Lack of capital is the reason why the mutual sector is ‘contracting’

“Limitations in capital” explain why the mutual sector is “contracting”, according to business secretary Vince Cable. “There is a problem of raising capital, mutuals cannot go out to...

“Limitations in capital” explain why the mutual sector is “contracting”, according to business secretary Vince Cable.

“There is a problem of raising capital, mutuals cannot go out to the Stock Exchange to raise capital,” he told delegates at the Is mutuality the answer to the ownerless corporation? conference, held in London last month.

“It is why building societies are either very small, or have grown through amalgamations like Nationwide.”

Mr Cable highlighted the Co-operative Bank as a prime example of an organisation being able to adapt and change its structure through external investments, but admitted that the “fundamental problem of raising capital has been the downfall of some of the mutuals”.

“We have been very conscious of this in government,” he said, giving the example of the government’s increase of the withdrawable capital limit in co-operatives to £100,000 as a way “we have tried to help mutuals”.

During the debate, Paul Coombes, chair of LBS’s Centre for Corporate Governance, added: “There is a considerable need for cash, funding is needed for innovation.”

Co-operatives UK secretary general, Ed Mayo, said the government has backed the idea of community share issues for small co-operatives, but “at a larger scale it can be a constraint”.

“In other countries there are institutions that understand the needs,” he said, highlighting financial assistance available in Spain and cross-sector support in Italy.

“The UK doesn’t have the institutions to support us in relation to doing that.”

Lord Myners added: “Access to primary capital is important, other models have access, the Co-operative Group was obliged to sell assets … indebtedness had risen to a level that it was uncomfortable.”

 

Read more from the conference:
How can co-operatives get governance right?
Mutuals are the future face of Britain’s public services

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