The next chapter for co-operative banking

The Co-operative Bank announced its results this week, with a further spread of red ink since its troubles began in May 2013. It is the right time perhaps to reflect on what next for ethics and co-operative banking.

For anyone who wants to know more about the state of the Bank, there is an investor presentation which tells the story. Put simply, the original plan was to trade out of the troubles back into full health. That has not been possible in current market conditions, despite plenty of hard work and practical achievements. The losses are exceptional – bad loans for example from the past that tend to go bad as they mature – and should be non-recurring costs. But the bank is not covering its operating costs in the current market conditions of interest rates lower for longer, even though those costs have come down, and that can never be a permanent state of affairs. And the bank has to operate with a sufficient capital cushion to satisfy the regulators, who, even if what happens to the bank is not classed as a systemic risk, will be watching like a hawk.

So, we are into Plan C now. The announcement last month of a search for a new buyer, or new capital, means that the next period will be one of flux for the bank.

‘What do I do as a customer?’, asked a friend yesterday evening (I think I encouraged her into the Bank in the first place many moons ago).

Of course, consumer protection in banking gives a guarantee of safety. Plus, the ethics are also strong and that remains a distinctive offer in a pretty despised banking market overall.

Of course, with values, no-one is perfect. You can choose whatever yardstick you like personally, or as a campaign group, to run the rule, but the Co-operative Bank is different. Its ethics are enshrined in the articles and the priorities are those chosen by the customers: that’s pretty much as democratic as you get.

The Bank is also engaging proactively with the rest of the co-operative sector, in particular supporting the cost effective but high impact programme of co-op business support, The Hive, run by Co-operatives UK. We have an agreed voluntary programme of compliance around the use of the word co-operative, in line with criteria that we drew up with the International Co-operative Alliance and in consultation with our members.

One option as a customer is to join the Customer Union formed by the Save our Bank campaign – or just link to it on Facebook. Customers who care what happens can then act together rather than individually.

The investor presentation by the Co-operative Bank CEO Liam Coleman makes it clear how critical it has been to the survival of the bank that it has remained and indeed strengthened its ethics (health warnings of course – nothing is perfect) and the customer base of around four million people has stayed loyal.

One day, that may be a Business School case study for ethical business, but for now that means that the ability of customers to come together and act together is critical for what happens next to the bank. Whether the suits in the Bank of England or potential buyers or investors appreciate that will be the flip side of this – this could yet turn from a survival epic into an unqualified tragedy.

And when we look at what is happening to co-operative banks worldwide, this is the story in every case. If you are owned by your customers, then your customers will tend to keep you on track, whether in terms of integrity or when things go wrong.

In Japan, the Norinchukin Bank made losses that were exposed during the 2008 banking crisis, having purchased worthless US securities at a time when the rating agencies were saying these were triple A secure. The bank turned to its members, who are farmers, to return it to solvency. The financial gap was around $900m, and the members made up the loss.

There are over four thousand co-operative banks in Europe.

A recent study led by the distinguished Professor Hans Groeneveld at the Tilburg University looked at sixteen co-operative banks across around a dozen countries in Europe and North America. The total membership is on the rise, with around sixty million consumer owners. Since 1996, the ratio of co-operative bank members to the population at large has risen from 14 to nearly 19, so that one in five adults in those countries are member owners of a co-operative bank.

Since 1997, their market share of deposits and loans has risen by around six percentage points to just below 25%. The cost-income ratio was comparable to the wider banking sector at large. Since 2008, return on equity has been higher than the wider sector (6.3% compared to 5.9%) – and I expect that is not an iron law but an indication that co-operative banks can perhaps behave differently in tough times, when they are needed the most.

There are regulatory threats and pressures – some moves to consolidation in countries like Denmark and Germany. Those pressures will be recognised by the wider UK mutual sector of building societies and credit unions – and the fledgling community finance sector too. It is great to see that Nationwide, full of confidence and purpose, has taken up membership of the European Association of Co-operative Banks. There will be a convention of European co-operative banks, large and small, in two weeks time.

The key point here is customer owned banking is a good and practical alternative to investor owned banks.

The UK Co-operative Bank is something of a hybrid, and was arguably never fully owned directly by its customers, but it has been a trailblazer on ethics for twenty five years and it matters a lot what happens to it next.

And however this does now play out, the next chapter of banking in the UK needs to be more mutual, more co-operative rather than less.

The best pub – a very different way to run a business 

It’s been another alcohol fuelled week. Not quantity, you understand, but quality…

On Wednesday night after an event of the Cross Party Group on Co-operatives at the Scottish Parliament, sponsored by Scotmid, I was given a masterclass on beer by a former member of the Edinburgh Student Housing Co-op, exploring the set up of a brewery co-operative. 

Last night came the wonderful news that our member, George and Dragon Pub in Hudswell, has been voted Pub of the Year by Camra. This was a public house rescued by the public. When the pub was closing, local people came together to buy and run it co-operatively. The confidence they gained acted as a flywheel for community development and new services for the village. 

