Members are normally happy in the short term as they get their windfall sweeteners but the worry is that societies will lose sight of their purpose. Since they were established to encourage people to save their new-found wealth during the Industrial Revolution they have played a worthwhile role. My fear now is that as the sector becomes more consolidated, societies will start to behave like their plc rivals and lose their focus on individual members.The most recent example of consolidation is the merger between Universal and Newcastle, expected to be effective on December 31 this year. This has been pitched as a move that will improve the distribution of products and services to the members of Universal. Newcastle has guaranteed Universal jobs for three years but what happens after that remains to be seen. Each member will get a windfall but the Universal brand name – with us since 1863 – will be scrapped. Newcastle has promised to keep a branch presence in Penrith, Berwick, Ponteland and Consett – the locations of Universal branches – for at least three years but it’s making no longer term guarantees. And last month it emerged that 70,000 members of Lambeth are getting payouts of at least 400 each after voting in favour of a takeover by the mighty Portman. For a while it seemed mutuals were having a stable time after the surge of societies converting to banks in the late 1980s, but it seems they’re on shaky ground again – the small ones at least. Loads of reasons are being given for the latest consolidation. Newcastle chief executive designate Colin Seccombe says:”Small and medium-sized building societies play an important role and can operate with healthy profits but they are in a challenging market. The enlarged society’s economies of scale and wider distribution will generate benefits in products and pricing.” Basle II is a driving factor behind consolidation and despite the Building Societies Association saying the spate of mergers won’t have a negative impact on the sector, the number of mutuals looks set to dwindle. Let’s hope some of the small boys remain to promote competition in the sector.
There\'s recently been a flurry of deals seeing mutuals joining forces and this looks set to continue. The transactions are normally couched as mergers but in reality the big boys are swallowing up smaller rivals. It\'s debatable whether this is good for customers.