Building society merger will not mean job losses

SKIPTON Building Society has moved to reassure staff of the Scarborough that there will be no compulsory redundancies following its merger with its Yorkshire rival to create the UK’s fifth biggest mutual.

The latest consolidation of Britain’s building societies was announced late yesterday and comes just weeks after the Yorkshire took over Barnsley Building Society, Britannia announced a potential merger with The Co-operative and Derbyshire and Cheshire building societies agreed to become part of Nationwide.

Scarborough, which is the UK’s 17th largest society with 200,000 members, approached Skipton after the economic downturn hit its profits and capital reserves.

The merger will create Britain’s 5th largest building society with assets of more than £16bn of assets and 860,000 members but the two organisations are looking to avoid any major job losses at a time when the financial services sector in Yorkshire is facing cuts following Lloyds TSB’s takeover of HBOS.

A spokesman for Skipton said: “Obviously there will be an overlap although compulsory redundancies are not something we can foresee at this stage.”

The chief executives of two of the region’s biggest building societies said that the sector is unlikely to see much more consolidation in Yorkshire following the latest merger.

Iain Cornish, chief executive of the Yorkshire Building Society, said: “There are still well over 50 building societies in the UK. For small societies that have run themselves in a very prudent way, there is no reason why they should be looking for mergers at the moment.

“In our case [merging with] the Barnsley was because of its investments in the Icelandic banks. But if you are small there is no reason to say you can’t thrive.

Mr Cornish said that the Yorkshire’s assets of £21bn and funding position made it “very, very strong”.

“House prices are falling very rapidly and 2009 is going to be a difficult year. But the Yorkshire is well placed,” he added.

Ian Ward, chief executive of Leeds Building Society, said: “We are a strong performer and continue to trade very successfully. Our model is working very well for us.

“We have much lower costs because we are very efficient. Our mission is to stay an independent building society.”

Adam Bennett, partner in the financial services practice in the Leeds office of law firm Addleshaw Goddard – which has acted on the last 13 building society mergers in the UK – led the team that advised Scarborough Building Society on the merger.

Mr Bennett said the move “was positive for the Yorkshire area”.

He said: “With the Scarborough and Barnsley mergers it should be seen as positive that the Yorkshire and the Skipton have been willing to step in. We have not had a Northern Rock or Bradford & Bingley situation.

“My view is that those societies that are still around will be resilient. The Leeds, Yorkshire and Skipton are still strong. The mergers have kept assets within the building society sector. Everyone of the 10 former building societies that demutualised have now gone.”

Mr Bennett said that he does not expect many more mergers in the sector.

“I don’t think that there will be an awful lot more – we certainly don’t have a queue waiting. A lot of societies can survive on making small profits every year but the market is very, very tough out there.

“If your savings are with a building society, you can sleep at night,” he added.

The merger between the Skipton and the Scarborough is expected to be completed in the first quarter of next year and will see David Cutter of Skipton become chief executive of the combined group – to be known as the Skipton – following the retirements of Skipton chief executive John Goodfellow and his opposite number at the Scarborough, John Carrier, at the end of this year.

It has yet to be confirmed what the role of Scarborough Building Society finance director Robin Litten – who earlier this year was named as its new chief executive – will be following the merger.