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Cheshire & Derbyshire BS join Nationwide

The Nationwide has flexed its muscles again and swallowed up rivals the Derbyshire and the Cheshire, to make it the undisputed super-power of the mutual world.

It has been just over a year since Nationwide and its 14 million members celebrated the completion of its takeover of Portman.
With the addition of the Derbyshire and the Cheshire it brings Nationwide’s member tally to a whopping 15 million.
The setting in which its latest merger occurred could not have been more different. Members of the two societies will not be able to stand against the merger after being overshadowed by the Financial Services Authority which has fast-tracked the merger.
The FSA has been forced to step in and use legislation from the 1968 Building Societies Act which allows the takeover by board resolution, rather than seeking the approval of members of the society.

Nationwide is doing as its name suggests and slowly planting its roots in every corner of the UK, snapping up the competition.
But it seems safe to assume that other societies will not be able to escape the impact of Nationwide’s takeovers on the wider mutual market.

Smaller societies may now find themselves struggling to compete with the likes of Nationwide. If losses start to outweigh profits and cash flow is tight then they could well be forced to succumb to a takeover whether they want to or not.

The credit squeeze has seen many firms forced to merge, suspend trading or at worse close their doors. While the loss of a mortgage firm is never good to see there is an extra sadness at the loss of a society.

Societies - in complete contrast to banks - are often an integral part of small or rural communities. It’s not unusual for customers at smaller societies to buy staff gifts at Christmas.
This is because staff actually have half an hour to help somebody confused by their finances and bamboozled by economic jargon. Staff will ask how customers are and mean it - not because it’s the first question on their sales script.

As the UK becomes increasingly dominated by the corporate giants, it would be a shame if all that disappeared.

For any type of mutual sector to exist though, it is inevitable that the larger societies will have to offer a helping hand to the smaller ones in order to ensure the sectors survival.
Both the Derbyshire and the Cheshire could not have brushed their expected pre-tax half-year losses of £27m under the carpet.
And if the Nationwide has not stepped in then the writing could have been on the wall for both the societies.

So while the merger will result in the loss of another mutual from the high street it will also helps secure the future of mutuals.
But with power also comes responsibility. Nationwide will have to make sure it lives by the mutual motto of working for its members and does not let its power impact on its products or service, in the knowledge that there is less competition in the market.
A super-power in any market can be a double-edged sword, and only time will tell if Nationwide’s latest merger results in it improving or weakening its proposition.


Posted on: 08-09-08