The George and Dragon was one of the early and pioneering societies in our Community Shares programme, now operating in partnership with Locality, Power to Change, DTAS, Wales Cooperative Centre, Co-operative Development Scotland, Plunkett Foundation and others – raising member capital to get things going.

I was reminded in Edinburgh by Martin Meteyard of an earlier generation of social businesses, combining cooperation and alcohol: the ‘Goths’.

The story is that until the early 19th century every Swedish householder had the right to distil their own spirits – and many did. At the time the annual consumption of alcohol was quoted as 7.5 gallons per head! 

In 1855 a law was passed making domestic distillation illegal and licensing commercial providers. The city of Gothenburg decided to award the retail spirits licences to only one enterprise, run as a trust. The trust aimed to sustain pubs, restaurants and off licences but moderate excess drinking. 

By controlling the income the town treasury provided libraries, museums, parks and other community facilities. Although the sale of beer and wine were not included in these restrictions, the system proved extremely profitable, providing thousands of Kronor annually for Gothenburg.

After spreading through Sweden, temperance campaigners and public house reformers in Scotland promoted the idea of ‘Goths’. The system was applied in various ways in Scotland, although the movement gained its firmest hold in mining communities.

Several societies were set up to run public houses according to the Gothenburg system. Some were aided by coal companies. The ‘Goths’ of the mining communities of Kelty and Cowdenbeath in Fife, Newtongrange in Midlothian and East Whitburn in West Lothian are examples. 

Armadale Public House Society in West Lothian was begun in 1901 by raising funds through the sale of shares to members of the community and was run by a committee of men, typically local miners. 

It’s a simple idea – to make public houses public. But it is also a very different way to run a business.

Help is at hand – The Hive is here for all co-ops

The Hive is a business support programme for groups wanting to start or grow co-operative or community enterprises, run by Co-operatives UK in partnership with The Co-operative Bank. The Hive is helping to build better co-operative businesses across the UK by offering offer a unique mix of free online resources, business advice and training and an online community.

The Hive offers a range of bespoke business advice to new and existing co-operative businesses and community groups, including:
FREE ‘Is a co-op right for you?’ sessions for anyone interested in learning about co-ops

Direct one-to-one advice

Peer mentoring

If you want to start or grow a co-op, visit to see if The Hive can help you.

Capital for co-operatives

Money talks – and so do people.

The co-op model of business is one where the voices that matter are not those of distant investors, but members – the people who are up close and involved in the business. That makes a difference. But every business needs finance and capital, so how do co-ops cope with the trade-off between access to capital and ownership based on participation?

13-arnold-kuijpers-600x685The relationship, says Arnold Kuipers, Director of Rabobank in Europe, is ‘a tense one’. Arnold was the opening speaker at an outstanding roundtable that we organised this week in London, along with our sisters, Building Societies Association and Association for Financial Mutuals (which has just merged with the British Health Care Association, which is good news).

The experience of Rabobank itself ranges from member capital and guarantees at the outset to a point at which there was no need for external capital. More recently, it developed a model for member shares, as a minority of their capital base built on retained earnings – which, through the sweepstake of regulatory policy, is now sold to institutions outside.

The headline conclusion was that there is no avoiding the trade offs if you need capital. But there is a lot of room for manoeuvre in terms of designing the approach you take to avoid the risks, and in structuring your business around a true understanding of the full costs and opportunities of external capital.

We will be working with our members on models for member capital raising, building on the success story of the last decade around community shares. Pioneered, or rather renewed, by Co-operatives UK, working with Locality and with the support of the Department for Communities and Local Government, since 2009, around 400 community businesses have raised around £120 million in member capital. That is real social investment.

Arnold Kuiper’s presentation is here: arnolds-presentation-co-operatives-uk

Simon says …in a complex world, we need deeper democracy

One of the great UK thinker and architects of democracy systems, Simon Burall at Involve is making a change today and it is one that might affect us all.


Simon’s achievements at Involve have been numerous. They include his leadership and innovation on open government. Under his leadership Involve has championed the cause of open government as a worldwide movement. He oversaw the development of the UK Open Government Network, and ensured the UK’s Open Government Partnership process was established as a widely recognised model of good practice.

Simon’s tenure has also seen Involve lead the push for deliberative public engagement on complex and controversial science and technology innovations. Finally, Simon has played a critical role in the thought leadership provided by Involve. He has made the case for deliberation and engagement across a raft of policy areas, developed Involve’s theory on deliberative systems, and innovated new models of citizen engagement on public services.

As Chair of Involve (not the day job, I know) I am delighted that Simon will continue to work with Involve as Senior Associate. That gives him the space to work further around the concept of deeper democracy, including how society responds to complexity and the emerging challenges and opportunities of science, technology and data.

We have appointed Tim Hughes as Involve’s new Director. Tim’s vision, expertise and dedication to Involve’s cause make his the strongest possible pair of hands to guide Involve into its next phase.

As Tim writes today, “If Involve didn’t exist, now would be the time to invent it”. Overcoming the triple threat of disillusionment, polarisation and disconnection will be one of the defining challenges of the decade to come. With our skills and expertise in citizen participation, open government, deliberation and facilitation, we believe that Involve is uniquely placed to take a leading role in facing that challenge.

