In good health

After the knockabout in the media in recent weeks, leading to the positive news on the added capital cushion for the Co-operative Bank, it is good to report that the co-operative sector overall is in good shape.

Homegrown: The Co-operative Economy 2013 is the annual statistical digest for the co-operative sector. It shows a growth in the co-operative economy for the fifth consecutive year, with a record number of people with co-operative memberships – now at 15.4 million.

Over recent years the sector has been running a campaign to promote gender equality in co-operatives and in the economy more widely. Two years ago, in Co-operatives Fortnight, we surveyed the voice and position of women in the movement, including some excellent and inspiring examples of good practice. This year, we have tracked this in terms of numbers.

The results show that 37% of director posts are held by women in co-operatives, compared to 13% in listed companies in the wider economy. This is good news for co-ops and a positive example of how business more widely can benefit from being more open.

These are tough times for all business, but the co-operative sector is in good health.

Still Co-operative?

The capital injection announced today for the Co-operative Bank resolves its immediate financial needs – in terms of boosting its equity cushion in line with the way regulatory requirements are headed.

But with minority shares and external investors, is it a co-operative?

There is a clear answer. Yes, even if, by degrees, close to the edge.

The indirect nature of member ownership of the Co-operative Bank has long been debated by us anoraks in the sector. Whereas most co-operative banks worldwide are consumer-owned, the UK Co-operative Bank was formed long ago by consumer-owned societies, and started with their needs rather than seeing itself as directly consumer-oriented. It is a co-operative as a direct part of the wider Co-operative Group, as it now is.

Whereas other countries, with some exceptions, have legislation in place allowing for co-operative banks, the UK has never had this clarity and the UK Co-operative Bank is set up in legal terms as a company, wholly owned by the Co-operative Group. Some of this is set out in a useful piece on the Guardian web pages on European co-operative banking.

How the Co-operative Bank ended up needing this capital injection is another story – one that is important to learn from when things settle. Robert Peston sets out many of the key issues in his latest blog but it is also about internal culture and governance, the regulatory shift, particularly in the UK to require higher equity cushions, and the way that ratings agencies operate.

So, is the Co-operative Bank a co-operative?

What is a co-operative is determined by the Statement of Co-operative Identity agreed by the International Co-operative Alliance (ICA). Here, it is Co-operatives UK, as the recognised apex body for the ICA that applies this as a guardian of co-operative identity. Our longstanding policy on implementing this in a UK context, following consultation with our members, was published in 2012.

This covers the issues and challenges of where we are now, including the tensions and issues that need are going to need close attention over time to ensure member ownership and control:

“What starts as one form of enterprise can change. Some co-operatives begin as 100% member owned, and then diversify, offering shares to investor-owners. This applies mainly to farmer co-ops, but also, internationally, to some others needing large investments, such as telecoms and insurance co-operatives. Here, while member ownership is obscured it still exists in a pure form behind the business. Sometimes investors are brought into direct ownership, and here the business can still be seen as member-owned if members retain more than 50% of the equity. However, there are doubts as to whether in practice members can exert enough influence to be said to be still in control. It is harder to apply, but it may be a better if more subjective interpretation to ask not just that members have majority ownership, but that they retain control.”

The Co-operative Bank is on a firm footing. It is a bank, like others, but its value is its difference – it needs to remain co-operative.

Co-operative Bank

The Co-operative Bank has been in the media spotlight, following the announcement of a downgrade in ratings by the agency Moody’s.

None of this has been good news. But it has been encouraging for me to see the way that the new leadership team at the Co-operative Group has responded to this, with a clear and credible set of steps to move forward.

Andrew Bibby debates some of the context for the Co-operative Bank in an article for the Guardian. He is right to point out that raising new capital for co-operatives isn’t the same as for shareholder companies as it has to be achieved in ways that live up to our underlying co-operative principles.

At Co-operatives UK, we organised a members roundtable on co-operative capital last month, looking at innovations in finance for co-operatives. We will publish a report on this over the next period.

We have also helped to set up access to potential lending facilities with our member Unity Trust Bank to support co-operatives and mutuals to meet their business needs. The Co-operative Bank can still be a first point of call for its existing customer organisations. But Unity Trust Bank is also part of the wider co-operative sector, focuses on social business lending and has a very good understanding of the unique needs of co-operatives and mutuals. It was also the first bank in the UK to be registered as a living wage employer.

Unity also works closely with community development loan funds to promote a range of packaged lending to support business growth. Grouped into the Community Development Finance Association, for which I am very proud to be the current Honorary President, these are developing an ambitious agenda for a more effective and inclusive market for enterprise lending.

The good news underlying all of this is that there is still a far lower rate of business failure in the co-operative and mutual sector.

Nationwide Building Society has the confidence of being a mutual, owned by customers and has a spring in its step. They have benefited, as the Co-operative Bank, continues to, from high customer loyalty – and they are attracting something like 1,000 current account customers a day from the shareholder banks.

Meanwhile, the Move Your Money campaign, which is playing such an important role in filling the deficit in debate on the fundamentals of banking, is gearing up for its big ‘switch and tell’ campaign.

Worldwide, co-operative banks have clearly outperformed both shareholder banks and state-backed banks, as a comprehensive new academic book from Professor Johnston Birchall of Stirling University sets out.

The big banks that have been bailed out, including Royal Bank of Scotland, Lloyds TSB, meanwhile probably want what the co-operative sector has got. Barclays has paid extraordinary sums to be told how to be ethical.

These are tough times, but we all need a better banking system to emerge at the end.

New life for local news

As ever more local newspapers close and titles merge, more and more communities are left without a local media outlet, feeding a sense that local media is undergoing a slow but inevitable death. But there are examples across the UK, Europe and the US and elsewhere that tell a different story.

Co-operatives UK and Carnegie UK Trust have joined together to organise a series of meetings across the UK showcasing these alternatives. By attending these free events we hope you will be inspired and stimulated to take action to save your local media. This is an opportunity to make local media work as a sustainable business and help to protect our democracy through local accountability.

The events are:

· Monday 10 June – Leicester 18.00 – 20.30
· Tuesday 18 June – Glasgow 18.00 – 20.30
· Thursday 20 June – Crewe 18.00 – 20.30
· Thursday 27 June – Belfast 18.00 – 20.30
· Friday 28 June – Cardiff 13.00 -15.00
· Monday 8 July – Edinburgh 18:00 – 20.00
· Tuesday 9 July – Manchester 18.30 – 20.30

For more information and to book visit: Please feel free to forward this invitation to colleagues and networks who may be interested.