bounty of flying ants. They will help fatten up the swifts for their return trip to Africa. The eternal war of pests vs predators will have broken out again by the time the birds return next spring.

Jonathan Guthrie is the head of Lex

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OPINION

Five pandemic truths that defy intuition

Five pandemic truths that defy intuition
Five pandemic truths that defy intuition

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It’s striking how much Covid confusion still reigns. Some of the informational miasma is deliberate — there’s profit for some in the bewilderment of others — but much of it stems from the fact that epidemics defy our intuition. So, here are five counterintuitive Covid truths that easily slip beyond our understanding:


1. If a large share of hospitalised people are vaccinated, that’s a sign of success. It has been common to see headlines noting that a substantial minority of people who have been hospitalised or even killed by Covid have been fully vaccinated. These numbers suggest vaccine failure is alarmingly common.

The fallacy only becomes clear at the logical extremes: before vaccines existed, everyone in hospital was unvaccinated; if vaccines were universal, then everybody in hospital would be vaccinated. Neither scenario tells us whether the vaccines work.

So try this. Imagine that 1 per cent of the unvaccinated population will end up in hospital with Covid over a given time period. In a city of a million people, that would be 10,000 hospital stays. Now let’s say that 950,000 people get fully vaccinated, that the vaccine is 95 per cent effective against hospitalisation, and that the vaccine doesn’t reduce transmission (although it does).

Here’s the arithmetic: 500 of the 50,000 unvaccinated people end up in hospital. A total of 9,500 of the vaccinated people would be at risk of a hospital visit, but the vaccine saves all but 5 per cent of them. These unlucky 475 still go to hospital.

The hospital contains 500 unvaccinated and 475 vaccinated people — almost half and half — which makes it seem as though the vaccine barely works. Yet when 95 per cent of people take a 95 per cent effective vaccine, hospital visits fall from 10,000 to fewer than 1,000.


2. Herd immunity isn’t the end of a pandemic. In the simplest epidemiological models, herd immunity is the moment when so many people are immune — either because of vaccines or prior infection — that the epidemic begins to die away of its own accord.

The keyword here is “begins”. An epidemic has momentum, like a train. Herd immunity is the beginning of an uphill gradient, initially very gentle. If the train is moving at top speed as it begins to climb the hill, it will keep travelling for a long way before it stops.

The difference between hitting herd immunity during a raging epidemic — yes, I am thinking of the UK — and hitting it through vaccination during a lull could be millions of unnecessary cases.


3. Masks matter, but not for the reason you think. Microbiologist Ravi Gupta has called the end of mask mandates in England “criminal”, while radio presenter Julia Hartley-Brewer has said she will boycott the bookshop Waterstones if they politely suggest wearing masks. What is it about masks that ignites such rhetoric?

This is all about the social stakes involved. While you can’t see who’s been vaccinated or who has ignored a ping from the contact tracers, you can see who’s wearing a mask.

I think it is considerate to wear a mask, an act that evidence suggests may protect me, probably protects others and certainly reassures them. For most people, wearing a mask is only a minor annoyance, so why not do it?

Only our innate tribalism can turn mask-wearing from a simple, promising precaution into the dividing line between the saintly and the damned. Cabinet ministers have boasted about removing their masks as soon as possible, which feels like boasting about farting in a lift: it might be a relief but it’s a strange thing to advertise. Once one realises this is about signalling tribal loyalty, it makes more sense.


4. Lockdowns also matter less than you think. It is understandable that we have focused so much on lockdowns. The radical social distancing ministers have imposed has been an unprecedented shift in the way we live, but it has saved millions of lives.

What we overlook is that much of this social distancing would have happened anyway. Many people “locked down” before lockdowns themselves, out of fear or out of consideration for others, or both. The most famous study of this by economists Austan Goolsbee and Chad Syverson estimated that around 90 per cent of the reduction in consumer traffic was voluntary.

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One need not believe the precise number to accept that people have often acted by choice, through fear or altruism. The flip side is also true: a lockdown that isn’t widely supported is neither effective nor tenable.