It is time to speak up on democracy and Involve has something precious to offer, which is a vision of a deeper democracy. John Dewey described democracy as conversation, and Simon’s tireless work in favour of a more deliberative democracy is a cause that is worth fighting for. Co-operatives talk about everyday democracy – and indeed are written into the Italian constitution on exactly that basis. In a more complex world, we need to upgrade our democratic systems and culture.

A lot depends on it. Thank you, Simon.




Co-operation is the hope of 2017

The co-operative sector story in 2016 was one of patient and practical action.

north_coop_000_logo-crsiteAt the top end, the Co-op is coming back into health as the leading convenience retailer, with positive sales and an investment in ‘being co-op’ that has had a wonderful response from staff across the business.

At the small end, Co-operatives UK has supported 121 new co-operatives come into existence, all focused on direct needs and new opportunities. The backing of the Co-operative Bank, creating a new business support programme open to any co-operative, The Hive, has been central to this work.

One example is the new GlenWyvis Whisky Distillery, which will be built on a farm above the town of Dingwall, 100% powered by green energy and 100% supplied by barley from a local farmer co-operative.

awhitephoto_glenwyvistshirts-1It is ninety years since the town had a distillery. Another, Ferintosh – one of the oldest distilleries recorded in Scotland, closed in 1785 to the consternation of Rabbie Burns, who lamented: “Thee, Ferintosh! O sadly lost! Scotland lament frae coast to coast!”

With an equity issue for members advised by Community Shares Scotland (spreading our pioneering work for co-operatives on this with Locality to all parts of the UK), work on the distillery started in 2016. The first product, on sale for Christmas, was gin and the first run of whisky, the last I heard, is planned for Burns Night 25 January 2017.

Alongside this, the society has appointed a curator, Cait Gillespie, to build the links with history for visitors, with the hope of a full visitor centre to come, possibly served by an electric powered bus and elevator from the town centre.

As Co-ops UK’s member impact report, Together, showed, our own ntogetheretwork has also grown stronger in 2016, with almost 1,000 people attending events and training and some of the UK’s largest agricultural co-ops entering into membership.

The year 2017 and beyond will be a time for Britain to think differently – and a time to prove that co-operation offers a compelling solution to Britain’s challenges.

In line with the ideas and encouragement of many members, in 2017 we will launch a long-term strategy to strengthen and grow the UK’s co-operative and mutual sector. Based on dialogue and data across the sector and beyond, I believe that it will help shape the foundations of a different kind of economy.

Co-operation is the hope of 2017 – so, with whisky or without, it is a good time to make your own participation a new year resolution.

The story of a big heart

I have been involved over the last fifteen years in a project to recognise and support culture in Mozambique and to make links with Deptford, here in South East London. I have blogged before on some of the uplifting outcomes of this collaboration, and some of the local co-ops involved.

Peter Llewellyn was one of the other trustees of the Merry Trust (Mozambiquan Educational and Recreational Resources for the Young – one for my acronym hall of fame, alongside Nutshell). He died last month and so I shared with his family the story of what we had done, the story of a big heart.

Peter’s sister, Jani, was an imaginative nursery school teacher and activist and when she knew she was dying, in 2001, Peter, I and a few friends took up a project that she had started, Merry. Jani had started by collecting buttons, for children in Mozambique, initially deposited in the local branch of the Co-operative Bank. With money from her flat after she died, and subsequently from the will of her Aunty Marge, Pete turned this into a formal charity and we set about making things happen on the other side of the world – and in Deptford where Jani had lived and worked.

Mozambique had been the poorest country in the world, measured by money, but one of the richest, measured by culture. From his own time in Africa, Peter, as Jani, knew that progress starts with focusing on what you have, not what you lack.

Fifteen years on, Merry has supported an astonishing array of tiny inspirations, cultural projects in Northern Mozambique – like teaching teachers how to paint, so that they could teach children in turn, like supporting woodcarvers to take over a shop as a co-operative to sell their work to tourists, like paying for the skins for traditional drums in a community centre overlooking the coastal town of Pemba and paying again when years later, the skins had given way through constant use, like supporting the first film ever made by people and about people in Pemba, like supporting cultural festivals that thousands of people took part in.

In Deptford, on the same principles of building on culture and thinking globally, Merry has sponsored one or two classes to go to shows, in every single primary school in Deptford and New Cross. It has supported school workshops on culture and world issues, dance, drumming and story telling, including an annual visit from a writer, Beverley Naidoo, dealing with issues rarely touched on even today of race in children’s literature.

Peter was a can-do organiser, able to make things happen in ways that made everyone feel good. We are all used to the idea that big global issues require big global organisations, but no, here with a lightness of touch and agility, with so little administration and fuss (and cost), one family, the Llewellyns and a few trustees, meeting in the cafe at British Film Institute on the South Bank, raised smiles, raised hopes and even raised life chances – in communities that can feel so distant and so different, if you don’t have the mindset to think in another way,with a big heart…

…that people you don’t know from across the world are friends to make, people to learn from and partners to co-operate with.