Blackfriar: Skipton to rescue again but what's in it for its members?

Skipton yesterday revealed it is to merge with the UK's oldest building society, Chesham, creating a mutual with assets of 15.9bn.

It's the second rescue Skipton has made since the financial crisis began, after merging with the Scarborough early last year.

Skipton claims the latest deal will "further improve Skipton's capital position" and benefit members.

But Blackfriar would like to see more evidence of exactly where these benefits will come from.

In 2008 Chesham was stung by its exposure to Icelandic banks, forcing it to a 1.9m loss after exceptionals. That loss-making trend has shown no sign of reversing.

Along with other mutuals, the all-time low Bank of England base rate has put Chesham in a tough spot. With the rate standing at 0.5 per cent, the mutual said it's been unable to make a profit on its lending and borrowing, and with no relief in sight, a merger is the only option.

"Since the onset of the 'credit crunch', Chesham has experienced a period of unprecedented pressure on its financial performance caused by a number of factors," said the society.

Skipton members, still reeling from the society's decision to break its promise by raising the standard variable rate for 64,000 mortgage holders, will want to know what the latest takeover offers them.

Skipton is not putting the takeover to members for a vote. The only vote will be by Chesham members, who will doubtless be pleased to see a larger and safer institution offer to take them under its wing.

Skipton members didn't get to vote on the Scarborough acquisition either, a deal that has since been dubbed "crazy" because of Scarborough's exposure to risky mortgage portfolios.

Rescuing weaker rivals has long been an admirable trait in a sector that looks after its own, but Skipton chief executive David Cutter needs to prove he's not putting bad with good.

Dorothy Thompson is a canny lady.

She put the cat among the pigeons this week saying that unless the Government offers renewable fuel biomass greater support, Drax could snub Yorkshire and site its proposed 2bn biomass project outside the UK.

Drax is more than aware of its position as the UK's biggest polluter.

But under Thompson's leadership, it is trying to do something about it.

You can see the zeal in Thompson's eyes when she says Drax could become 100 per cent biomass – so no polluting coal would need to be burned. But she says the group is being condemned to high carbon generation by the Government.

The company is due to make a decision on the first of its three plants, which will burn organic matter such as wood cuttings and peanut husks to create electricity, by the end of the year.

Ms Thompson said that "regulatory certainty" is needed if the company is to put forward a watertight investment case for the plants.

She has the backing of independent researchers. Ben Warren, partner at accountants Ernst & Young, said the Government's decision was "an oversight that urgently needs to be corrected".

Biomass plants currently only have subsidy levels guaranteed up to 2013 – unlike other forms of renewable energy such as wind, which have certainty for 20 years.

Despite her tough stance, Thompson says she is confident that its 2bn project to build three landmark biomass plants in Yorkshire and Humberside will go ahead, despite the current lack of Government support.

In fact she said she would be "absolutely stunned" if the three plants were based anywhere else than the UK.

It really would be madness for the Government to do anything other than back Drax's ambitious plans to turn Yorkshire from having one of Europe's biggest polluting power stations into a world class haven for renewable energy.