All this matters because it is easy to think that everything revolves around the rules. More important is social solidarity, clear information and prominent people setting a good example. Alas, we’ve had to settle for social solidarity alone.


5. Covid was a near miss. After the disruption to life, love, education and commerce, and after more than four million confirmed deaths around the world — with many more unconfirmed and many still to come — it may seem strange to say so. But this could have been far worse. It could have been as contagious (or more) as the Delta variant from day one. It could have been as deadly as Mers, which has killed a third of the people confirmed to have contracted it. It could have attacked children rather than the very elderly. And it could — like HIV — have defeated efforts to create a vaccine.

So while we count the cost, we should also count our blessings — and dramatically strengthen our preparedness for the next pandemic.

Tim Harford’s new book is ‘How to Make the World Add Up’

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OPINION

Rich People’s Problems: Can classic cars beat the Ulez?

Rich People’s Problems: Can classic cars beat the Ulez?
Rich People’s Problems: Can classic cars beat the Ulez?

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A car journey always feels more exciting when there’s a destination. With another foreign holiday cancelled and continued travel confusion over green, amber and red, the only traffic lights I want to see are in England this summer on a staycation road trip.

As you know, I am a huge fan of English fizz, so we plotted a tour of three delightful vineyards in East Sussex and Kent over three days. Destination settled, what car should we take?

I am a big fan of electric cars, which are exempt from the £12.50 daily charge for entering London’s Ultra Low Emission Zone (Ulez). On October 25, this is set to expand from the existing congestion charge zone all the way to the north and south circular roads.

I’ve owned electric cars for 12 years and know their limitations. Sadly, the infrastructure just isn’t there yet, especially in the countryside. I recently took Grant Shapps to task about this on my TalkRadio show. If we all went electric, the transport secretary seems blissfully unaware that the 25,000 charging points he’s so proud of won’t service the nation’s 30m vehicles.

Setting aside the range constraints, until someone makes a convertible electric vehicle, they’re not appealing for this kind of recreational excursion.

One of the reasons I sold my Tesla was because it was soulless, like driving around in a doctor’s waiting room. My current electrical companion, the Jaguar I-Pace, resembles a footballer’s living room. Sadly, the panoramic glass roof doesn’t open. Its only function, it seems, is to highlight when your car needs a wash (when it gets covered with bird poo, in case you were wondering).

For driving around the Garden of England, I wanted to go open top with a petrol engine soundtrack and a huge boot to stow all the cases of sparkling wine we planned to buy.

James Max’s Mercedes 380sl proved the perfect ride for his tour of three vineyards in East Sussex and Kent
James Max’s Mercedes 380sl proved the perfect ride for his tour of three vineyards in East Sussex and Kent © James Max

If, like me, you have a suite of cars, they’ll have different applications. The electric Jag is ideal for buzzing between our homes in London and the north Essex coast. My Aston likes a long-distance overseas adventure. It’s epic for unlimited speed autobahn motoring and hill driving, and perfect for posing outside luxury hotels and villas. It’s convertible, but not nimble enough for an English country road.

The Rolls is good for an outing to the chippy or a nice breakfast run, but far too unreliable for long haul. Thankfully lockdown allowed me to add one more vehicle to my fleet — a Mercedes SL.

Produced between 1971 and 1989, the Mercedes R107 sports car was the second longest single series produced by the auto manufacturer, after the G-Class. They made over 300,000 of them. Before you conclude that they’re common, remember the volume of production means a plentiful supply of spare parts.

Many vehicles ended up in the US, so they’re not that prolific on Britain’s roads and they’re a 1980s television icon. Bobby Ewing had one. So does Greg James from Radio 1, so they must be cool.

Like many classic cars, they do have a rust problem. Early models weren’t galvanised, and they’re all susceptible to the bulkhead rusting (an impossible-to-get-to part behind the engine bay and under the windscreen). If it rusts, you’ll know about it because your carpets will be damp and the car will honk — but not in a “toot” way. It’s fixable but expensive, so you’ve got to be careful when purchasing.

If you have all the money in the world, you’d go to the official SL Shop. They’ve currently got a late run 1989 300 SL on offer with just over 12,000 miles on the clock for (wait for it) £80,000. Fine if you’re looking for an investment, but it’s too much for a usable classic.

