Page last updated at 17:42 GMT, Monday, 3 November 2008

Building societies set to merge

Skipton Building Society
The new merged group will be called the Skipton Building Society

Skipton Building Society has agreed to merge with the smaller Scarborough Building Society as the mutual sector continues to shrink.

The deal should be completed early in 2009 after the Scarborough approached the Skipton, having suffered from "difficult trading conditions".

They said the enlarged group would be a top five building society with 860,000 members and 16bn of assets.

Some borrowers could see lower interest rates but there will be no windfall.

The announcement comes shortly after the Yorkshire Building Society said it was to take over its smaller rival, the Barnsley Building Society.

In September, the UK's biggest building society, the Nationwide, agreed to stage a rescue takeover of two small societies, the Cheshire and the Derbyshire.

"Reduction in consumer choice is never a good thing and looks set to be one of the long-term legacies of the current crisis," said David Hollingworth, of London and Country Mortgages.

No vote

The Scarborough said that further house-price falls and an impending recession would lead to an "unacceptable reduction" in its capital resources.

We believe this merger is in the long-term best interests of our members, our people and our local community
John Carrier
Chief executive of Scarborough Building Society

As with other recent mergers, there will not be a vote on the proposed merger among members of the two societies. It will require approval from the Financial Services Authority and the Office of Fair Trading.

In the short-term, borrowers on a variable rate mortgage with the Scarborough would see a fall in their interest rate, and savers would be on similar or better rates than prior to the merger, the building societies said.

No compulsory redundancies were planned, a statement confirmed, as the enlarged society would maintain a "significant presence" in Scarborough. The Scarborough head office would also continue to be used.

Long history

The Scarborough was founded in 1846 and is the UK's 17th-largest building society with more than 200,000 members across the UK, nine branches and assets of 2.85bn at the end of April.

It will lose its name as the merged society will take the Skipton name.

The larger institution was founded in 1853, is the UK's sixth-largest building society with more than 660,000 members, 84 branches and group assets of 13.4bn at the end of April.

John Goodfellow, chief executive of the Skipton, said he was "delighted" with the proposed merger.

John Carrier, chief executive of the Scarborough, said: "We believe this merger is in the long-term best interests of our members, our people and our local community, and can only serve to enhance the building society sector."

He said they had been in talks about a merger for some time.

Both these men are set to retire at the end of the year. David Cutter will become the chief executive of the new merged society.

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