Private equity firms target UK building society sector

The UK building society sector will this week come under the spotlight with news that JC Flowers, a major US private equity company, is set to take a 49% stake in the Kent Reliance Building Society in exchange for a £50 million investment. It is believed that liquidity problems within the sector could also see up to a further six building societies receive the same type of investment from the American giant, something which could dramatically change the landscape of the UK building society sector.

It is believed that the Financial Services Authority (FSA) is this weekend mulling over the move by the US giant and any potential issues which may arise with regards to UK regulations and laws. If the proposed move is waved through by the FSA the investment would be put to the building societies 180,000 members who would ultimately vote on whether it proceeds. There is no doubt that the landscape of the UK building society sector has changed over the last decade and is set to change even more in the short, medium and longer term.

The introduction of more competitive business practices, as opposed to the traditional mutual society membership procedures of the past, could make the sector almost unrecognisable.