Under lockdown, I became obsessed with The Market, the online classic car auction website that’s just been snapped up by Bonhams — perfect for drooling over as you head off to bed. It’s easy to register and their process for profiling cars with hundreds of detailed photos and video footage is light years ahead of traditional auction brochures.

Browsing the site, I was distracted by a Triumph Stag. Throaty, burbling and practical if you do manage to find a well sorted example. However, I have previous — a narrow escape a few years ago with one that had more filler than a faded TV personality. It didn’t drive well, wasn’t particularly comfortable and rattled and squeaked like an old British Rail train carriage.

After some homework, I concluded that the first generation Mercedes SLs built before 1979 were cheap for a reason. They were often riddled with problems. The final run from 1986 are generally the best, but the most expensive. Early 1980s vehicles offer the best value for money, especially if they have over 100,000 miles on the clock. Plus — they’re only a couple of years away from becoming a heritage vehicle (40 years old) which is when they become road tax and Ulez exempt. Bonus!

As for engine size, the 560 series is somewhat lairy, like the US market it was aimed at. I prefer the 300 series; it’s fast enough to cruise along a motorway and powerful enough to motor through the countryside.

The R107 is particularly lovely on a winding country road. The seats and driving position are super comfortable, the roof mechanism easy to operate and the big steering wheel gives a floaty yet relaxed driving experience.

Don’t be swayed by men in tweed jackets who tell you that you need a small wheeled manual sports car. They’re the kind of people who drive MGBs, a car suitable only for short people with a waist size less than 34” who don’t care about looking undignified falling out of the low-slung cockpit.

The car I eventually purchased for a shade over £17,000 was a 1982 Mercedes SL 380 with 102,000 miles on the clock that been previously owned by John Menzies, great grandson of the founder of the newsagent group, and subsequently by a Scottish artist. The provenance was excellent, and the file was thick with invoices for servicing, repairs, upgrades and paintwork.

The running costs are low and the £268 insurance great value. And on the first turn of the key, it purred into life. What a car!

Back from touring the fantastic wine estates of Busi Jacobsohn, Balfour at the Hush Heath Estate and Gusbourne, we certainly don’t feel short-changed. The cellar is fully stocked for a summer of garden parties, and last week, an SL like mine went for £28,000 online.

But here’s something else to consider. After 2025, Transport for London has signalled there will no longer be a tax saving for electric vehicles. It could be that heritage vehicles (or a mobile crane, should you own one) will become the most cost-effective way to cruise around town.

James Max is a radio presenter and property expert. The views expressed are personal. Twitter: @thejamesmax

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OPINION

What will arise from the demise of mass commuting?

What will arise from the demise of mass commuting?
What will arise from the demise of mass commuting?

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Before the pandemic, a friend who lives in a southern English village used to commute into London. He’d leave home at 7.45am and return at 9pm, grumpy and shattered. He rarely saw his children, let alone his neighbours.

Now he works remotely from his garden shed, takes the kids to school and has used a chunk of his new spare time to become supremo of his village cricket club. He’s forever popping to the field to take the covers off the pitch or get the pavilion roof fixed. He has gone from commuter to pillar of the community.

He isn’t alone. In the former commuter belts of big cities, remote work is now creating community. Is this a net gain for humanity, or is it outweighed by downsides elsewhere?

Commuting worsened the decay of civic life, observed political scientist Robert Putnam in Bowling Alone, his 2000 classic about the US. Ever fewer Americans knew their neighbours, worked as a volunteer or went bowling in clubs any more. This decay had many causes, but, said Putnam, “I was shocked to find how robust a predictor of social isolation commuting is. There’s a simple rule of thumb: every 10 minutes of commuting results in 10 per cent fewer social connections.”

American commuting times have worsened since Bowling Alone was first published, hitting a new high in 2019. This affected everybody, not just commuters. Before the pandemic, I met a friend from Orlando, Florida, whom I hadn’t seen in years. When I asked how life was, he grumbled about worsening traffic. At the time I thought this was a disappointingly mundane answer, but later I realised traffic ruled his life. Going anywhere took for ever, so he rarely went anywhere.

