Leader: Prepare for price war as giant muscles in

Viewed in isolation, the news that Tesco is seeking a non-executive director with insurance knowledge could well fly under your radar. But consider the background to this corporate giant and its latest expansion plan could give you a bigger headache than you first imagined. For nearly two decades Tesco has performed as a City darling, keeping ministers smiling as well as serving up the perfect brand case study. Tesco has built an extensive property and retail empire, creating thousands of jobs and providing substance to years of New Labour economic spin. After all, Tesco’s offering of providing community-transforming, off-the-peg, store set-up and developing an extensive supply chain network has given it a presence in nearly every UK postcode.

So far, the most high-profile losers in this equation have been local independent shopkeepers, disgruntled town planners, property developers, the odd farmer and specific vested interests. But now its much acclaimed chief executive, Terry Leahy, is beginning to sail much closer to home. This month Tesco reported record profits of £3bn and a fresh impetus for its personal finance division. The heart of the manoeuvre sees Tesco attempt to exploit the void in the crumbling banking sector with plans to create in-store branches and further establish a foothold in insurance. Tesco planted the seeds of its ambition at the end of last year after acquiring the RBS share of its decade-old, joint venture, affinity deal, in the midst of the economic turmoil.

As well as re-examining the role of its online price comparator offshoot, TescoCompare, Tesco could capitalise on leverage in distribution from its new banking arm as well as benefit from the potential of the lead-generating data reservoir that is its loyalty card club. In short, Tesco is positioned nicely for a future in financial services and to grow in the insurance space, as well as fill a gap on an increasingly empty high street.

How long will it be before it attracts corporate banking clients with insurance needs? After all, it would be fairly easy for it to take out a chunk of the commercial SME market, especially should you consider the speed in which it grows.

This week Tesco would not reveal the full extent of its plans (see pages 22-23) but on this basis, how long will it be before Tesco is advised to begin providing its own advisory service to the masses? And are you ready for that price war?