Bernard Ginns: Hardly time to draw breath when moving in high society

January saw Yorkshire's merger with the loss-making Chelsea, which was approved by 86.68 per cent of shareholding members and 85.44 per cent of borrowing members.

The move creates a 35bn mutual with more than 2.7 million customers and turns Yorkshire into a genuine national player with the scale to compete on the national stage.

Iain Cornish, the group chief executive, said: "The financial services market has changed fundamentally over the last two years and scale is increasingly important to the efficient operation of building societies and access to funding markets."

Then came Skipton, with a hat-trick of less welcome announcements. First, it said it was tearing up a guarantee and increasing its standard variable rate from 3.5 per cent to 4.95 per cent, angering tens of thousands of borrowers who face substantially bigger monthly mortgage bills.

Skipton announced days later that it would be culling 90 jobs at its head office in Skipton and a satellite centre in Scarborough. The management said the restructuring was essential to ensure its financial strength in the post-credit crunch environment.

Skipton was then embarrassed by a printing error which meant 3,155 account statements were sent out with other customers' personal details printed on the reverse.

Leeds Building Society, the other significant mutual in this heartland of building societies, joined in the action last week with an announcement of its own.

It revealed that it has established a wholly owned subsidiary called Headrow Commercial Property Services to rescue a shopping centre from administration and save 250 jobs in the process.

Leeds would not say how much it paid for the assets of Hornsea Freeport nor would it comment on a 17m loan it is believed to have made to the previous owners, Hornsea Estates and Hornsea Estates (No.2), to buy the shopping centre in October 2007.

It did say though that it is confident that the asset value will increase substantially. Peter Hill, the operations director, said: "We have taken a commercial view on this opportunity.

"We have got a vision about how we can make this into a very successful business venture which will be good news for our members."

They will certainly hope so. Buying shopping centres is quite a diversion from the core business of a building society, but I can see the rationale in Leeds wanting to take control of the asset as it tries to recoup its loan and benefit from a subsequent upturn in the commercial property market.

Stepping back, it's been a very busy five weeks of the new year – who knows what else will come from this sector in 2010?

One thing we can be sure of is more consolidation. All the main players agree on that. There are 52 building societies in the UK, down from around 2,000 at the peak of the mutual movement. Experts believe we could be down to 20 or 30 within the next decade.

This won't be a bad thing if the remaining societies grow in size and ability to compete with the banks. I've said before in this column that competition is essential in the provision of financial services, otherwise we end up with too few big players, which is no good for businesses or households.

It is vitally important that building societies are able to compete on a level playing field. This region has some of the best mutuals in Britain so we have a lot to lose – or gain.

Despite the extraordinary pressure placed on the model by the historically low interest rates, unfair competition from state-owned rivals and burdensome contributions demanded by the Financial Services Compensation Scheme, our big three are all expected to deliver profits when they report annual figures in the final week of February.

Skipton has already said its figures should show "a substantial increase in group profitability".

Leeds has said it will deliver increased profits this year. Yorkshire said it made a core operating profit of 1m for the six months ending June 2009.

But organisations can only withstand so much cost-cutting and disposals and in the interests of greater competition in the market place, it is time that the Government stopped paying lip service to the sector and started looking at how it can make life easier for these community-based saving and lending institutions.

After all, how much taxpayers' money has been needed to bail out the building societies, com-pared to the countless billions of pounds hosed at the banks?