Civic life in Britain appears to have decayed too. The Office for National Statistics found fewer chats or exchanges of favours with neighbours, a weakening sense of local belonging and falling membership of “political, voluntary, professional or recreational organisations” in 2018 compared with 2012.

I’d seen this over the decades in the outer London neighbourhood where I finished school and where I still have family. At some point the church on the high street was converted into a pub. Once people stopped gathering in pubs too, the place became a bad chain restaurant.

I returned to the neighbourhood last month. The pandemic has transformed it into a 15-minute suburb, where all the necessities of life are a walk away. Many residents now work from home. Everyone was on the morning school run, chatting and exchanging favours and, afterwards, parents popped up in local coffee shops or at the lunchtime hot-yoga session.

Mock these new urban rituals all you like, but they are what constitutes 21st-century community. After a week there, I was waving to familiar faces on the street. It felt like the 1950s suburban idyll recalled by the Beatles in “Penny Lane”, with the barbershop where “all the people that come and go/Stop and say hello”.

One day I saw friends who had recently moved to another part of London. They had integrated fast, partly because their neighbours were around all day and partly because of their street’s WhatsApp group. Admittedly, it was full of boring stuff about bins, but then community often is boring. The WhatsApp group was so central to local life that they assumed it had been going for ever. In fact, like so many across Britain, it had started with the pandemic.

The revival of neighbourhoods has downsides. In some big cities, staying in one’s street will encourage segregation of like with like. Yet in the London region, that risk is mitigated by the sheer amount of residential mixing. Some of it is economic: my old neighbourhood has social housing and some lower-middle-class homeowners who bought before gentrification as well as bankers who are buying now.

There’s also ethnic mixing: in the babel of languages on the school run, I got to know a Parisienne in a hijab who talked of London as a non-racist paradise. At my friend’s cricket club, he has reintegrated several British Asians who had quit in a past, less-welcoming era.

Some people worry the neighbourhood revival will kill off city centres. But that won’t happen, longer term, in attractive cities. The suburbanites I met were already going into London a day or so a week, and they’ll go more often when nightlife and cultural venues revive. They love central London. Some would happily move there. They just don’t want to commute there every day. David Milder, an expert on downtowns, sees Central Business Districts giving way to “Central Social Districts”.

Tourists will eventually return too, and while some companies will abandon inner London, others around Britain and the world are itching to take over unwanted office spaces. Imagine Ricky Gervais’s fictional firm in The Office trading up from the Slough Trading Estate to a one-day-a-week meeting room off Piccadilly.

The neighbourhood revival will claim other victims. Charmless city centres and exurban business parks where people only ever went to work may die along with mass commuting.

Follow Simon on Twitter @KuperSimon and email him at simon.kuper@ft.com

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OPINION

A tale of two Covid tests

A tale of two Covid tests
A tale of two Covid tests

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This article is an on-site version of Martin Sandbu’s Free Lunch newsletter. Sign up here to get the newsletter sent straight to your inbox every Thursday

Free Lunch is about to take a break for the summer, and will be back in the second half of August. Rather than promising you a “what did I do for my summer holiday” note when I’m back, I will devote today’s article to a theme related to travel and holidays — at least if you are attempting the cross-border sort during this second pandemic summer.

A few years ago I wrote about a humble service I found useful to make sense of differences between economies: the car wash. Depending on the country (or indeed the period in time), are you more likely to find your car washed by automated giant roller brushes or a by a group of low-paid men armed with rags and spray bottles? The answer can tell us a lot about different models of capitalism, in particular, whether they are organised around the intensive use of low-productivity work or based on increasing productivity by substituting capital for labour.

I keep looking out for analogous examples — Free Lunch readers, do send me yours — and on a recent trip I collected a new one. Suitably enough, it involves an economic activity that has boomed in the pandemic: coronavirus testing.

Having obtained an EU digital Covid-19 certificate, I recently managed to do a quick trip from London to Oslo to check in on family there I hadn’t seen for a year and a half, without having to quarantine on entering Norway. On the way back, I needed to get a test before departure and several times after returning to respect the UK quarantine requirements and secure a release from self-isolation rules upon a negative test on the fifth day after travelling.

