David Cutter: After the crash, the mutual benefits of building societies are clear to see

Making the prospect of home ownership tangible for ordinary people for the first time, Yorkshire’s building societies were among the flagbearers for mutuality – a concept and approach to business witnessed across the UK which proved an enduring alternative for consumers in a crowded financial services marketplace.

Initially established as “collectives” to enable people to club together and build their own homes, five societies remain in the Yorkshire region – Yorkshire Building Society being the largest, followed by Skipton, Leeds, Beverley and Ecology. Yorkshire is the second biggest society nationally, Skipton ranks fourth and Leeds fifth, in terms of asset size, and we all offer products and services to savers and borrowers right across the country, bringing important competition and diversity to the marketplace.

On a smaller scale, Beverley concentrates on offering a valued service on a local basis and Ecology has a special place amongst those looking for mortgages and projects that benefit the environment.

In recent days, we and our major peers all announced our annual results for 2013. Both as group chief executive of Skipton, and collectively, in terms of my role as chairman of the Building Societies Association, I am delighted to observe that these results show how all of the region’s building societies continue to add as much value as ever to our local economy, and the lives of the area’s consumers.

Despite five years of the worst global financial crisis in memory, Yorkshire’s mutuals have continued to report strong profitability and capital – a vital safety net, the lack of which triggered the demise of many high profile banking casualties. This strength gives our members the peace of mind of knowing their savings are secure with us.

Skipton’s profits increased to £102m in 2013, Yorkshire’s to £199m and Leeds’s to £64m. However, it is the virtuous circle which we create together which positively impacts the economic vibrancy of the region, as well as the financial wellbeing of families.

While profits and growth are important measure of success, we also plough some of the proceeds of success back into the communities in which we operate, to further enrich them.

In terms of bare statistics, we collectively employed over 14,000 people in the UK during 2013, almost half of whom are based in Yorkshire.

Head count increased by almost 600 to support the ongoing growth and development of our businesses. Combined, we lent £11.4bn of new residential mortgages to help homeowners achieve their aspirations in a challenging market environment.

More than 15,000 of these loans were to first-time buyers, who are so vital to fuelling a buoyant housing market which is so central to economic health.

Net lending, being the growth in our mortgage books, amounted to £4bn, accounting for 36 per cent of the growth in the UK market – well in excess of our combined natural market share. Our local building societies have therefore played a huge part in revitalising the country’s residential mortgage market. Much of this success was at the expense of the banks which, as a whole, contracted their market share during the year.

We also offered average savings rates well above the historically low Bank of England base rate of 0.5 per cent and average market rates, paying a weighted average rate of 2.11 per cent during the course of the year, much of which provides typical building society customers with a vital top up income into their retirement. The three societies are now entrusted with a combined £45bn of savers’ balances.

We were able to punch above our weight in this way because we’re free of some of the shackles that bind PLCs. We don’t have shareholders to please, and take decisions which are in the long term interest of our members rather than being driven by the short-termism of the City.

While we need to make healthy and improving profits to boost our core capital base and invest in our businesses, we can use a proportion of what’s left to balance this with consistent value for our members and continually develop our products and services for their benefit.

Taxes paid by the three societies amounted to in excess of £150m in 2013. And then there is the intangible “brand” capital that the region’s building societies bring to the area. Over the past decade, the city of Leeds has taken on the mantle of the financial services capital of the North. The reputational benefit of this in terms of fuelling onward business investment in the region cannot be underestimated. Not only that, but the wage bill of these three societies within the region is estimated at nearly £200m per annum, with jobs centred in Leeds, Bradford, Skipton and elsewhere supporting the economic vibrancy of the region.

Added to this is the “softer” aspect of what we do – giving something back to the communities in which we operate through charitable giving of over £1m during 2013. At Skipton, in addition to our Charitable Foundation, we do this through a Grassroots Giving programme which provides small donations of £500 to salt-of-the earth clubs and societies which make a big difference to local lives, but are too often overlooked for mainstream funding.

In this way, we are continuing to reflect that founding mutual ethos of “helping people to help themselves” and last year saw tens of thousands of people engaging with this programme to vote for the organisations dear to their hearts.

Throughout the challenging events of recent years, we have always maintained our mutual difference, and it is pleasing to see it really coming into its own as Yorkshire’s societies emerge from the financial crisis stronger than ever. This year and beyond look similarly bright despite ongoing market challenges and we look forward to continuing to contribute strongly in the years ahead.

David Cutter is chairman of the chairman of the Building Societies Association and chief executive of Skipton Building Society.