Building societies bring mutual values to bear on economic crisis

‘The culture, behaviour and decisions made by building societies, credit unions and co-ops are different because of their different ownership business model’

With interest rates just hiked to 5% and inflation still high at 8.7%, the cost of living crisis is far from over. As chief executive of the Building Societies Association, Robin Fieth is proud that building societies and the mutual financial sector remain the safest of havens for savers and borrowers.

He is at the helm of an organisation which has been going strong since 1869, currently representing all 42 UK building societies and seven of the largest credit unions, with some 26 million members and £500bn in total assets. 

Its mutual values are, he says, key to its success despite the economic challenges. 

“We have a cost of living crisis, inflation is still high, households are really struggling financially and the mutual sector remains focused on members,” he says. “The culture, behaviour and decisions made by building societies, credit unions and co-ops are different because of their different ownership business model. 

“They are not driven by shareholder expectations to maximise profits, instead they aim to make enough profit to keep the organisation safe and sustainable, and to invest in the future for current and future members. 

“We can also provide a far more customised service, taking into account people’s personal circumstances, offering creative solutions, managing existing financial commitments and still providing a safe home for people’s savings and helping them fulfil their dreams of home ownership.”

Robin, who joined the BSA as CEO in 2013, has regular meetings with counterparts at the Association of Financial Mutuals, Abcul and Co-operatives UK. 

“The group we have is a really useful forum for discussing things like updates to legislation,” he says, “and we can also support each other in all kinds of different areas. I am a member of the board of Co-operatives UK and my purpose in standing for election was to help bring that relationship between us closer together.”

For many with a mortgage, the biggest challenge currently is soaring interest rates – causing misery and worry for millions. Building societies comprise 23% of the outstanding residential mortgages in the UK. 

“What we have said consistently, long before inflation started increasing, to any mortgage borrowers concerned is talk to your lender early,” says Fieth. “There is far more that can be done before you get into trouble than when you start missing payments. There is a whole range of options out there.”

With 85% of people on fixed-rate mortgages, he adds, “the challenge is the number of people whose fixed-term mortgages are coming to an end across the whole market – that’s 400,000 in our sector. It’s a bit of a shock for people but there are lots of options that lenders have. Building societies will treat you as an individual and take the time to work with you.“

Despite the economic crisis, many continue to put money aside for a rainy day and continue to choose building societies to do that. Figures show the sector currently holds £362bn of deposits – 19% of the UK total and 41% of all cash ISA balances. Interestingly, the figures also show that savings balances increased by £8.5bn in the first quarter of 2023 in contrast to balances across the market decreasing by £4.7bn in the same period. 

That’s probably because in 2022 building society savers received £1.2bn more in interest than they would have got at the major banks. They also paid on average 0.42% on instant access savings accounts while high street banks averaged 0.16%. 

The membership of building societies has also increased from 25 to 26 million in the last couple of years.

For the most vulnerable, the credit unions which are  now part of the BSA family offer an alternative for safe access to help in hard times, providing loans to a wide section of society and communities financially excluded by other providers and building societies. 

“Some of the largest credit unions came to us and their co-membership is important,” says Fieth. “We encourage all  our members to work with their local credit unions where appropriate.”

Unlike many other banks and finance providers, building societies are rooted in their local communities and all are headquartered outside London, employing  51,500 full and part-time staff with 1,300 high street branches. Many, like the Yorkshire Building Society, invest in a charitable foundation, which supports charities and good causes in the communities where their members live and work, raising millions in the process.  

Looking forward, the BSA welcomes the government’s proposals to amend the Building Societies Act 1986, as well as the proposed changes to the Credit Union Act included in the Financial Services Bill, particularly those which will enable credit unions to extend their remit.  

Related: Boost for mutual sector as building societies beat banks on savings balances

“The changes coming in via the Credit Union Act will enable credit unions to start offering a wider range of services to their members – things like insurance and car finance which they can’t do at the moment. On the building societies side the legislation offers some tidying up and relatively small modifications to help us, which we wish to see implemented. We also require additional measures to be introduced to future-proof the act.”

Despite the current economic crisis, Fieth remains optimistic and the role building societies can play in helping people weather the current storm. 

“I spent most of my life looking after shareholder-owned businesses,” he says. “Coming into the mutual sector, it is so different because you have a commonality of purpose between customer and member because they are the same people; there is none of that conflict between shareholder and customer interests.

“What that results in is businesses that are genuinely purpose-run, for profit but for social purpose. That to me is absolutely fascinating and something that just fits with my values. The integrity of that business model I find really exciting continually.”