Drive to secure 1,500 jobs as Tesco switches insurance arm to Fortis

TESCO Personal Finance last night revealed that it is to transfer its general insurance business to Fortis UK, prompting the Scottish Government to step up efforts to secure the 1,500 new jobs the deal will create.

Edinburgh-based TPF made the surprise announcement last night after rumours over the switch began to emerge in the City. Tesco's banking arm revealed it is moving the bulk of its insurance business away from Royal Bank of Scotland (RBS), which has acted as the group's underwriter for more than 11 years since the two groups established TPF as a joint venture.

Benny Higgins, chief executive of TPF, last night maintained that negotiations with Fortis UK were at "an early stage". He said a decision had not been taken on where the new jobs would be based, but said the issue would be resolved within weeks.

However, it is understood that Scottish Development International (SDI), the inward investment arm of Scottish Enterprise, is in talks with Tesco to try to win the new jobs for Scotland.

Last night a spokesman for the Scottish Government played up the contribution TPF had already made. He said that establishing TPF's HQ in Edinburgh had led to an increase in its workforce from 250 to 450.

The spokesman added: "This demonstrates the resilience of Scotland's financial services industry and reaffirms our reputation as a leading international centre for financial services.

"We will continue, working with SDI, to promote Scotland to companies including Tesco Personal Finance as an attractive location for inward investment."

SDI refused to comment, but a well-placed source said any negotiations taking place were strictly confidential. In certain areas of Scotland any company – from the UK or overseas – that brings jobs is eligible for Regional Selective Assistance. A Tesco spokesman said the group would welcome any offers of assistance available.

It is likely that the main competition for the jobs would come from Gloucester, in the west of England where Fortis UK has its main headquarters and employs 3,000 people.

A spokesman for RBS said it had not yet been served notice by Tesco about transferring the business but that for employees it was "business as usual".

RBS played down the effect it would have on its insurance business and said the move "has not come as a surprise".

The bank spokesman would not comment on implications for jobs at the partnership division of RBS Insurance.

The business transferred to Fortis UK involves about £500 million a year in motor and household insurance premiums.

Other parts of the insurance business, including travel and pets are underwritten by RBS and UKI Partnerships, but TPF said it was looking for to set up more new partners and to "watch this space".

Higgins commented: "What we hope is to get control of product design and pricing.

"Through club-card relationships we have an understanding of customers that gives us the opportunity reinvest in price and give customers better value because we know more about the risk."