So here is a tale of two PCR tests. The first, I booked in downtown Oslo with a promised one-to-two-day turnround; the second, near King’s Cross station in London with a 24-hour guarantee. Online booking was equally simple for both — though the one in Oslo cost only NKr800 (£65), while the one in London cost twice as much at £129.

The bigger difference, however, was in the test centres themselves. The spaces were both small-sized operations in what would previously have been compact shop fronts or street-level offices. In Oslo, a single staffer manned the reception, checked me in and took the swab. The only “paperwork” involved double-checking my national identity number and confirming verbally the absence of symptoms and my travel history. The London centre was rather more involved. It had a security guard locking and unlocking the door, a receptionist checking me in and a medical staffer taking the swab. Before he could do that, I had to manually fill in a long paper form repeating all the information I had already entered when booking.

And the results? Both came back swiftly; the Norwegian one after 21 hours and the UK one after eight. The UK test result was sent via email. The Norwegian one came with a text alert that it was available on the country’s public health portal; this had the added benefit that my (negative) result was automatically added to my EU certificate, which might have been useful had I been going anywhere else in Europe but the UK.

The contrast I want to focus on is how, for a basically identical product, the activity seemed much more wastefully organised on the UK site. It had three employees versus one, yet the demand on the day was similar (there was one other person getting tested). The paperwork meant the whole visit took me three times longer if not more. These are big differences — too big, I think, for them to be seen within one economy. So they must reflect differences between the economic structures of the two countries.

This could, of course, be a completely unrepresentative experience. But suppose it wasn’t; suppose it captures roughly the differences in how the private PCR testing industry is organised in the two countries? If so, what lessons should we draw from them?

First, that labour productivity matters enormously. If a service can be delivered by one person instead of three, that person can be paid three times as much (or the service can cost half the price and the worker still earns 50 per cent more, which I suspect was the case here). The lesson from my original car wash parable holds up here too.

Second, this runs both ways. High wages force businesses to make each job earn its keep; in other words, raise labour productivity. The one staffer standing in for three is an illustration of that.

Third, however, this is not really about making fewer workers do more things. On the contrary, it is about workers doing less. The automation of the paperwork in the Oslo testing centre meant the administrative tasks for the staffer taking the swab were reduced to a minimum. That meant a larger share of an overall smaller number of labour hours could be spent on the more skill-dependent and higher value-added medical task.

Fourth, remember the security guard. The UK provider deemed one necessary. The Norwegian provider, not. This is a simple illustration of the economic value of trust, which, as the chart below from the latest World Values Survey shows, is in shorter supply in the UK.

Bar chart of Public attitudes to trust, per cent of respondents showing The trust divide

There are many things I am unable to take into account here. The rent for the testing centres may be very different, for example. Or there may be significant subsidy and tax differences of which I am unaware. Or one place may need to plan for different demand patterns over time that a snapshot experience does not capture.

Still, the similarities with my well-worn car wash example are striking. Do Free Lunch readers think the same? Do share your thoughts — and if you come across other examples of such differences during what I hope will be a relaxing break, send them my way.

Other readables

  • It is not only high wages that may spur productivity. So may, paradoxically enough, other regulatory burdens on businesses. In my column this week, I wrote about the EU’s big gamble that tough climate change laws will make European businesses global leaders in green technology.

  • In a fascinating in-depth report from Gabon, my colleague David Pilling explains how the west African country would like to be paid for how it has preserved its forests.

  • Sarah O’Connor takes up the fight against factory fetishism.

Numbers news

  • There has been a debate in the US over whether unusually generous unemployment benefit has kept people from seeking work and thereby kept employment lower and wage inflation higher than they could be. University of Massachusetts economist Arindrajit Dube has now compared the performance of US states that ended the supplementary unemployment insurance payments in June with those that chose to extend it — and found that, if anything, employment figures were worse in states that cut UI benefits.

    Weekly employment to population ratio
  • My colleagues have mapped how vaccinations help weaken the link between Covid cases and deaths.

