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Thursday, July 23, 1998 Published at 16:01 GMT 17:01 UK

Business: The Company File

Conversion rejected

Nationwide asked its 4.9 million to vote

Nationwide members have voted by a narrow margin against converting the building society into a bank.

The margin was just 33,000 in favour of mutuality with more than two million members voting. Some 1,135,587 members voted against conversion, while 1,101,887 voted for.

The vote was announced at the Nationwide's annual meeting in London. Under its terms there will not be another vote for three years.

Nationwide chairman Charles Nunneley said that those who wanted a conversion had fallen significantly short of what would be needed for a formal conversion vote. The board had a mandate "to continue with our building society strategy, providing long term value to our members and competition and diversity in the financial marketplace."

The arguments

Supporters of conversion said it would force the building society to release large sums to its former members and free it to compete on a level playing field against other banks.

[ image: Members were asked it they supported becoming a bank]
Members were asked it they supported becoming a bank
Opponents say members would lose out in the long term because a bank would be under pressure to deliver high dividends to share holders, meaning higher mortgage charges and lower interest rates for savers.

Nationwide says that its lower mortgage rate compared to the demutualised former societies is worth £400 a year on £60,000 of borrowing.

Andrew Muir on Nationwide conversion
The mutual camp won the first round of the campaign on Wednesday when two self-confessed carpetbaggers, Michael Hardern and Andrew Muir, who had pledged to push the move to a bank, failed to make it onto the Nationwide board.

[ image: Andrew Muir is adamant conversion is the right choice]
Andrew Muir is adamant conversion is the right choice
Mr Hardern has now twice failed to make it onto the board but the gap has narrowed from three to one against to three to two.

The result follows a direct ballot of the building society's 4.9 million members, many of whom are considered to be carpetbaggers looking for a windfall.

A payout of £1,000 was predicted if the building society decided to convert to a bank.

Mr Hardern said he did not expect to win the vote because he had been fighting the entire "Nationwide party machine".

Adrian Coles, director general of the Building Societies Association, said: "Tomorrow's generation of consumers shopping for cheap mortgages and high savings rates will be grateful to Nationwide members."

Flying the mutuality flag

The Nationwide is considered the last of the large building societies and many smaller mutuals would have taken its lead from a decision to convert.

Abbey National was the first to convert and has been followed by other big names such as the Halifax, Alliance & Leicester, Northern Rock and the Woolwich.

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