Rock return would strike the right note

26 October 2009

Christopher Taylor
chief executive officer
London & European

I agree with the Building Societies Association’s recent call for the government to consider returning Northern Rock to the society sector.

There’s too large a gap between Nationwide and the rest so slotting Northern Rock back in would add a sizeable lender to the mix and enhance the market dynamic.

But this would go against the trend for contraction. We’ve already seen a geographer’s roll-call of mergers in the past year or so - Skipton, Scarborough, Barnsley - and it’s likely that more are on the cards.

The BSA’s argument focusses on the benefits that Northern Rock would have for the market as a mutual rather than whether it would be good for the lender.

But mutuality could offer benefits all round. We’re in a different market climate compared with the carpet-bagging era of the 1990s when there was strong popular pressure to demutualise.

Now, mutuals’ attitude to risk and lack of shareholder pressure is striking a chord with the public so this could be their opportunity to regain some ground.

Britannia’s merger with Co-operative Financial Services shows the strength of mutual values, which can also be seen in the retail sector where John Lewis, with its partnership structure, regularly outperforms competitors.

A cooperative philosophy can be good for the bottom line. Mutuals appreciate the value of human capital and know that - to quote Tory leader David Cameron - we’re all in it together.