PSST. Don’t tell Nick Clegg, but “co-operative” is not a byword for success. Earlier this year, the deputy prime minister said he wanted Britain to become a “John Lewis economy”, in reference to the firm’s employee-owned structure. Yet there are just two major co-ops in the UK. John Lewis, the patron saint of retailers, is indeed a success story, having outperformed its high street rivals last year. The other is the aptly named Co-operative Group. And it isn’t doing very well at all.
Yesterday, its chief executive, Peter Marks, was forced to admit that his attempt to buy 600 or so Lloyds branches was in trouble. It was hoped that the branch sales, which are being made to satisfy European state aid rules, would create a bank just about big enough to take on the big guns: HSBC, Barclays, Lloyds and Santander.
For Liberal Democrat ministers, the fact that the branches were going to a co-op was the icing on the cake. Of course, only the worst kind of cynic would suspect the government, which owns most of Lloyds, played any part in making sure the Co-operative was the preferred bidder.
The group’s attempts to buy the branches have been troubled from the get go. The banking division’s well-respected boss, Neville Richardson, quit last summer, largely because he disagreed with the bid, and the group has been unable to find a replacement since. Yesterday, Marks said there was an executive, as yet unnamed, waiting in the wings to take the role if the deal goes through. If that was meant to inspire confidence, it failed miserably.
Discussions with the FSA over “a number of regulatory and economic issues” are also dragging on for far longer than they should be. The initial completion deadline at the end of this month will be missed and it now looks as though this is the beginning of the end for the deal. NBNK, the banking buyout venture run by former Lloyd’s of London chair Lord Levene, is waiting in the wings.
The Co-operative’s worries aren’t confined to banking. Its supermarket business is performing abysmally following a poorly-executed takeover of Somerfield, providing proof that merging two mediocre players rarely creates a better one. Sales in the division were down by a staggering 21 per cent last year. If one of the listed supermarket groups had put in that kind of performance, it would have been curtains for the chief executive.
All in all, things are in a bit of a mess over at the Co-op. Liberal Democrat dreams of a co-operative challenger bank will likely remain just that.