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Co-op Financial Services and Britannia merge

21 January 2009
Russell Brady, CFS head of corporate affairs

‘There's been a renaissance in the co-op movement'

Russell Brady, CFS head of corporate affairs

Co-operative Financial Services (CFS) says that its proposed merger with the mutual Britannia will not result in less commercial lending to social businesses.

The merger would see the new business become a wholly owned subsidiary of the Co-operative Group - with Britannia Mutual members becoming Co-op members.

The move, which will take three years to complete, has been recommended by the boards of both organisations and is expected to result in a greater variety of products and a greater ability to loan, letting the new enterprise compete more effectively with high street banks.

Britannia is the UK's second largest building society and the Co-operative Group is the world's largest consumer co-operative. Each has around three million members and both have a strong commitment to member ownership.

However, whereas almost half the CFS loan book is with commercial customers, the level of commercial lending is much lower at Britannia, at about 15 per cent, with most borrowers being private individuals.

CFS head of corporate affairs Russell Brady told Social Enterprisethat the merger would not result in fewer loans to social businesses.

He pointed to the strong balance sheet of both organisations - with both operating at a profit - and the fact that both had continued to lend commercially over the past year despite the difficult market.

He said they saw continued commercial and corporate lending as ‘an important part of the expansion in our plans going forward'.

‘We have seen the sustainable business market really develop and given our relationship with a number of social enterprise areas and the experience we have in that sector it's not something we're going to turn our face away from.

‘In the Co-operative Group as a whole we've taken on and pioneered the development with social enterprise, whether in terms of renewable energy or the social sector more widely - it's not something our members would allow us to step away from. It's very deep and important to us.'

Brady also confirmed that several special initiatives to promote the development of social enterprises and co-ops - for example, their work with Esmée Fairbairn around community owned post offices - would continue.

‘There's been a renaissance in the co-op movement,' said Brady. ‘We're seeing it in finance, retail and food and we see the virtuous circle coming home to bear. We believe very much our time has come.

‘We've fared better than our peer group because we've not got carried away with speculative trading which our members wouldn't accept or legislate for. The member owned model has fared very well over the last 12 months and we see a really good opportunity for social enterprise to help spearhead the recovery.'

The proposed merger has been made possible by new legislation that is still passing through parliament and must be approved at the Britannia annual general meeting on 29 April. If all goes to plan the merger will begin in the summer and take three years to complete. There will be no forced redundancies.