    Chart showing that in well-vaccinated countries, the Delta surge in cases is no longer mirrored in deaths. In countries where few have been vaccinated, death rates are reaching record highs

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OPINION

Big Oil’s sales spree to cut emissions may leave fossil fuel assets in weaker hands

Big Oil’s sales spree to cut emissions may leave fossil fuel assets in weaker hands
Big Oil’s sales spree to cut emissions may leave fossil fuel assets in weaker hands

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The 2010 Deepwater Horizon disaster spilled more than three million barrels of oil and would eventually cost operator BP and its partners more than $70bn in remediation costs.

What might have happened if the Deepwater partners had not been financially robust companies but instead highly leveraged private equity-backed independents? Who would have picked up the tab in the face of disaster?

As the energy transition evolves, companies across the oil, gas and utilities sectors are under pressure to commit to becoming “Net Zero” carbon emitters by dates well within the operating lifetimes of many of their assets. Environmental, social and governance criteria, high-profile court cases and disinvestment campaigns are leading the biggest companies to restructure to conform to a zero-carbon consensus.

But much of the restructuring will involve sales of assets rather than closures. Leading companies are selling oil and gas assets to smaller companies, which may not have the financial strength to meet the challenges that catastrophic failures can present.

A leading US utility, Exelon Corp announced in February that it will spin off its generation and electricity supply business, about 27 per cent of which is natural gas-fired, into a new, “competitive” company, while retaining regulated transmission and distribution assets.

In the US oil sector, Royal Dutch Shell’s sale of a 50 per cent stake in its 340,000 barrel-a-day Deer Park refinery — to Mexico’s Pemex — represents an asset transfer to a state-backed oil company that struggles to run its existing refineries.

In Europe, Engie was a leader in selling fossil assets, and in 2019, BP sold its Alaskan assets to privately held Hilcorp Energy which, within months, allowed their greenhouse gas emissions to rise 8.7 per cent, according to Bloomberg. Shell is reportedly considering the sale of its significant position in the Permian basin.

Such transactions may allow sellers to reduce their direct emissions numbers but may leave the assets in weaker hands unable to meet liabilities accruing from a catastrophic failure. Such deals raise fundamental questions as to who are the best owners of assets in the long term.

As the energy transition progresses they face multiple risks. Asset owners may be called on to confront unexpected liabilities which test their balance sheets.

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In the event of bankruptcy, smaller, less heavily capitalised companies are more likely to simply walk away. That can leave host governments — local, regional and national — to clear up the mess, with ballooning strains on the public purse, lower tax revenues and potentially significant social consequences.

Current asset sales probably are not the last round. As pressure to reduce emissions intensifies, asset buyers such as thermal-centred power companies may themselves be pressured to conform to ESG criteria.

They, too, may find that the easiest way to mitigate direct ESG risk is to sell assets to others. This is a risky ownership cascade.

While the direct consequences of disasters in the oil and gas sector may be mainly environmental, gas is linked to power and keeping on the lights.

Failures in the power sector can cause significant outages over large areas, bringing economic damage and penalties. Brazos Electric Power Cooperative, the largest in Texas with more than 1.5m customers, filed for bankruptcy protection following February’s statewide blackout. Brazos said it acted to protect its members from $2.1bn in charges levied by the Texas grid operator Ercot during the blackout.

As climate uncertainty intersects with electrification, such risks will increase. A power asset may be marginal today, but important tomorrow as the system around it shifts to accommodate new load or more intermittent renewable generation.

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Failure of that asset at a critical moment could lead to enormous liabilities that the sponsor’s balance sheet is unable to bear. That, in turn, may force governments to compensate those affected, increasing costs for rate payers and taxpayers.

Climate change is a systemic risk, but the shifts necessary to mitigate it may raise specific risks. Energy asset sellers and their regulators should carefully consider whether in their attempt to reduce the risk of ESG-related damage they merely shift the liability to others less able to shoulder the burden.

Bill Barnes is the founder of Pisgah Partners, an energy project development consultancy

The Commodities Note is an online commentary on the industry from the Financial Times

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