HAMISH MCRAE: Mutuals deserve more respect – support them

HAMISH MCRAE: Try to support mutuals by giving our business to them, even if it is only popping into Waitrose on the way home










Royal London to the rescue of LV, or Liverpool Victoria as it used to be known? Well, sort of. The loss of most of the mutually-owned life assurance companies has been one of the scars of the British financial system, as indeed was the loss of most of the major building societies. 

Out of all the building societies that converted to plc ownership not one, not one, remains independent. Even the mighty Halifax ended up being taken over by the Bank of Scotland, and after the rescue of the bank, is now a home loans division of Lloyds. There are still some smaller building societies, but only the Nationwide, which to its great credit did remain a mutual, has true scale.

In the life assurance world much the same has happened. Great names such as Scottish Widows have also been sucked into the Lloyds group. The memorable Norwich Union is now merely a constituent part of Aviva.

Ray of light?: If LV is to lose its independence, the least bad solution would be a full merger with Royal London

Of course, not all tales of mutual life companies have ended well. Remember the scandal of Equitable Life? The harsh truth is that in the UK mutual life firms have about 9 per cent of the life assurance market, whereas in North America it is about 35 per cent and continental Europe 25 per cent. 

Royal London is our largest surviving mutual, the equivalent of the Nationwide in the building society movement. If LV is to lose its independence, the least bad solution would be a full merger with Royal London. 

The worst one would be flogging itself off to Bain Capital. That is not because Bain is a nasty asset-stripper, which I don’t think is a fair description. If it sees a business opportunity it will go for it. The blame is with the LV management. The Bain takeover is the worst outcome because societies need diversity of ownership. We need public companies, private equity, family businesses – and mutually-owned enterprises – to keep our system of market capitalism sweet. That is why we need the John Lewis Partnership. 

If what emerges is, some sort of hybrid solution, so be it. But let’s meanwhile try to support mutuals by giving our business to them, even if it is only popping into Waitrose on the way home.

Christmas comes early to retail sector 

Christmas has come early this year, to judge by the surge in retail sales. Last month, they were nearly 6 per cent up in volume on pre-pandemic levels. Given the global supply chain ructions and inflation projected to rise even further, it makes sense to buy early. 

We will learn more about the resilience of our consumers very soon, for this is the week of Black Friday, the bridge between the US Thanksgiving holiday on Thursday and the weekend. Until it was pipped into second place by Singles Day, the Chinese blowout earlier this month, it was the largest single shopping day in the world. It has now crossed the Atlantic to rank alongside Boxing Day as our biggest consumer spending spree. 

So what should we look for? The first thing is its scale. There is a huge question mark hanging over the economy, which is the extent to which the savings built up over the lockdowns are going to be spent. There is at least £100billion, maybe £150billion, sitting in bank accounts of so-called excess savings. 

Will that wall of money hit the market with a bang? Or are people still sufficiently worried about the future to hang back a bit?

The second thing is prices. Everyone is urged to get a bargain, just as they are on Boxing Day, but we are all savvy enough to sniff out the phoney deals. What we do know is that wholesale prices have shot up, so the challenge for retailers will be how much of those costs to absorb and how much to pass on. Will we get the big price hit now, or will there be more to come next year? And third, what are we buying? Will it still be electronic kit? Or clothes? Or stuff for the home? Or maybe we will spend less on objects and more on services – spending more on entertainment, eating out and so on. If that happens, Black Friday may seem a bit of a flop. But then money not spent now gives consumers more firepower for the bumpy months ahead.

Price of a peerage remains a constant 

We may have the highest retail price inflation for 30 years, but curiously the price for one thing has not changed in real terms for nearly a century. 

You may have noticed that a peerage seems to cost a donation of around £3million to the Tory Party. Back in 1922 the price for one in Lloyd George’s notorious birthday list was £50,000, a practice outlawed three years later. So what would £50,000 in 1922 be in today’s money? According to the Bank of England’s excellent online inflation calculator…£2,905,527.64.

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