Building Society Demutualisation

The development of the financial services industry from the 1970s onwards created the conditions for the huge changes that have overtaken building societies. In order to diversify to keep up with banks and other financial institutions in the commercial world the old societies needed to expand. To do this they had to raise capital.

Margaret Thatcher’s Conservative government of the 1980s began the process of loosening the bonds of mutality which led, in the 1990s, to the rush to demutualise. But, in a sense, demutualisation was only the logical outcome of changes that had been occuring in the financial sector, and more widely in society, for many years.

Nowdays the only difference between most building societies and banks is that building societies, still echoing their original function, primarily offer mortgage services. Otherwise current, savings and business accounts, credit cards and loans are available from both. The traditional community service of the old mutual society no longer really applies. Even societies that have retained their mutual status have expanded their products.

The Skipton Building Society (founded 1853), for instance, offers homeloan management and financial services and controls 16 subsidiaries.

However there is still strong support for the remaining mutual societies. They are often able to offer better rates, for borrowing and for lending, than other organisations.

They offer a feeling of tradition and dependability – important to savers in a fast changing financial market – and cross-generational dependability: the investment of parents and grandparents is passed on to children and grandchildren. Often the old adage ‘if it ain’t broke, don’t fix it’ applies to these traditional societies.